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Fri, Oct 27, 2006 - Page 10 News List

Oracle launches pricing attack on rival Red Hat

AP AND BLOOMBERG , SAN FRANCISCO

AP and Bloomberg, SAN FRANCISCO

Having already vanquished some of his biggest rivals, Oracle Corp chief executive Larry Ellison on Wednesday launched a pricing attack on Linux software leader Red Hat Inc.

Ellison unveiled his plans to support Red Hat's product line at sharply discounted prices before a packed audience of software customers and developers gathered at Oracle's biggest convention of the year.

"If you are a Red Hat customer, it just takes a couple of minutes to switch to Oracle," Ellison, 62, said during his keynote speech at the Oracle OpenWorld conference.

The initiative threatens to siphon substantial revenue from Raleigh, North Carolina-based Red Hat, a leading provider of open-source software that runs on the Linux operating system. Product support accounts for most of Red Hat's revenue, which totaled US$278 million last year.

"I don't think this will kill Red Hat," Ellison said in response to a question from the audience. "This is capitalism. We are competing."

Investors, though, are worried Red Hat will be hurt by the challenge from the world's second-largest software company.

Red Hat's share rose US$0.10 to close at US$19.51 on the NASDAQ before Oracle's announcement, then plunged US$2.23, or 11.4 percent, in extended trading.

Oracle's shares gained US$0.07 to close at US$18.69, then retreated by US$0.27 in extended trading.

Red Hat did not immediately respond to a request for comment.

Corporations have begun replacing expensive servers and programs to connect applications, choosing open-source software such as Linux, which runs on low-cost personal computers. Open-source programs use publicly available software code contributed by programmers. Red Hat and other distributors typically offer the software at little cost and charge annual support fees.

Red Hat competes with Novell Inc, the second-largest seller of Linux software, and Microsoft Corp's Windows operating system. Growth in spending on Linux servers slowed to 6.1 percent in the second quarter after 15 straight periods in which growth topped 10 percent, according to market research firm IDC.

Known for his combative style, Ellison has overseen a US$20 billion takeover spree during the last two years that devoured two of Oracle's biggest rivals in the business software industry, PeopleSoft Inc and Siebel Systems Inc.

Oracle also had been eyeing a possible acquisition of open-source software maker JBoss Inc, only to lose out to Red Hat, which bought JBoss for US$350 million in a deal that closed in June.

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