SAN FRANCISCO (Reuters) – Oracle Corp. is taking aim at Red Hat Inc., the top distributor of Linux operating system software, with an offer to provide half-price technical support to Red Hat Linux users.
Speaking at the company’s annual user conference on Wednesday, Chairman and Chief Executive Larry Ellison said Oracle was seeking to solve key problems that have held back the development of Linux among big corporate customers.
“Oracle is announcing full support for Red Hat Linux,” Ellison told the OracleWorld conference in San Francisco. “The goal is to enhance and speed the adoption of Linux.”
“Our support costs less than half what Red Hat charges,” he added.
Linux is the most-popular variant of open-source software, which allows developers to share code in order to focus on creating new features themselves. Software like Linux allows customers to use programs for free, paying only for custom features, maintenance and technical support.
Red Hat shares fell nearly 11 percent to $17.40 in extended trade from a Nasdaq close of $19.51 following Ellison’s announcement. Oracle shares rose slightly to $18.71 in extended trade from a regular-session closing price of $18.62.
“What happens to Red Hat? Is killing them an unintended consequence?” one audience member asked Ellison during a question-and-answer session following his announcement.
“This is capitalism, we are competing. We are trying to offer a better product at a lower price,” said Ellison, the technology industry’s most outspoken executive, adding that Red Hat may choose to cut its prices too.
Ellison said Oracle was targeting corporate customers who rely on Red Hat Linux as the operating system to run their core business applications, but choose to pay Oracle to provide Linux technical support and maintenance.
Responding to a principal concern among big businesses, Oracle will fix bugs in current and prior versions of Red Hat Linux software, providing similar levels of technical support as it now offers on Oracle databases and applications.
“There is no true enterprise support” for Linux, Ellison said, using industry jargon for technical support contracts for big business enterprises. “We would like to fix that.”
Another concern among corporate customers is the threat of patent suits by software makers against customers, but Ellison said Oracle would assume legal responsibility to assure them.
“This uncertainty about intellectual property is also slowing (Linux) adoption among our large customers,” he said.