AOL Time Warner may buy Red Hat – and upset Microsoft

The Linux operating system is open source, not proprietary, which allows numerous volunteer programmers to continue developing it. Red Hat makes its money by packaging and selling Linux, mainly for the servers of web sites and businesses. To date, Linux has been considered insufficiently user-friendly to make a dent in the market for home PCs although it is said to run 30% of all servers. The intervention of media giant AOL Time Warner could change that.

The Washington Post speculates that AOL Time Warner may be seeking to package Linux with its AOL internet browser software which is used by more than 33 million subscribers, an installation which could wipe Windows from the desktop.

The newspaper does not name its sources and notes that neither AOL Time Warner nor Red Hat would provide any official comment. At first glance, the acquisition may seem a good move. However, while Red Hat is slightly profitable, it is also widely regarded as an over-valued company, with a market capitalisation of more than $1.45 billion on annual revenues below $100 million.

If AOL Time Warner is determined to distribute Linux in competition to Windows, the acquisition of Red Hat seems unnecessary, given the likely cost and the open source nature of Linux. Further, Red Hat's success is in the corporate market, which does not fit with AOL's consumer base. An alternative and cheaper solution may be for the media company to develop its own incarnation of Linux or enter into a distribution deal with Red Hat.