[Am-info] AOL in Negotiations to Buy Red Hat

[Mitch Stone]

--- From a message sent by Paul Rickard on 1/20/02 6:38 PM ---

>========== On 2002.01.20 05:53 PM, Mitch Stone typed: ============
>
>>Another possible (and more encouraging) speculative scenario: AOL pumps 
>>money into Red Hat, helps them develop a strong "brand" and uses that to 
>>leverage the big box makers into selling retail Linux boxes. Far-fetched, 
>>perhaps, but something to consider. All this assumes Steve Case really 
>>wants to go mano-a-mano with Bill Gates.
>
>     The RedHat buyout wuould be with stock; paper money that has a small 
>impact on the bottom line of the company that gives it out. Spending REAL 
>money on RedHat would get quite expensive, and it's no secret that AOLTW 
>is cutting its budgets all around, from marketing to film production. 
>They're so cheap they put all their DVDs in a sorry cardboard case 
>instead of something solid like all the other companies do. And even if 
>it did buy RedHat and spend ungodly amounts of money on it, AOL has 
>nothing to offer the box assemblers for incentive except money, and the 
>way budgets have been tightened there probably isn't enough of that 
>around to convince any of them to risk the wrath of Microsoft. Microsoft 
>can allow or disallow the sale of Windows, that means more than just a 
>cash bonus, it means the survival of companies. Microsoft has every 
>mainstream OEM by the throat, and it has for a better than 15 years. AOL 
>cannot change that with or without RedHat.

I wouldn't make too much of the current round of belt-tightening. The 
smart companies are positioning themselves for a general economic rebound 
some time this year. As for Microsoft continuing its historic practices 
towards the box builders ad infinitum, I'm not so sure they can, even if 
the wimpy settlement is approved. IBM seems to be getting away with 
offering Linux in high profile fashion while also selling Windows boxes. 
If the OEMs get hit with a full-on broadside from AOL-TW bearing Red Hat 
Linux, I think they'd be hard pressed to say sorry, no, we just can't do 
that.

>     Case doesn't have the testicles to go face to face with Microsoft 
>anyway, at least not the way his now-underlings at Netscape once did. The 
>way Novell did before it had its tail clipped. The way Borland used to, 
>before Microsoft beat it lifeless. Digital Research. IBM, for crap sake. 
>And they had a lot better stuff than AOL does, even including WinAmp, 
>Netscape, all the online properties, and the AOL service itself. AOL 
>doesn't have a compelling enough product (RedHat irregardless) to win in 
>a straight war with Microsoft, they just have enough customers to do OK 
>while skirting around the edges of Ms' product lineup. Online services, 
>Web sites, and instant messengers are one thing, operating systems are 
>another enirely. So far, Microsoft has been fairly tolerant of AOL and 
>treated it like little more than an annoyance. A love-hate relationship, 
>the appearance of civility. Occasional attacks, but nothing with the full 
>force of MICROSOFT (all-caps now) behind it. If AOL had an advancing OS 
>on the market, Gates, Ballmer, Allchin, and Belluzzo wouldn't rest until 
>there was nothing left of AOLTimeWarner except a smoking hole in the 
>earth. You know what Ms was capable of in the past, and the company has a 
>better position now than it has at any previous time in history.

Clearly Steve Case has been very deferential towards Microsoft over the 
years -- but what choice did he have? Microsoft stood between AOL and 90% 
of their customers. I'm guessing that Case knows that this toe-dance can 
go on for just so long. I saw some persuasive evidence that they were 
looking for a path around the Microsoft roadblock two years ago. Maybe, 
just maybe, they think they have one in Red Hat.

>     Bottom line: if AOL buys RedHat, they won't spend any money to 
>develop it. If they by some chance do spend money on it, the amount will 
>have to be massive and still likely futile. And if they somehow do all 
>that and make any progress on Microsoft with RedHat, Microsoft will 
>flatten the entire corporation and all its subsidiaries like a 
>steamroller over a jelly donut. It still MAKES NO SENSE unless AOL does 
>this to HELP Microsoft instead of hurt it. _NO SENSE WHATSOEVER._

Look, we're all just guessing here, but I think you're jumping to 
conclusions. AOL-TW is a pretty hard target, even for Microsoft, and 
they'd have to do something blindingly and brutally anticompetitive, like 
making sure the AOL client won't run on Windows, to block AOL-TW's entry 
into desktop computing -- assuming of course that this is their plan. You 
can say this acquisition doesn't make any sense, and I'm pretty much at a 
loss to explain it as well, but one thing I can be pretty secure in 
saying is that if AOL does this thing, it won't be for giggles.

 Mitch Stone  
 mitch@accidentalexpert.com