IBM and Red Hat Collaborate to Deliver E-Business Software Solutions for Linux

IBM and Red Hat To Market, Distribute and Support Bundled Offerings

SAN JOSE—August 15, 2000—IBM Corporation (NYSE: IBM) and Red Hat, Inc. (NASDAQ: RHAT) today announced an agreement that will enable, for the first time, a commercial Linux* developer to bundle all of IBM's Linux-based software into e-business solutions.

Through the far-reaching collaboration, IBM and Red Hat will jointly market, distribute and support bundled IBM, Lotus, Tivoli and Red Hat software offerings. IBM will provide the software for Red Hat Linux** solutions through products such as IBM DB2*** Universal Database, IBM WebSphere*** family of e-business servers, Lotus Domino***, Tivoli Framework***, and IBM's Small Business Pack for Linux.

The agreement is unique for both companies in two respects:

• This marks the first time that Red Hat and IBM will embrace and promote each other's Linux offerings providing both enterprise and small-business solutions for its customers worldwide.
• Through a first-of-a-kind comprehensive marketing agreement, IBM and Red Hat will jointly fund marketing and channel recruitment and enablement efforts focused on IBM/Red Hat solution bundles for the worldwide Linux market.

"We are delighted that Red Hat has embraced IBM software for building e-business solutions for our mutual customers," said Steve Mills, general manager, Solutions and Strategy, IBM Software. "By working together and having the breadth of software available for Linux from IBM, Lotus, Tivoli and Red Hat, we can offer customers more choices for complete e-business solutions faster and with global availability and support."

Initially, Red Hat will sell Red Hat Linux and Red Hat services bundled with IBM software such as DB2, WebSphere Application Server, Lotus Domino and the IBM Small Business Pack for Linux. The agreement allows Red Hat to use any IBM, Lotus or Tivoli software available on Linux in future solutions. These complete e-business and Internet solutions will be available through Red Hat's online marketplace at redhat.com, beginning September 1, 2000. IBM and Red Hat will work jointly to enable channel partners to sell these solutions. Additionally, IBM intends to sell these same solutions through its "ShopIBM" Web site.

The announcement extends and strengthens the relationship between Red Hat and IBM that began in early 1999, when IBM led the industry in announcing support for Red Hat Linux. Since then, the two companies have worked closely on several projects designed to advance the adoption of Linux and open source software.

"The past year has seen an accelerating pace of development that signals wide customer acceptance of open source software and Linux into mainstream computing," said Matthew Szulik, chief executive officer, Red Hat, Inc. "This agreement is perhaps one of the most significant developments so far. IBM is the gold standard for computing. With Red Hat and IBM working together to develop and market e-business solutions for Linux in enterprises around the world, and with IBM now selling Red Hat Linux with its products, it's clear that open source software is fully capable of handling critical business computing needs."

Linux momentum
According to International Data Corp. (IDC) research, paid Linux shipments grew faster than any other server operating system over the past two years. Figures for 1999 show Linux shipments held 24.6 percent of the server operating system market, up from 15.8 in 1998.

Research firm Netcraft, Inc. (http://www.netcraft.com/) states that as of May 2000, 30 percent of all public Web sites run on Linux-based operating systems, making Linux the most popular choice for deploying public Web sites. IDC research shows 40 percent of all spending on Linux servers is for Internet-related applications, firmly entrenching Linux servers in the Internet infrastructure.

About Red Hat, Inc.
Founded in 1994, Red Hat is the leading provider of open source Internet infrastructure solutions, ranging from small embedded devices to high availability clusters and Web serving. Red Hat applies its technological leadership to create open source solutions for Internet infrastructure and post-PC environments, offers services backed by the best understanding of open source and the most comprehensive resources, delivers the brand of a widely trusted open source leader and corporate partner, and persists in an indelible commitment to the virtues of open source to lead a revolution in the computing industry.

Red Hat, Inc. is based in Research Triangle Park, N.C. and has offices worldwide. Visit Red Hat on the Web at http://www.redhat.com/. For investor inquiries, contact Lippert/Heilshorn at (212) 838-3777.

About IBM
IBM is the world's largest information technology company, with 80 years of leadership in helping businesses innovate. The fastest way to get more information about IBM is through the IBM home page at http://www.ibm.com/. Information on IBM's Linux offerings is available at http://www.ibm.com/linux.

Forward-looking statements
Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, product plans and performance, the ability to continue to develop the Linux kernel and other software, reliance upon strategic relationships, Red Hat's dependence upon an open source business model, reliance upon independent third-party Linux developers, management of growth, expansion of Red Hat's business focus and operations, the possibility of undetected software errors, the enforceability of the GNU General Public License and other licenses under which Red Hat's products are developed and licensed, the scarcity of Linux-based applications, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov/.

* Indicates trademark or registered trademark of Linus Torvalds.

** Indicates trademark or registered trademark of Red Hat, Inc.

*** Indicates trademark or registered trademark of IBM Corporation and/or its subsidiaries.