The Hidden Giant of the Tech World
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Quick, what do Google (NASDAQ: GOOG), Facebook (NASDAQ: FB) and Yahoo (NASDAQ: YHOO) have in common?
If you said they were major tech companies, you're close, but as they say, no stogie. What they all have in common is that they're powered by Linux, the free operating system that anyone in the world with the right technical know-how can contribute to.
While it looks like some kind of hippie institution right out of the Bay Area, it has some serious business advantages over systems like Microsoft (NASDAQ: MSFT) Windows, especially in the server space. These systems that are serving up your cat pictures have to stay up 24 hours a day, 7 days a week, with very little downtime. Since thousands of programmers all over the world are working to improve the various bits that go into a Linux system ever since Linus Torvalds released his initial version of the kernel, or the very heart of the system, in 1991, it's become very stable and reliable.
The situation is analogous to public companies, where anyone can scrutinize a corporation's finances, from investors to analysts to bloggers, to see if a company is a worthwhile investment.
The upcoming Windows 8 features some user interface tweaks that are intended to make it more tablet-friendly, causing some weeping and gnashing of teeth among users. Don't expect Linux to replace Windows on the business desktop, however, for the same reason they used to say that nobody ever got fired for buying IBM.
In addition, since Linux is intended as a work-alike to Unix, it benefits from the research that's gone into that system over the years.
Linux is also more flexible than Windows in the server world. It's fairly trivial for Google to create large data centers of commodity servers in key areas around the world. Facebook also has massive clusters of servers as well.
Linux's attraction to Google, Yahoo! and others while they were still startups was that it lowered the barriers to entry. Faced with buying a copy of Windows server for several hundred dollars each, the various distributions of Linux are free (both as in "speech" and as in "beer.")
Sergey Brin and Larry Page were able to start Google very cheaply by simply by sticking PC boards into homemade server racks made out of LEGO as grad students at Stanford. Now Google's trading at over $600 a share.
In the '90s, the choice for an Internet startup was between expensive Sun Microsystems (now Oracle) servers running Solaris or off-the-shelf PCs running Linux and the Apache Web server. Plus, they could hire newly-minted computer science graduates to maintain these systems. The choice was obvious. Using Linux gave Google, Yahoo! and others a significant competitive advantage simply by saving so much more money than established enterprise companies.
Other businesses have caught on to Linux's power. Red Hat (NYSE: RHT), one of the major Linux has done consistently well selling their Enterprise Linux to businesses. They've consistently beaten investor's expectations and their revenues have gone up and up and up.
When your friend who's a serious geek praises Linux, before laughing and pointing out how you've never seen it on a serious business desktop, realize that many of the major tech companies rely on it to serve up the large databases and webpages that allow them to go public in the first place.
ddelony has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft. Motley Fool newsletter services recommend Facebook, Google, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
