October 27, 2006 (ITServices India.com) -- Red Hat Inc. won't cut its prices for Linux support contracts to businesses, despite plans by Oracle Corp. to offer similar services at a steep discount.

Red Hat CEO Matthew Szulik made the comments today to cable channel CNBC, one day after Red Hat's stock plunged following Oracle's announced plans to offer support for Red Hat Enterprise Linux (RHEL) and offer an Oracle-branded "clone" of RHEL.

At Oracle's annual confab, OpenWorld, on Wednesday, CEO Larry Ellison said his company's plan -- an extension of Oracle's five-year-old "Unbreakable Linux" program -- will deliver support at prices half of what Red Hat now charges. Prices start at $99 per system per year for bug fixing and patches and rise to $1,199 for premium support, which includes indentification.

Red Hat's stock fell 24% to $14.83 yesterday, erasing nearly $1 billion from the company's market value.

In a response emblazoned "Unfakeable Linux" and posted on its Web site, the Raleigh, N.C., Linux distributor raised doubts about the value and compatibility of Oracle's offering to customers. That view was in contrast to enthusiasm from the head of the largest Oracle user organization.

"The IOUG is extremely excited by Oracle's announcement for enterprise-class support for Linux," Ari Kaplan, president of the Chicago-based Independent Oracle Users Group, said in a statement today. "This Oracle support for Linux encompasses the complete best-of-breed technology stack from the operating system to the database, Fusion Middleware, application server and applications."

According to the IOUG, about half of its members run their databases on Linux.

Reaction from vendors that already provide support for Red Hat, many of whom also heavily do business with Oracle, was muted.

IBM "thinks Oracle's move is a validation of the space," according to a spokesman. IBM has supported customers running Red Hat and Novell Inc.'s SUSE Linux for five years, he said, with more than 7,000 full- and part-time Linux consultants.

IBM said it will continue to work with Red Hat on providing patches to RHEL. Moreover, it will continue to price its support offerings "similar to Red Hat to avoid channel conflict, because we want customers to feel comfortable buying support from either one of us," he said.

Hewlett-Packard Co., another leading provider of Linux support, said it "supports Oracle's plans" and is "pursuing a number of options with Oracle to ensure our ability to extend the benefits of the offering to customers," according to an e-mailed response from an HP spokeswoman.