IBM has made Linux a commercial factor. Linux specialists like Red Hat Software were there, sure, but Red Hat’s still losing money on operations, with revenues running at an annual rate of just $100 million a year. And while the inventors of Linux may have thought they were creating an alternative to the software monopoly of Microsoft Windows, IBM has used Linux as a brilliant attack on Sun Microsystems. Sun’s most successful business is the sale of proprietary computers running Unix software, an operating system similar to Linux.
Giving away Linux on cheap Intel-based hardware, IBM can undercut the price of Sun’s computers and still make money on proprietary IBM software and consulting services. At LinuxWorld, IBM announced new Linux computers and a Linux version of its Tivoli software for automating data centers.
While IBM profited nicely on December quarter sales of $24 billion (nearly half of that from consulting), Sun still suffered a slight operating loss on $2.9 billion in sales for the same period.