The grass-roots Linux movement got a major vote of confidence Tuesday, when Intel and Netscape Communications announced a signed agreement to invest in Linux distributor Red Hat Software.

Yet, Microsoft -- which has recently added Linux onto the list of threats to its Windows NT operating system -- said Linux's key strength is also a major weakness for any company trying to build a business based on the OS.

In short, it's free.

"It's a difficult business model to make work," said Ed Muth, enterprise marketing group manager for Microsoft's Windows NT. "It's one of those things that the marketplace will decide."

Yet, the price is right. Already, unlike other versions of Unix, Linux's share of the server market is growing, said International Data.

And that's worrisome for the top OS vendor. "Linux is a respectable competitor," said Muth. "They are not the largest in the landscape, but they are important enough for us to be thinking about."

Intel split? No sweat

While the investment from Intel means great things for Red Hat, it's business as usual as far as Microsoft is concerned.

"We have products that run on the Macintosh," said Muth. "Intel has their business model, which we respect and understand."

Muth pointed out that the announcement would more likely affect makers of other varieties of Unix than Microsoft's own Windows NT.

Linux law completely different

Creating a business around Linux is a difficult task. Companies that base their business plan on only Linux have no intellectual property invested in the operating system.

To Microsoft, that means no competitive advantage. "Companies need to protect their IP territory," said Muth. "Otherwise, there is no reason to stay in the market."

Microsoft has opened its purse wide in hopes of claiming more information territory. In fact, the company is throwing more than $US1 million an hour at the Big Brains in hopes that its engineers think of things first.

And being first can mean big profits.

Linux is a free operating system developed by thousands of developers worldwide. It takes its name from programmer Linus Torvalds, who created the original Linux kernel when he was a student at the University of Helsinki in 1991.

To insure that Linux stays free, Torvalds wrote a clause requiring anyone who uses or distributes the Linux OS to also include the source code.

Red Hat in the black?

For Linux distributors, like Red Hat, the Torvalds' requirement that the operating system stay free is a blessing and a curse. The open source code attracts developers, but makes it difficult to make money from their own development work.

Yet, Rich Gray, intellectual property and antitrust attorney with law firm Bergeson, Eliopoulos, Grady & Gray thinks that the Linux model may not last.

"Linux could be co-opted by an applications maker," he said. "If a company invented a killer app for Linux, and didn't use the code, you could corner the market by controlling access to that application."

By not using the Linux code, programmers avoid the requirement to open their own source code to the world.

In short, the battle has moved from the operating system to the application.

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