Intel and Netscape Communications have taken equity stakes in Red Hat Software, a distributor of the free Linux operating system.
With the investments, Red Hat will establish an Enterprise Computing Division that will offer enterprise-grade products and services, according to Red Hat President Robert Young. At an event at the ISPCon trade show in San Jose, California, Red Hat also announced investments by venture capital firms Greylock and Benchmark Partners.
Intel is expected to pursue the growing Internet service provider market with its expanded backing of Linux, a free, Unix-like OS that has gained wide acceptance among small and medium-size ISPs.
Red Hat is one of several companies that packages Linux for sale along with support offerings. The OS was invented by Linus Torvalds and has evolved on an "open-source" basis for several years. It is available as freeware over the Internet and has been seen by some as the most serious, fast-growing competitor to Microsoft 's Windows NT Server.
Microsoft on Tuesday was diplomatic about both Linux and Intel's involvement with Red Hat.
"Linux is a respectable competitor but more often an alternative to Unix and Solaris than Windows NT," said Brad Chase, vice president of developer relations and marketing at the Redmond, Washington, software maker.
As for the other half of the Wintel duopoly, Chase said, "This does not impact our relationship with Intel in the least. Intel often takes small equity in companies like this."
One observer said the moves by Intel and Netscape are likely to boost the acceptance of Linux in large enterprises.
What large organisations want is someone to turn to for support, said Robert Berger, president of Internet Bandwidth Development, in Saratoga, California.
"Red Hat will probably become the most visible place where companies know they can buy support," Berger said.
Although the investments might seem to legitimize Red Hat's Linux product over others, thereby destroying the operating system's greatest strength, Berger said that shift is unlikely.
"If they start to make it proprietary, they're probably going to lose support, because people can go around them," Berger said.
Observers said Intel is intent on pursuing the market for ISP servers, which today run predominantly on Unix.
"We've watched for the last three years the gradual growth of the market for Linux servers for service providers," said Michael Howard, president of Infonetics Research, in San Jose. Howard said Infonetics figures show 65% of servers at small and medium-size ISPs run Unix, and 30% of those are Linux servers. The remaining 35% run Windows NT, he said.
Howard said small and medium-size ISPs will remain relevant even as massive providers dominate the core of the network, and will help to keep Linux growing.
"There are something like 5,000 ISPs in the world, and over 90% are very small," Howard said. "They're the ones using Linux, and they still have a place and will for several years to come." For example, local and regional ISPs will provide specialized services and buy wholesale national access from carriers such as WorldCom, he said.
Intel Corp., in Santa Clara, California, is at http://www.intel.com. Netscape Communications Corp., in Mountain View, California, is at http://www.netscape.com. Red Hat Software Inc., in Research Triangle Park, North Carolina, is at http://www.redhat.com