March 11, 2003 9:00 PM PST

Red Hat revamps premium Linux plan

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Linux seller Red Hat on Wednesday will unveil a new phase in its plan to profit from a premium product, introducing a new lower-priced version of its Advanced Server software and a new brand name.

The new name for the product is Red Hat Enterprise Linux AS. Red Hat will also introduce an Enterprise Linux ES version for lower-end servers that have one or two processors, said Mark De Visser, vice president of marketing at the Raleigh, N.C.-based company.

Red Hat is becoming increasingly aggressive with its high-end Advanced Server software plans, but the company wasn't successful in persuading companies to pay $1,500 to $2,500 per year for a subscription to use the Linux version on low-end servers. The new Enterprise Linux ES product costs $349 or $800 per year, depending on support levels, De Visser said.

"We needed to introduce an entry-level version of the enterprise platform," De Visser said. "Advanced Server was just shooting too high."

The Enterprise Linux line also includes a WS version for workstations with one or two processors, De Visser said. It costs $179 or $299 per year for basic and standard subscription plans, respectively.

The Enterprise Linux products are certified to work with computers from IBM, Dell and Hewlett-Packard and with software from Oracle, Veritas, BMC Software, Borland and others. Red Hat guarantees that software that's certified to work with one version will work on future versions as well, such as the version 3.0 product coming this fall.

The company's strategy is an effective way to make money out of Linux and associated higher-level software that can be obtained for free in the open-source realm. Red Hat asserts that, although its premium products can be reconstructed, those versions won't come with certifications.

The strategy is proving effective, some believe.

"We recently (met) with Red Hat management and came away incrementally more positive on the company's long-term prospects, particularly regarding Red Hat's ability to create competitive barriers for other distributors of Linux, including large companies," Thomas Weisel Partners securities analyst Tim Klasell wrote in a recent report. "We believe that the key differentiation for Red Hat is its relationships with leading (software and hardware companies) and its Advanced Server product."

Red Hat will also announce on Wednesday versions of its Enterprise Linux products for Itanium processors. The AS versions cost $1,999 and $2,999 per year, depending on the level of support. That's $500 more per year than the products that run on servers that use Intel's lower-end Xeon and Pentium processors or AMD's Athlon. The WS version costs $800, more than twice the price of the Xeon version.

The lower-priced version indicates that Red Hat is adapting to business realities, said Michael Dortch, an analyst with the Robert Frances Group.

"Anything a company like Red Hat can do to align pricing more closely to the real life of the target customers is a good thing. It seems to me that this new packaging indicates Red Hat has been listening to customers and responding to what they want," Dortch said. "That's news these days."

 

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