But Wait, There's More

Server Makers, Linux Distros Back LSB 2.0

The Linux Standard Base 2.0 specification, which is a blueprint for keeping the Linux kernel and the commercial Linux distributions that are based on it from diverging and therefore wreaking havoc among server makers and application software providers, was released on August 30. The LSB is created and administered by the Free Standards Group. Not surprisingly, all the major server vendors and Linux distros endorsed the standard, which seeks to enable application compatibility across Linuxes running on a wide variety of platforms. It doesn't ensure that all Linuxes are exactly the same, but rather that all applications that are written for LSB compliant hardware and software will run on any other LSB compliant system. There is still plenty of room for differentiation in the Linux racket, even after toeing the LSB line.

LSB 2.0 has a new application binary interface for the C++ programming language, and supports the current crop of 32-bit X86 and 64-bit X86, Itanium, Power, and zSeries mainframe architectures. It also supports the Posix 1003.1-2001 and Single Unix Specification Version 3.0 specs, which help improve Unix compatibility inside Linux. LSB 2.0 also includes a mock-up of a complete LSB 2.0-compliant Linux distribution. The Open Group, a standards body that administers the Unix brand and standard, announced a certification program for hardware and software vendors who want to get compliant with LSB 2.0.

Novell Restructures Development with Linux Focus

While we were taking our vacation, Novell announced that it has reorganized its development organization to reflect its increasing emphasis on the Linux operating system and identity management products, the two key drivers of Novell's planned growth. The two new development units are called the Platform and Application Services unit and the Identity Services unit. The former will comprise SuSE Linux and NetWare as well as GroupWise middleware, and Ximian client and middleware software. This unit will be headed by David Patrick, who was running the Ximian business. David Litwack, who was running the Silverstream business unit (which Novell acquired for $212 million in June 2002 for its eXtend middleware and application development tools), will be running the Identity Services unit, which includes the ZENworks system management tools and the Silverstream products.

Red Hat Hires New CFO and New Global Services VP

Back in June, when commercial Linux distributor Red Hat had to preview its financial results to calm the fears of Wall Street in the wake of the departure of Kevin Thompson as chief financial officer, the company promised that it would have a new CFO by the end of the third quarter. The company has kept its word and hired Charles Peters, who comes to the company from his jobs as CFO at fabric maker Burlington Industries. Peters was previously senior VP of finance at Boston Edison Company and CFO at test equipment maker GenRad before that.

Red Hat has also announced that it has created a new vice president position to cover its services business. Kate Johnson, who was an IT manager at USB Investment Bank and a management consultant at Deloitte Consulting Group, is now responsible for how Red Hat delivers its global training, support, and services offerings.

Unisys Partners with Red Hat for Linux on ES7000 Servers

A few weeks ago, server maker Unisys bowed to the realities of the server market and announced that it would support Linux on its ES7000 line of Xeon and Itanium servers. Initially, Unisys said that it would support Novell's new SuSE Linux Enterprise Server 9 operating system, and predictably, now Unisys has announced that has partnered with Red Hat to deliver support for Red Hat Enterprise Linux AS Version 3 on its full line of servers. Unisys says that it will offer Red Hat Linux on both the Xeon and Itanium ES7000s and on all sizes of machines, ranging up from four-way to 32-way systems.

Merrill Lynch Calls for HP Breakup--Again

Hewlett-Packard did its Digital Experience Launch of 200 new products a few weeks ago, and analysts at Merrill Lynch took the occasion to once again advise HP's upper management to hire a chief operating officer and to seriously consider splitting up the company into pieces. Steve Milunovich, the top IT analyst at the brokerage firm, has been saying for months that HP can be sensibly split into a consumer company and a commercial company, or can be divided into digital imaging and computing halves.

For the third year in a row, HP has launched a boatload of new products around the back-to-school and end-of-year IT budgets. And while Milunovich applauded the launch of the Vivera branding for HP's printer ink, which lasts 100 years, as opposed to 60 to 70 years with normal ink cartridges (and thereby justifies HP's premium prices and props up the profit margins of its Printing and Imaging unit), as well as new Photosmart printers, flat panel TVs, DVD home theaters, and other consumer products, he complained in a recent report that the products seem a little late to market, with school soon to start.

Milunovich also believes that HP's need to emphasize functionality over low price with its imaging and printing products--and thereby to ensure continued profits that help to prop up its server and storage units--will give Lexmark leverage with customers. He makes a good point.

But the argument that all profitable divisions should be set free, while making financial sense in the short term, is not necessarily a good strategy in the long term. If IBM had believed the nay-sayers more than a decade ago, there would have been five Baby Blues that would be tearing one another to shreds today in a way that may not have yielded profits for these individual companies or decent products for consumers, because of the relentless cost cutting and competition.

Competition can go too far, and just as spinouts and mergers can. What IBM chairman and CEO Louis Gerstner correctly recognized was that IBM was far more valuable as a single entity than it was as a bunch of smaller companies. Upon taking over IBM, Gerstner must have also seen that it was in a much worse state than anyone had imagined and that it wasn't really possible to break up the company. Keeping IBM whole was his only real option, and he knew that the profits from one division could shore up other divisions as he cleaned house and got IBM into shape. It took four to five years for this to pan out, and Gerstner had the benefit of the ERP, Y2K, and dot-com booms to boost IBM's prospects.

While HP's current state is somewhat different, in that it is the result of a recent merger of two behemoths, whether Milunovich or the rest of Wall Street likes it or not, in the long run, HP needed Compaq as much as Compaq needed HP, and neither was going to profit without doing something radical, like the merger. Maybe HP should have bought Dell? Maybe HP should have done a lot of things. But it bought Compaq, and HP's management is committed to seeing this merger through, even without a boom to help tide it over. Wall Street had just better get used to this idea.

CEOs Who Outsource Seem to Be Profiting Nicely

The 50 largest companies engaging in outsourcing of their workforce (including offshoring) have been reaping the benefits from those moves and passing some of the benefits to their CEOs in the form of higher salaries, according to a report by United for a Fair Economy and the Institute for Policy Studies. The report, "Executive Excess 2004," found that salaries among CEOs at the 50 largest outsourcers increased by 46 percent in 2003, to an average of $10.4 million, and the report further discovered that these CEOs made an average 28 percent more than all CEOs averaged across large enterprises that year. Outsourcing clearly pays; it just doesn't happen to pay you.