Subject: Reuters: Amazon saves 25% on shift to Linux
From: "Karsten M. Self" <kmself@ix.netcom.com>
Date: Tue, 30 Oct 2001 18:12:10 -0800
Tue, 30 Oct 2001 18:12:10 -0800

Summary:  Sun and Microsoft lose when Red Hat helps provide Amazon with
$17 million on technology costs, likely realized through licensing and
hardware savings.  Possible AOL-MSFT storm clouds on the horizon.

Nod to Red Hat.  Administration costs, anyone?



http://dailynews.yahoo.com/h/nm/20011030/tc/retail amazon linux dc 2.html

Tuesday October 30 4:32 PM ET
Amazon Says Saving Money with Shift to Linux

    By Scott Hillis

    SEATTLE (Reuters) - Amazon.com Inc. (Nasdaq:AMZN) saw its technology
    costs fall by nearly 25 percent in the previous third quarter as it
    reaped the benefits of falling telecommunications prices and a shift
    to the cheaper Linux operating system, the online retail giant said
    in a regulatory filing on Tuesday.

    Amazon's adoption of Linux mirrors experiences among other companies
    that, eager to cut costs amid the faltering economy, are
    increasingly using the open-source system as an alternative to
    costlier software from companies such as Sun Microsystems Inc.
    (Nasdaq: SUNW) and Microsoft Corp. (Nasdaq: MSFT).

    Linux is an open-source operating system, meaning its code is freely
    available, in contrast to proprietary products like Microsoft's
    Windows which keep their code under lock and key.

    By using Linux, corporations can use numerous computers without
    paying a software license fee for each one, and can also customize
    the system to fit their particular needs.

    Linux's greatest success has been on the Internet, where it has a 24
    percent market share on server computers, according to market
    research firm IDC, which projects Linux will remain the No. 2 server
    operating system behind Windows through 2005.

    And as far as telecommunication prices go, according to Adam
    Hamilton, an analyst with brokerage McAdams Wright Ragen, he figures
    the company probably has also benefited from lower connectivity fees
    it pays to keep its site up and running on the Internet.

    In its third quarter, Amazon said it spent $54 million on
    technology, down $17 million or 24 percent from the $71 million it
    spent a year earlier, the company said in a 10-Q filing with the
    Securities and Exchange Commission.

    In the first nine months of the year, Amazon spent $189 million on
    technology, compared to $200 million in the same period last year,
    it said.

    ``The decline in absolute dollars spent ... primarily reflect our
    migration to a Linux-based technology platform that utilizes a
    less-costly technology infrastructure, as well as general price
    reductions for data and telecommunications services due to market
    overcapacity,'' Amazon said.



    AMAZON TIGHT-LIPPED

    An Amazon spokesman declined to give details of exactly how the
    company was using Linux, what software it had replaced and how much
    it was saving from that move alone.

    ``We've always been pretty closed-mouthed about technology on the
    back-end stuff, partly because it's pretty steep tuition and we
    don't want other people going to school on our tuition,'' spokesman
    Bill Curry said.

    However, Amazon has a deal with Linux vendor Red Hat Inc.  (Nasdaq:
    RHAT) to use its software to process secure electronic commerce
    transactions -- the heart of Amazon's operations.

    By embracing Linux, Amazon is edging away from the Seattle area's
    high-tech powerhouse, Microsoft.  Analysts said while Amazon is
    believed to use some Microsoft products, a recent deal with
    Microsoft foe AOL Time Warner Inc. (NYSE: AOL) is probably pushing
    it farther away from the software giant.

    ``With the investment they took from AOL and the agreement to
    provide AOL with a personalized shopping platform, I think they've
    been gravitating toward the Linux-Unix anti-Microsoft camp,'' said
    Hamilton.



    PROMISED LAND OF PROFITS AHEAD?

    But the shift to Linux started earlier when Amazon said in late
    April it would begin moving a ``large portion'' of its systems to
    Linux as part of a broader plan to cut costs and nudge the
    money-losing company toward profitability.

    Amazon Chief Executive Jeff Bezos is fond of saying his company is
    better positioned than traditional retailers because it is based on
    technology, the price of which falls over time, rather than real
    estate, the cost of which constantly rises.

    IDC operating systems analyst Dan Kusnetzky said it was no surprise
    Amazon was saving millions by switching to Linux.

    ``That's one of the reasons Linux is so attractive,'' Kusnetzky
    said.  ``The software, and often the cost of the hardware that runs
    on it, is considerably less.''

    But now Amazon is facing flagging consumer confidence, a shaky
    economy, and deep uncertainty about the future in the wake of the
    Sept. 11 attacks.

    Amazon shares fell 63 cents, or about 8.8 percent, to close at
    $6.423 on Nasdaq Tuesday.

    ``Whether or not they can make it to the promised land based solely
    on that (technology savings), I don't think is true. They need the
    economy to come back,'' Hamilton said.

-- 
Karsten M. Self <kmself@ix.netcom.com>       http://kmself.home.netcom.com/
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