Silicon Spin 4-15-99

Hello, welcome to Silicon Spin, the show that tackles what we think are high-tech issues. I'm your host, John C. Dvorak, and along with our panel of what we think are pundits, We want to get your comments so we can see what we think about them. So make sure to visit the website at siliconspin.com and don't forget to answer the question of the week for a chance to win the valued Silicon Spin mug, which I think, you know, it's fluctuating on eBay right now, but I still have hopes for it to hit $100. Today's focus on Silicon Spin, Bill versus the Penguin, Linux races against Microsoft NT. Before we get to that topic, let's introduce today's panelists. To my right, Bob Young, CEO of Red Hat Software. These are the guys that are the primary distributor of the open source code Linux. Kevin Surace, the Executive Vice President of General Magic. He's responsible for developing the Portico virtual assistant and other telephony products. Over there on the far right is Jeff Hadfield, Editor-in-Chief of the Visual Basic Programmer's Journal and other Fawcett technical publications. And finally, Andy Reinhardt, correspondent for Business Week's Silicon Valley bureau. Welcome, everybody. Bill Gates is starting to feel the chill. First, Linux, the open source code symbolized by a penguin, didn't matter much to Microsoft. Then all of a sudden, Linux pecked away to the point where Gates admitted it was a potential competitor. That was hard for him to do. This week, Gates says the penguin is getting around, but it can't fly. Gates, seen here in a Microsoft video, told an audience of— in Houston— an audience of IT pros that freeware is confined to simpler applications like word processing processing and spreadsheets. I don't know what the heck he's talking about, but that's what he said. As for which is faster, as opposed to Linux or NT, an independent commission— an independent study commissioned by Microsoft declares, and believe this is a big shock, declares NT the winner. During the test, NT 4.0 was almost— this is a good one, too— 4 times faster as a web server, which nobody else seems to confirm, and 2.5 times faster as a file server. The tests used ZD's benchmarks, and Microsoft supported the NT system, and Red Hat wasn't there. Bob, can you tell us what happened in this, what some people are considering a fiasco?

Well, it's only a fiasco, I think, for Minecraft and possibly Microsoft. We don't really know what happened. We weren't, as you say, we weren't there. We weren't invited to participate. We weren't even aware of this challenge.

I was talking to a friend of mine, Jason Perlow, who's back in— who does one of the magazines back in— one of the writers in New York, and he told me that the evidence was that Red Hat was detweaked in such a way, or the Linux that they were using, whatever, whosoever's code it was, was tweaked and it was just— wasn't optimized, and the other stuff was punched up the most. Because isn't in the field, most people— I don't know if anyone can say this is true or not true— in the field, Isn't Linux seen as a faster server product?

Linux is a very efficient, a very clean OS. Runs very effectively if you tune it properly. And you can tune any application and any operating system to run either quickly or slowly depending on what you're measuring for. So for example, if you're looking for I/O throughput, you're going to tune your OS differently than if you're looking for number crunching. Applications, for example. And these guys clearly had an interest in making Microsoft look good. The exciting bit of this sort of story, though, the series that you just mentioned, is that previously Microsoft had a reason to ignore Linux. Because the very act of acknowledging Linux gave it credibility that they didn't want it to have.

Right. And I can't blame them for that.

Exactly. But suddenly you have Microsoft acknowledging Linux all over the place. Clearly Microsoft have determined that Linux have a big enough market share and a big enough momentum in the market marketplace that they can no longer ignore it, and the cost to them of acknowledging it and competing with it is less than the cost to them of trying to beat up on it and giving it credibility. So we think this is sort of a watershed moment in the market acceptance of Red Hat Linux and Linux and open source in general.

Can I ask you a question I've always wanted to ask, though? What makes Linux any different from just being this year's Unix?

Great question.

And then we actually had— we've had a bunch of major CEOs at major corporations who, when we approach them, they say, now, why does the world really need another operating system? And you've seen a whole bunch of these, you know, IBM's OS/2 and this sort of thing. The primary difference is the open source model under which this stuff is built.

Right.

Because for the first time, the end user and the industry at large has real control over the operating systems they're using. And when you think about it, an operating system is an infrastructure layer item. We all have to use operating systems. It's like the highway system that we all drive our cars on and all the trucking companies use.

Mm-hmm.

And imagine one trucking company owning that highway system. They could not only charge whatever toll they wanted, they could redirect the highway to serve their customers better than their competitors' customers. And this is putting the OS in the public space where both the users and the other industry suppliers have as much control over the infrastructure layer as Red Hat does, Our role is effectively we're the maintenance company over the Linux OS that you choose to buy from us.

But Bob, my question is not necessarily— I'm not arguing your point that it's a threat to Microsoft. We did a survey on our website, on devx.com, where we asked what they thought the biggest threat to Microsoft was, and second only to Microsoft themselves was Linux. But my question is, if one company— you don't want one trucking company to own everything, but isn't it possible that you might want more than one company to be driving trucks over it. I have no issue with that. But do you want multiple people building the road? And I think that's the question we're asking about. I mean, I'm trying to extend your metaphor.

Have you been on a Caltrans road recently?

Exactly. That's what I'm saying. I mean, you know, you don't know. But then again, do you want— you know, when you drive through this county, do you want this person to have built this part of it? And so on and so forth. I've taken the Linux plunge myself to try and figure it out. And for a server installation, I have no problem with it. But there's no way I would have known the tweaks. I wouldn't have presumed to know the tweaks.

Even more to the point, do you want to have to get out of your car and build your own road in front of you before you can drive on it. I mean, as a consumer operating system, I don't think we're talking about a real phenomenon here yet. Which is why I'm astonished that Gates is talking about spreadsheets and word processing.

We think that that relates to his implied threat to port, of course, Office to Linux, and we're very excited about that comparison as far as spreadsheets. But in actual fact, keep in mind that while we don't differentiate between desktop and server OS, we ship you a complete OS that can be used for both. There are 2 separate markets, and no one actually buys operating systems, they buy applications. And so that— on the server, we have all the applications. We have Oracle, we have Sybase, we have IBM's DB2. On the desktop space, you go into CompUSA, you aren't going to find very many applications that run on Linux.

Right.

So the net effect is we got a long way to go before we're going to have those applications, the TurboTax, the QuickBooks, the games that you're looking for to make Linux successful in your basement. Having said that, in the enterprise, it's going to make a great dedicated desktop, and a huge percentage of the PCs that go into enterprises are dedicated machines to a particular application.

Yeah, but Bob, may I question one other thing here? You know, we made a choice, in fact, in building a sophisticated internet service with 300 servers, and we had to essentially choose, frankly, between NT or Unix, right? And potentially Linux, and we talked about that, et cetera. But the bottom line got down to where we were going to get the support, how much money was being thrown into both third-party developers and the development of next-generation OSes. If you looked at where the money in the industry was going, whether or not we agree or not, there's an awful lot of money going into NT. And I would argue that IS managers don't want to know or don't care that they can add to the source code. In fact, they don't know how to add to the source code. They want something that's going to keep their job.

Yeah.

And I think if they choose NT or UNIX, they're probably going to keep their job. And if they choose Linux and the thing blows up, They may not. So how do you answer that?

I'm so far over on your side on that one.

Actually, I'll tell you what, why don't we take a break and then we'll get back to the answer to that question right after this. Welcome back to Silicon Spin. We're finishing a discussion about Linux versus Microsoft. This is the big battle that's coming up in the, in the probably years ahead. Kevin, you had an interesting question. Can you reiterate it?

Sure, Bob. I've got to design a service that's got 300 servers, or I'm an IS manager. Look, I can choose Sun today. I've got Solaris. I've got NT with Microsoft's backing. Why would I ever choose Linux?

That's a great question because we ran into that one so often. January '98, we started winning industry product of the year awards for the second year in a row, and yet all the customers were still choosing the competitive products. And so we were going, I think we got a problem here. And the problem was Red Hat was simply too small to be a trusted supplier of an enterprise like yours. So what do you do? Well, we could double the size of Red Hat. but we'd still be too small. We could quadruple the size of Red Hat and we'd still be too small. So we recognized we had to go out and get real industry endorsements of both Red Hat and the software development model itself. That led very directly to the investment round last September where Intel and Netscape stepped up and acknowledged support for the open system development model, as well as for Red Hat Linux specifically. And that is what opened the taps. That's where IDC's report that showed up in December of a 212% growth rate in the space, And that in turn led the opportunity for us to bring in the second round of major vendors into supporting this model. And so suddenly, whereas that concern would have been perfectly accurate a year ago, and probably still accurate 6 months ago, is today no longer a big issue.

Why?

I think that—

Just because you got a lot of money? You didn't explain it.

Because if you can't get these services from Red Hat, you can get these services from multi-billion-dollar suppliers like Dell and Compaq and IBM. and Netscape and Oracle, these guys have all stepped up saying that they are willing to offer services and products built around these technologies to their customers. You are no longer depending just on Red Hat for that support.

I was actually more interested in the classic open source model for supporting these kinds of products. I mean, at least the way it's supposed to be, which is, in other words, there are these guys out there that are giving you support in a kind of a free-for-all manner, that you go to the IRC for all practical purposes, 24 hours a day, there's somebody around the world that can answer any question about Linux and fix your problem on the spot. And I'm actually kind of concerned that you would say that an IT manager couldn't deal with either putting any new source code in the operating system or deal with this kind of open source mentality, because to me, that IT manager isn't qualified to do the job.

There's a lot of IT managers that don't code in C. I mean, a lot of them are focused on running their IT department for their company. They don't care that it's open source or not open source.

And you don't think they should have some people that can do a couple of lines of code somewhere in the company?

No, John, the issue is the IT manager's job is not to solve today's problem. His job is to worry about the problems that are going to come up in 5 years. When he adopts new technology—

But shouldn't he have one guy that knows something? Of course.

And he's got lots of these guys, and they've all been installing Linux solutions all across his corporation. But the catch is his job depends on the success of that technology solution 5 years down the road, and he can't trust some nameless kid on the net who solves his problem today being around 5 years from now. And that's where Compaq and IBM stepping up to support this is so important for this model to actually make headway in the commercial world.

So you think that's the big turn for you? You've got some big partners that are going to help support it, and that's going to make people feel much more comfortable.

This comes back to the original point. This is why Microsoft are now publicly saying Linux is evil, because the answer is—

They're very slow, by the way.

The big point, and this is what we hear from developers worldwide, is not that they're not interested in Linux. I mean, if there's a target market for Linux, it's the people that like to tinker, and those are developers and IT managers.

Absolutely.

So at this stage, I see no problem with prototyping, but Bob's mentioned that he's got a company full of guys who've been playing with Linux. It's possible, but unlikely. If I were staking a career as a developer or as an IT manager, I would still be looking at something that's entrenched, that's got an established third-party development model, as you talked about. that's got established development tools to solve my application customization issues, that is something established. Now, I may prototype on Linux, but I think it's still premature to dive into that.

Don't you think it's a little old-fashioned, the way you're thinking?

I'm an old-fashioned guy.

You look like an old-fashioned guy.

Jeff, whatever you do, don't tell us what your email address is because it's going to be full.

Again, I'm not arguing that Linux has a lot of value. I'm just saying that at this stage I think you're taking a risk to go with it, and that's just based on my opinion.

Yeah, that's Jeff Hadfield, editor-in-chief of Visual Basic Programmers Journal. You can probably find it. It won't take any talent to find his email address. Coming up on Silicon Spin, the stock went up and the handcuffs went on. An arrest in the case that pumped up Pairgain stock next. Welcome back to Silicon Spin. First, the Melissa virus resulted in a quick arrest. Now the FBI has found a suspect in the Peargain stock fraud case. We talked about it, I think, last week. Thursday, the FBI arrested a 25-year-old man who apparently works for Peargain as a computer engineer. On April 7th, Gary Hoak allegedly used Bloomberg's website logo to place a false story that Paragain was about to be acquired. The company's stock then jumped more than 30% and quickly sank on the news that the story was fake. ZDTV reporter Janet Yee talked to securities attorney John Appel. Appel says the financial punishment could really hurt.

He could be looking at liability to any investors who bought Peregrine and lost money as a result.

His employer could certainly be looking at civil liability, particularly if the employer had any knowledge whatsoever about the activity.

While prosecutors say there's no indication that higher-ups were involved, Appel said the company could still face penalties. Andy, why would a 25-year-old IT pro imagine he could get away with this kind of a rather dubious hack?

Well, I can't vouch for the technical side of it, but I suspect he was playing on a lot of gullibility and vulnerability that's sort of inherent in the internet culture. I mean, people have a tendency to believe what they see on screen.

Was it an April Fool's joke, maybe? Has anybody brought that possibility up?

Did it run on April 1st?

Well, maybe. April 7th, but he missed it. Maybe he missed the deadline.

In all seriousness, I think that, you know, financial and investment information on the web is to be taken with a considerable grain of salt.

Yeah, but there's another issue that came up in this story, which is that maybe you can take it with a grain of salt, but if you can sue for the losses that you had on some speculation like this and get your money back, wouldn't that just encourage people to just take a chance on every one of these kind of speculative deals?

To tell you the truth, that surprises me a lot. I'm surprised there isn't a little bit more of a caveat emptor kind of situation with this information. I mean, if you read something without having any idea whatsoever what the source of it is and you act upon it and you're burned, you know, that doesn't seem to me like it's the fault of the person who posted it necessarily.

It's somebody— so you think the guy should be blameless? The guy— so in other words, you can pump this stuff out there and not have a financial hit?

Not blameless. Clearly, he perpetrated a hoax, but to the extent that people can recover damages as a result of that, I could see—

Yeah, well, don't you think it would minimize the hoaxing?

If people are prosecuted for hoaxing?

Right, and made to pay all the losses of every investor who got suckered? Yes, yes.

It's clear I haven't thought this all the way through.

Well, I'll tell you, in this particular case, for anyone who's been in a public company before, you absolutely know that you cannot— Disseminating any information that's even just the hint of possibly incorrect. Just the hint. And for an employee, you know, it's one thing for someone on the web to post something about someone else, and you can already get in trouble. But as an employee of a public company, to post something like that, and hoax it up with the Bloomberg logo and everything, he clearly didn't understand the SEC rules at all. This is terrible.

Not only that, but he clearly didn't figure out how easily he could be caught at it. But in terms of not understanding, you call him a 25-year-old IT pro. He's a 25-year-old kid, and he clearly wasn't showing much sense or responsibility in this one.

Not at a public company.

Well, I mean, we're of course assuming that he actually did it. This is all alleged, but maybe it was just— I'm thinking when I see something like this, just kind of a goofy thing to do.

See what he can get away with.

Yeah, just kind of a silly act.

It reminds me of the alleged sorts of things that I would allegedly do in my alleged high school.

And you can do goofy things about a high school or goofy things about a private company, but not at a public company, and not being at that public This is bad.

How many people do you think actually realize that there's implications like this? Because I think there's a lot of naivete out there. There's people— I mean, look at these day traders. I mean, they're just going buying stocks and running up the PE ratios to thousands and thousands.

Naivete on both sides of the fence. That is, the doers— there's a lot of public companies now that aren't billion-dollar companies anymore. They're zero-dollar companies in terms of revenue. They went public at a stage where maybe these rules aren't so clear to everyone, right, as they might be at an Intel or something else. And there's naivete in the day traders. So there's naivete on both sides of the aisle.

I blame this on a decrepit education system in this country. Coming up on Silicon Spin, Linux offers free and easy encryption. Will that encourage criminal behavior? The debate next. Welcome back to Silicon Spin. Big Brother may be watching you at home and at work. An AT&T survey found consumers like seals of privacy if they're not confused by them, and they hate spam, which is not much of a surprise. As for the office, more companies than ever are spending millions of dollars on Companies are spying on their employees. The American Management Association says monitoring of email, phone calls, and computer files in the workplace has risen from 35% in 1997 to 45% in 1999, and it's going up. 84% of those companies tell employees that they're being watched. That leaves the 16% who don't. Kevin, can the virtual assistant help with privacy?

Well, we'd have to spend a lot of time defining it, but basically a virtual assistant is something that lives on the internet. and puts all of your stuff there in a very private way that's highly encrypted and highly secure. So in some way, in this workplace scenario, sure, because you could have all of your communication occur out on the internet, including your faxes, your emails, and your voicemails, and your stocks, and your calendar, etc., in which case your employer wouldn't be able to get to them through their normal—

Hotmail.

Yeah, Hotmail to the nth degree. That's exactly right. Exactly right.

And is your communication between your desk So between your desktop and your assistant, your virtual assistant, is that private?

HTTPS, absolutely. Secure link all the way around. So that wasn't the main reason we developed the technology, but it can afford some privacy, absolutely. But to add to this topic, interestingly enough—

Can employers still find a way to tap in by like having a camera over your shoulder or something like that? I mean, there's a lot of systems, things now with the camera built into the little—

Well, they'd also have to tap the phone. And they'd have to tap your cellular phone.

You've never called a company and they said, this call may be monitored?

Yes, but not from a cell phone. You pick up a cell phone, a digital cell phone, and you're calling your virtual assistant. You've got access to your email, your voicemail, your faxes, your pages. Very tough to get at.

Wasn't the preferred method by employers, though, to embed transistors in your head?

Running Linux, as a matter of fact.

One of the better applications.

It won't crash.

Okay, so here we have a problem. You're using a very highly encrypted private virtual assistant, and you decide to launch a A phony rumor about your company's being bought by another company.

And they can't track you down.

Well, this is the Zero Knowledge scenario, right? For those who are familiar with the concept.

No, I'm not. Tell me.

Okay. Zero Knowledge is a company, they're in Canada, and I'm not the expert on them, but their intent is to create gateways that you can route anything through, including news to newsgroups or web pages or whatever, and they instantly erase everything that went through them.

So this is different than the anonymous servers that are in Finland.

Significantly different because everything's erased forever. Instant erasure. And so there's no tracing at all, which probably scares the FBI and probably scares a lot of people, but it will offer complete anonymity for anyone who wants to post this kind of stuff on the web.

Wow.

But it's basically turning the web back into a conversational mode. I mean, we don't record every conversation we have privately with people. Why should we be recording every conversation we have on the web?

Because it isn't private on the web. If it was between you and I, Well, that may be fine, but if it's between me and 50 million people who see it, maybe not fine anymore.

But you're only deleting the private emails, aren't you? Are you talking about deleting the newsgroup conversations?

Oh, well, again, zero-knowledge is a technology that allows you to erase all of the tracing, all the way through your ISP and all the way back, all the way from your desktop. So it's desktop encryption all the way through, and all the traces are erased. So there is no track of where you posted, what you posted, how it got there.

I actually know— I've got to— we're going to have to look into this.

Yes, absolutely.

Anyway, I'd like to thank our panelists, Jeff Hadfield of Fawcett Publications, Bob Young of Red Hat Software, Kevin Surace of General Magic, and Andy Reinhardt of Businessweek. I'm John C. Dvorak. Thanks for watching Silicon Spin.