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Local Tech Wire

RESEARCH TRIANGLE PARK, N.C. – The latest growth forecast for the Linux software market is a mixture of good and bad news for Raleigh-based Red Hat and other developers.

A predicts that the Linux market will top the $1 billion market for the first time in 2012. IDC statistics show Linux revenues increased 23.4 percent between 2007 and 2008 and growth should continue at nearly 17 percent a year through 2013.

That’s good news for (NYSE: RHT) and rival (Nasdaq: NOVL), which dominate the Linux business. According to IDC, the two companies accounted for 94.5 percent of Linux revenue in 2008.

The two also dominated new Linux subscriptions last year at 90 percent.

The recession is hurting Novell, but news could be worse without Linux. On Thursday, Novell said quarterly revenue fell 12 percent to $216.1 million from $245.2 million in the previous year. Matt Asay, writing at Cnet, noted Novell’s Linux revenues increased more than 20 percent to $40 million to make the revenue picture much better.

In June, Red Hat said its most recent quarterly revenue rose 11 percent to $174 million from the previous year.

Overall, Linux subscriptions for server services are expected to drop this year before rebounding in 2010, IDC said.

Use of free Linux services is also expected to increase, IDC says. “Nonpaid: deployments of Linux increased to 43.3 percent of Linux usage in 2008, up from 41.4 percent in 2007.

By 2013, the Linux business should be worth $1.2 billion.

However, IDC also believes server subscriptions and nonpaid deployments: will slow over the next five years due to increasing use of virtualization in which multiple operating systems can be run on a single piece of hardware and an enterprise. IDC says it is not yet tracking the virtualization metric in terms of new subscriptions and deployments.

"The dynamics we are seeing here are fascinating,” said Al Gillen, vice president for system software at IDC.

“The convergence of the difficult economic conditions, the maturing of enterprise virtualization software, and the increasing use of replica copy deployments of Linux server operating systems is leading to a shift where the success of the market is increasingly defined by the installed base rather than by the number of brand new subscriptions or deployments being made,” he added.

“This phenomenon is not unique to Linux – as we see the same trend playing out with Windows server operating environments.”

According to IDC research, Gillen said more companies are finding Linux to be reliable for other uses beyond servers.

“We find that more customers are seeing nonpaid Linux as a viable solution for certain non-critical business needs, despite the lack of commercial applications and the potential support challenges that come with a non-commercially-supported distribution,” he said.