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AOL might be buying Red Hat.

This is probably the clearest shot across the bow of our friends in Redmond. Not only could AOL be a trojan horse to deploy Linux on to desktop PCs, but AOL would be purchasing yet another of Microsoft’s died-in-the-wool enemies.

I think this would be a very strategic deal. RHAT has been buying back its shares for cents on the dollar since September 11, which could be an indicator that these talks have been going on for a while.

-Ian.

—– http://www.cnn.com/2002/TECH/industry/01/21/aol.red.hat.ap/index.html

Report: AOL in talks with Red Hat

Red Hat distributes the Linux operating system

DURHAM, North Carolina (AP) –Both AOL Time Warner and Red Hat have declined comment so far on a published report that AOL Time Warner is negotiating to buy the Linux distributor.

The Washington Post reported late Friday that AOL Time Warner — parent company of CNN — was in talks to buy Durham-based Red Hat, citing sources familiar with the situation.

The deal could bolster AOL Time Warner’s battle against rival Microsoft as both companies jockey to move their services beyond the personal computer to mobile devices and such nascent services as interactive television.

“As a company policy, we don’t respond to rumors,” Red Hat spokeswoman Melissa London told The Associated Press in response to the report.

AOL Time-Warner spokeswoman Tricia Primrose also declined to comment.

Red Hat packages and sells a version of the Linux operating software — its logo is a cartoon penguin — the basic code of which is open and public. While popular for Web servers because it’s relatively cheap and very stable, Linux has barely penetrated the desktop market dominated by Microsoft.

Nearly all of AOL’s subscribers use desktop computer software that runs on top of Microsoft’s Windows operating systems. In fact, the number of potential users currently using Linux is a very small fraction of the market at the moment.

But the service could easily be configured to run on Linux, as an Internet appliance offered by Gateway did until it was discontinued last year.

In addition, AOL owns the Netscape browser, which is distributed for free and offers a version for Linux.

Many handheld portable computers currently in development also run on Linux.

Red Hat, with 600 employees, reported a $15 million loss in its latest quarter, an improvement from a $55.3 million loss in the previous quarter.

Red Hat and IBM recently announced a partnership in which Red Hat would provide Linux software and services for IBM’s eServer line of Web servers for business.

Red Hat was founded in 1994 and went public in 1999, with its stock soaring from $14 to a high of $286.25. The stock price fell as the technology stock bubble burst, but it’s made a minor comeback recently.

Red Hat announced Thursday that it will move headquarters to Raleigh on North Carolina State University’s Centennial Campus.

Copyright 2002 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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