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Volume 1, Number 37 -- October 26, 2004

But Wait, There's More

Red Hat Says Security Email Is Fake

Commercial Linux distributor Red Hat is warning customers that an email claiming to come for its tech support organization is a spoof and that it contains malicious code in the form of Trojan horses that compromise the Linux system.

The email, which comes from "The Redhat Security Team," says that people need to download a .tar file from Red Hat's Fedora development site. The message includes the usual assortment of typos and bad English that easily identify it as malware.

Red Hat wants to remind customers that official messages from the company concerning security patches and always sent from, and that these emails never contain any code. They only point to places on the Red Hat site where people can download the code for themselves.

Microsoft Stuns Competitors By Licensing Dual Core Chips as One Chip

In last week's issue, the lead story, "Rotten to the Core: Chips, Lies, and Software Licenses", we discussed how software licensing practices were being warped by the advent of multicore or multithreaded processors. The essay finished by saying that although Sun Microsystems, Intel, and AMD were all trying to convince software vendors to price their software based on CPU socket counts instead of processor core counts, their arguments had been met with much mocking and laughter.

That is, until Microsoft weighed in last week on the issue just after we went to press.

Microsoft, always seeking an advantage, announced that it would treat dual-core chips as if they were only one processor with regards to operating system and middleware software pricing. This will certainly make IBM, Oracle, and other software giants think twice, but with Microsoft having the deepest pockets in the industry, the fact that Microsoft is going to effectively cut its software prices in half on dual-core processors (and presumably by a factor of four on quad-core chips) does not necessarily mean the industry will follow suit. That said, the fact that Microsoft has broken ranks makes Intel and Sun look a lot less ridiculous--but only in hindsight.

Unisys Joins OSDL, Partners with SAS for Linux BI

Server maker Unisys announced last week that it has joined Open Source Development Labs, one of the centers of gravity in the Linux development community and the place where Linus Torvalds gets his paychecks from.

Joining OSDL is one way the big IT players demonstrate that they are serious about Linux. A few months ago, after four years of espousing that Windows was the appropriate alternative to Unix and that its ES7000 Intel-based servers were the best boxes on which to run Windows 2000 and Windows 2003, Unisys finally game in to the realities of the server market and supported Linux on the ES7000 machines. Unisys says that it will join a number of the working groups at OSDL, and it will undoubtedly contribute its expertise in enterprise-class servers.

In further news on the Linux front, Unisys also announced that it has partnered with the SAS Institute to peddle its analytical and business intelligence software for Linux on the ES7000s. Data warehousing is one of the big drivers of the ES7000 business to date, and by supporting 64-bit Linux using the Linux 2.6 kernel, Unisys and SAS will probably have an easier time attacking Unix accounts than they would with a Windows offering.

Cybernet Systems Beefs up NetMAX Reseller Program

Commercial Linux distributor Cybernet Systems announced this week that it is expanding its reseller channel in an effort to get a bigger piece of the Linux server pie. (We reported on the latest version of NetMAX, in the September 14 issue of this newsletter.) Cybernet was shipped about 40,000 NetMAX licenses since 1999, with early versions of its appliance software being run on top of BSD Unix; the latest several NetMAX versions have run on top of Linux.

Under the new NetMAX channel program, partners can get up to a 33 percent discount on NetMAX software and acquire new X86 hardware for their customers at similar discount rates. Cybernet is also automatically renewing the partner agreement for any reseller that acquires $2,000 or more in NetMAX licenses to resell, and is offering a 50 percent discount on support rates for partners. The reseller program also includes discounts on Cybernet consulting services. Free online reseller support sessions, and a quarterly reseller newsletter.

Dell Refreshes Entry Servers for SMBs

Dell has been setting the pace in the SMB server market for years and its competitors know it and have been gunning for it in the uniprocessor and two-way server space. The company yesterday responded with an update of its popular PowerEdge SC line of servers, which are aimed at customers with tight budgets and no significant IT staff.

The PowerEdge SC420 is based on the Intel E7221 chipset and supports hybrid 32-bit/64-bit Pentium 4 chips running at between 2.8 GHz and 3.6 GHz with an 800 MHz frontside bus or the Celeron processor running at 2.5 GHz with a 533 MHz frontside bus. The machine scales from 256 MB to 4 GB of main memory and includes a dual-channel Serial ATA RAID 1 disk controller and has an optional Ultra320 SCSI disk controller. Dell offers 40 GB, 80 GB, 160 GB, and 250 GB SATA drives and 36 GB, 73 GB, and 146 GB SCSI drives; the machine supports only two disk drives (like other entry tower servers from Dell). It has a Gigabit Ethernet port embedded on the motherboard, which is a big improvement over 10/100 Mbit Ethernet, and has five slots (two PCI Express, three PCI). Dell is configuring Windows Server 2003, Windows Small Business Server 2003, and Red Hat Linux 3 ES on the box.. A base machine with the Celeron chip, 256MB of main memory, a 40 GB SATA drive, with no operating system costs $499. However, this is not a real configuration. With the 3.6 GHz Pentium 4 chip, 1 GB of main memory, and two 160 GB SATA drives in a RAID1 configuration costs $1,586. If you want an operating system on top of that, then Windows SBS 2003 costs $499 or a one-year subscription to Linux 3 ES costs $349.

The PowerEdge SC1420 is a two-way entry tower server with a $799 base price, which is being given away with a $100 instant rebate as we go to press. It offers the same operating system options as the PowerEdge SC420, but it is an entirely different machine. The PowerEdge SC1420 is based on Intel's E7250 chipset and runs the hybrid 32-bit/64-bit "Nocona" Xeon DP processor, which have an 800 MHz frontside bus; Dell is supporting Xeon DP speeds ranging from 2.8 GHz to 3.4 GHz. The E7250 chipset supports up to 8 GB of main memory and the same disk options, Gigabit Ethernet, and PCI slots as the PowerEdge SC420. However, the SC1420 tower has room for four disks instead of two, which means it can support RAID5 data protection (which is not included in the base box). With two 3.4 GHz Xeon DPs, 2 GB of main memory, and four 160 GB SATA disks with a RAID5 SATA disk controller, the SC1420 costs $5,152.

Some Europeans Come Out Against Software Patents

European IT companies have been in a tug-of-war match with the political bodies in the region over software patents. Right now, the European Patent Convention offers patent protection on many things, but software is not one of them. In the United States, software is covered by copyright protection and in many cases patent protection. This is a fundamental difference of opinion about what protections writers of software are to be afforded. A contingent of European software makers want to adopt the U.S.-style of patent protection for software, and legislation is moving forward in the EU to accomplish this goal.

However, not everyone wants the Europeans to enact patent protection for software, and the people behind, including commercial Linux distributor Red Hat and open source database provider MySQL, are pushing for a grassroots campaign in the European IT community to block the adoption of laws enabling software patents.

Florian Muller, of SWM Software-Marketing, a German software company, is managing the campaign and is the main interface with the press and politicians. Muller is fired up on this issue.

"Software patents are used for anti-competitive purposes, stifle innovation, and would cost the entire economy and society dearly," said Muller in a statement accompanying the announcement of the organization. "On the bottom line, they create more injustice than justice. There is only a small group of people in the patent system who would benefit from them, and some large American corporations have ulterior motives. The public interest must prevail because every European citizen, every European company and every European government would end up paying a high price for such a monumental mistake." He called on everyone, particularly the open source and Internet service provider community, to support the campaign. "Anyone who mistakenly believes that patents are the same as copyright will see that this campaign is supported by successful businesses who protect their software development investments on the basis of copyright law. I have been living off copyright law for almost 20 years myself. Copyright protects innovators--software patents are used as weapons against innovators."

IBM's Third Quarter Is Decent, xSeries Sales Booming

IBM is holding up a little bit better this year than most IT vendors. And like the other vendors, the company is taking it one quarter at a time in 2004. Having had three solid quarters this year, and one of its best third quarters in the past decade, IBM is looking forward to a good showing in the final 13 weeks of the year.

For the third quarter, IBM booked sales of $23.4 billion, up 8.9 percent. Gross profits were $8.65 billion, up 10.7 percent. As the company rolled out new servers, storage, and software in the quarter, its sales, research, and development costs rose, putting pressure on profits. IBM had income from operations of $1.8 billion, up 1 percent. Income in the quarter would have been even higher if the company had not paid $237 million to settle a class-action lawsuit over its pension plan. Thanks to stock buybacks, IBM was able to boost earnings per share by 3.9 percent, to $1.06.

Sales of xSeries servers, which are based on Intel and Advanced Micro Devices X86 processors, exploded by 26 percent; and this was the tenth consecutive quarter of double-digit growth for IBM's xSeries line. Mark Loughridge, who took over as IBM's chief financial officer a few quarters ago, said that blade server sales were up 140 percent in the quarter and that blade products are now a significant contributor to profits in the xSeries line. IBM has a broad product mix, so there is always something that is not selling well. As was the case in the second quarter, the iSeries did not do so well, with sales down 26 percent. Sales of zSeries mainframes were up 12 percent, with MIPS shipped in the quarter up 17 percent, compared with this time last year. Sales of pSeries Unix servers were up only 1 percent in the quarter, thanks to the same product transition the iSeries is dealing with as it moves from Power4 to Power5 chips. Even with the iSeries drag, IBM's hardware sales were up 12 percent, to $7.5 billion. The Systems and Technology unit, which is comprised of servers, storage, chips, and other technology, had sales of $4.1 billion in the quarter, up 9 percent, while the Personal Systems unit (which includes PCs, laptops, retail systems, and printers) saw sales rise 17 percent, to $3.3 billion. ThinkPads and desktops had double-digit revenue growth, while store system sales boomed and were up 50 percent.

Storage sales, including disk and tape together, were up 5 percent in the quarter, and were similarly muted by product transitions. Overall disk sales were down 1 percent in the quarter as midrange disk sales climbed by 27 percent. Loughridge said that, on the technology front, chip yields at the 300mm fab in East Fishkill, New York, had doubled again in the third quarter and that IBM expected yields to improve by another 40 percent in the fourth quarter.

Loughridge also said that server sales in emerging markets like Russia, China, India, and Brazil were up 30 percent or more in all of those regions in all of the three quarters of 2004, and this appears to be one of the primary drivers of big iron sales for IBM. This presumably includes the company's core server brands, including the iSeries. Think about it. If IBM were not seeing booming sales in these areas, iSeries sales would have been a lot lower, and even pSeries sales would have gone south. Take out those four booming markets, and even zSeries sales might have flatlined this year.

IBM's Global Services business, which accounts for just under half of total sales, accounted for $11.4 billion in sales, up 10 percent. IBM's long-term booking declined by roughly half in this quarter, and Loughridge explained that the average term for both long-term contracts (spanning years to a decade) and short-term contracts (running a year or less) is contracting as customers negotiate for shorter terms, in order to give themselves more flexibility. IBM's backlog declined by about 3 percent, to $110 billion (that's after the removal of the giant contract it lost with JPMorganChase, which is taking its IT back in-house), and it had bookings of about $10.5 billion in the quarter. Loughridge was at pains to explain that the shortening of contracts was good news, in that it allows IBM to recognize revenues on contracts in a shorter term, and he said that IBM believes it can continue to grow revenues in services in the coming year, even as this change ripples into its services business.

For the third quarter, the Software Group had sales of $3.6 billion, up 5 percent, due mostly to currency effects. Operating system sales were $600 million, down by 2 percent (again, blame the iSeries for the decline), and middleware sales were up 6 percent, to $2.9 billion. Host-based middleware sales increased 5 percent, while middleware for Unix, Linux, and Windows servers increased 7 percent in the quarter. WebSphere family products were up 14 percent, but Lotus middleware sales declined 6 percent. DB2 sales across all platforms increased by 15 percent, and DB2 tools grew by 34 percent. IMS database sales were a lot lower, and other legacy middleware products saw sales decline, said Loughridge. Tivoli systems management products grew by 21 percent in the quarter, aided by the acquisition of Candle, and Tivoli security product sales were up 47 percent.

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Editor: Timothy Prickett Morgan
Managing Editor: Shannon Pastore
Contributing Editors: Dan Burger, Joe Hertvik, Kevin Vandever,
Shannon O'Donnell, Victor Rozek, Hesh Wiener, Alex Woodie
Publisher and Advertising Director: Jenny Thomas
Advertising Sales Representative: Kim Reed
Contact the Editors: To contact anyone on the IT Jungle Team
Go to our contacts page and send us a message.


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New Report Picks Apart Linux, Windows Security Claims

IBM Offers Low-Cost Blade Chassis, Bundles for SMBs

Sun Tight-Lipped About Future Opteron Machines

IBM Revamps Midrange, High-End Storage Arrays

But Wait, There's More

The Four Hundred
Move iSeries Forward and Adapt, or Die, Zeitler Says

Users Express Frustration with IBM, Marketing At COMMON

Problems with Early i5 Plague Customers, Partners

The Windows Observer
Big Blue Should Do Power Windows, Too

Microsoft Backs Intel, AMD on Dual-Core Licensing

TopSpin Pushes Utility Computing with Grid Switch Bundle

The Unix Guardian
IBM Launches 64-Way Power5 Unix Servers

Sun Makes Quarterly Revenue Increase Twice in a Row

Sun Lifts Curtain on UltraSparc-IV+ Processors

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