AOL in Talks to Buy Red Hat

AOL Time Warner Inc. is in talks to buy Red Hat Inc., a prominent distributor of the Linux computer operating system, according to sources familiar with the matter.

The negotiations--which are still fluid--are the latest indication that AOL Time Warner, the world’s largest media company, is looking for alternatives to software made by Microsoft Corp., whose Windows operating system runs 90% of the world’s PCs.

The longtime competitors have fought over rival consumer technologies lately, including online subscription services, instant-messaging systems and Web-based video and audio players.

Officials of AOL, Red Hat and Microsoft declined to comment.

Durham, N.C.-based Red Hat sells products and services based on the Linux operating system, the freely available software developed collaboratively by volunteers.

To counter Microsoft’s desktop hegemony, New York-based AOL Time Warner could use the deal to couple its America Online software, the market leader with more than 33 million Internet subscribers, with Red Hat’s operating-system technology, sources said.

The AOL online software, which consumers can install for free from the Web or a compact disc, is designed to run on Microsoft’s Windows operating system.

But the AOL software could be configured to override Windows and launch a version of Red Hat’s Linux operating system, sources said.

It was unclear Friday what price tag Red Hat could fetch. The company has a market capitalization of about $1.45 billion and employs about 600 people.

News of the talks came after the markets closed. Red Hat shares closed off 14 cents at $8.41 on Nasdaq. AOL Time Warner fell 46 cents to $29.58 on the Big Board.