RALEIGH, N.C. — Microsoft’s stunning announcement Thursday that it was embracing the Linux operating system through a deal with Novell produced a quick reaction at Red Hat.

Red Hat, the world’s leading distributor of the open-source Linux platform, called the Novell-Microsoft partnership “UNTHINKABLE” on its web site.

Microsoft is the world’s dominant, proprietary, patent-protected software provider. Novell, once a bitter rival of Microsoft, is Red Hat’s top Linux rival with its Suse Linux offering.

The deal is the second hammer blow unloaded on Red Hat in a week. Just last Thursday, software giant Oracle — a Red Hat development partner — said it was moving into the Linux market by offering Linux support at a discount under Red Hat prices.

Red Hat’s bread-and-butter is its subscription revenues for support Linux users in the enterprise market.

Red Hat (NASDAQ: RHAT) shares dropped 5 percent when the Microsoft-Novell deal leaked Thursday afternoon. By the time the markets had closed the shares rallied to show a 2 percent, or 33 cent, drop for the day to $16.10.

In after-hours trading, Red Hat dropped another 44 cents.

However, Matthew Szulik, chairman and chief executive officer of Red Hat, saw a positive effect in the deal..

According to The New York Times, Suzlik said that Microsoft recognizes Linux as a “core component of information technology infrastructure.” He also called Novell, a “weakened and vulnerable” company, that was attempting to gain market share in the Linux market.

On its web site, Red Hat branded the Microsoft-Novell deal with one word:


“It was inevitable,” Red Hat said. “The best technology has been acknowledged.”

According to Red Hat, the announcement is good news for the open source software community.

“The relentless march of open source is shaking up the industry by freeing customers from proprietary lock-in and lack of choice,” Red Hat said.

“It means Linux has won. The world’s largest software companies are saying what customers have known for years: Open source innovation delivers better software and better value,” Red Hat added.