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Oracle on Wednesday carried through on recent intimations that it might move fully into the Linux business, a step analysts said would change the dynamics of one of the fastest-growing parts of the software world.

The US company said it would make available its own version of the open-source operating system under the new “Unbreakable Linux” brand. It also said it would offer bug fixes and full support for the software at a lower price than that charged by Red Hat, the biggest Linux company.

Countering warnings from some observers that its entry might fragment the fast-growing Linux world, creating multiple incompatible “distributions” of the software, Oracle promised that its version would be identical to that produced by Red Hat.

Asked whether Oracle had the legal right to take its rival’s code, strip out the trademarks and redistribute the code under its own brand, Larry Ellison, chief executive, said: “It’s an open-source product, right? That is what open source means.” Software issued under an open-source licence is generally freely available, though any company that makes additions or improvements to the software has to make these available to other users as well.

“Strategically, this is very important [for the way competition between the biggest software companies is developing],” said Rick Sherlund, analyst at Goldman Sachs.

Oracle’s entry into the Linux business would limit the rise of Red Hat, which has emerged as the clear leader in the open-source software business, he said.

While IBM and some other big technology companies tried to counter the growing power of Red Hat by encouraging another company, Novell, to enter the Linux market, that has done little to stem Red Hat’s advance.

This year, Red Hat signalled its growing ambitions with the purchase of JBoss, another open-source company, moving it closer to creating a full package of software that might one day rival companies such as Oracle and Microsoft.

“They have created another Microsoft in the marketplace,” Mr Sherlund said of the big technology companies that supported Red Hat in its early days. “They have wanted to clip Red Hat’s wings.”

By selling a “stack” of software, from the operating system and middleware to a database and applications on top, Oracle will also open a new front in its competition with Microsoft, since it will be in a better position to sell a simple and complete solution to smaller and medium-sized companies, he said.

Shares in Red Hat dropped more than 13 per cent in after-market trading on Wednesday, leaving them at roughly half the level they stood at before Mr Ellison indicated in an interview with the Financial Times in April that he was considering entering the Linux business.

Mr Ellison said yesterday that Oracle’s aim was not to “kill Red Hat” but to expand the Linux business by introducing better support.

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