BEIJING, May 8 /Xinhua-PRNewswire/ -- Data in CCID Consulting's Analysis Report on China's Linux Software Market in 2007Q1 show that operating sales revenues in China in 2007Q1 reached 1.234 billion Yuan, up by 9.4% over 2006Q1. CCID Consulting is China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong. Linux continued to top the growth of all operating system products. Its sales revenues reached 31 million Yuan, up by 30.9% year-on-year, continuing to maintain a fast growth momentum. Linux accounted for 2.5% of the overall non- embedded operating system market, up by 0.4% over 2006. However, it was still in a weak position as compared with Windows, Unix and other competing products.

I. Affected by Vista, Linux growth slowed down.

As China's GDP grew by 11.1% in Q1, the Linux market also maintained a relatively fast growth momentum. On one hand, this was closely related to the overall situation of national economic operations. On the other hand, it also benefited from the continuous pull of strategies towards the rise of Central China and the revitalization of Northeast China. A steady increase in IT application demand drove up the growth of the software market.

Thanks to the radiative effects of such large-scale activities as the upcoming 2008 Beijing Olympics Games and the World Expo 2010 Shanghai China, IT applications in some industries are gathering pace. To a certain extent, this has pushed forward the growth of the overall software market. In addition, State policy support for the Linux industry is also one of the driving forces for continuous market growth. However, since Microsoft introduced its Windows Vista operating system at the end of 2006, particularly after it signed a series of pre-installation agreement with leading PC makers, Linux growth slowed down in 2007Q1. The increased demand was basically concentrated on server-end Linux.

CCID Consulting's analysis of the vertical markets shows that government departments and big enterprises are still the main Linux users, accounting for a market share of 67.2%. The "copyright software" policy jointly implemented by the four major ministries and commissions has also benefited Linux. Cooperation between vendors in the industry has directly pushed forward further market growth.

As for industry segments, Linux market growth was mainly concentrated in the government, financial services and telecom sectors, which accounted for a market share of 34%, 22.5% and 21.2% respectively. The implementation of some government procurements, telecom and netbar projects and the upgrading of banking services systems were the important driving forces for the growth of Linux applications. In addition, the education sector achieved a market share of 10.4%, basically level with that of last year.

II. Linux faced more grave external challenges.

In the report, CCID Consulting pointed out that data released by Microsoft at the end of March showed that 20 million sets of Vista Personal Edition were sold worldwide in the first month of its introduction to the market. Of this, the sales volume of Vista Personal Edition in China was twice the initial sales volume of XP. All kinds of fast upgrading strategies and the $3 copyright Windows XP provided to government administrative departments in developing countries were yet another "war" bugle call from Microsoft to Linux. Meanwhile, Oracle staged offensives to Red Hat in the Linux services market. The dispute which Novell induced in the open source software industry further intensified competitive pressures in the Linux industry, adding too many uncertainty factors to the originally relatively weak Linux industry.

III. Vendors played their respective skills and competed on various fronts.

As for industry standards, to strengthen the competitiveness of the Linux industry, the Open Source Development Laboratory (OSDL) and the Free Standard Group (FSG) were merged into the Linux Foundation. It will soon introduce new test tools and thus strengthen Linux standards. This will greatly improve Linux's ease-of-use and low cost advantages.

In the market, vendors came up with their tactics in the face of competition inside and outside the industry. In January, Red Flag Linux signed a joint operating system development agreement with MiracleLinux and Haansoft. The new edition of Asianux will be released this July. Novell released SUSE Linux Enterprise 10 at the BrainShare Conference. TurboLinux further strengthened its cooperation with Intel in virtualization technology. This made TurboLinux China's first Linux distributor to support VT in China. The continuous introduction of new products and new technologies is the very direct embodiment of vendors to meet external challenges and serve consumer demands.

Meanwhile, Linux vendors are stepping up their efforts to expand in the government procurement and SMB markets. In 2007Q1, Novell won the bid for central and State organs' Project of Centralized Procurement and Supply of Information Products. Red Flag Linux obtained the qualifications for "100 Piloting Innovative Enterprises". To a great extent, these have promoted the development of Linux in China. In addition, with the gradual reduction of government procurements and orders from big enterprises, strengthening abilities of sales towards small- and medium-sized customers and expanding marketing channels have also become the new areas of competition for Linux vendors.

To sum up, CCID Consulting's research shows that China's Linux market is still small in size at present. In the face of great competitive pressures, continuously improving their R&D strength, expanding marketing channels, forging cooperation both inside and outside the industry and carrying out M&As will become important strategies for vendors to compete for the market. Meanwhile, CCID Consulting forecasts that in the remaining 3 quarters of 2007, there will be unprecedented competition in China's Linux market.

About CCID Consulting

CCID Consulting Co., Ltd. (also known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: HK08235), is a direct affiliate of the China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen and Harbin, with over 300 professional consultants and industry experts. The Company's business scope has covered over 200 large- and medium-sized cities in China. Apart from home market development, CCID Consulting is establishing international cooperation links across the United States, the Asia-Pacific region and Europe, by setting up agents in the U.S., Japan, South Korea, Australia, Singapore, Italy and Russia, with the aim of going global.

Based on four major competitive areas of powerful data channels, industrial resources, intense knowledge and deep understanding of information technology, CCID Consulting provides customers with consulting, research and IT outsourcing services covering strategy planning, IT application, marketing strategy, human resources and information technology outsourcing. Our customers range from industrial users in IT, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks.

CCID Consulting is committed to becoming the No. 1 brand for strategy consulting, the No. 1 consultant for enterprise management and the No. 1 expert in market research. For more information, please visit our website at http://en.ccidconsulting.com/.

For more information, please contact: Cynthia Liu Coordinating Manager CCID Consulting Co., Ltd Tel: +86-10-88559080 Email: liuyan@ccidconsulting.com

CONTACT: Cynthia Liu, Coordinating Manager of CCID Consulting Co., Ltd,
+86-10-88559080, or liuyan@ccidconsulting.com