Canonical Sets Its Sights on Apple

If you hate Microsoft Corp. (Nasdaq: MSFT) and loathe Apple Inc. (Nasdaq: AAPL), you may have found your way to Linux-based operating systems. And if you've done that, you may have noticed that most of the things you want, whether it's a word processor or a music player, are probably available free of charge.

So how does one make money in the Linux business? The model employed, known as the “professional open-source business model,” profits from the selling of professional services, maintenance, and support. Red Hat Inc. (Nasdaq: RHAT), which became the first open-source company to post revenues exceeding $1 billion back in March, made $965.6 million of its 2012 revenues through subscriptions for such professional services.

Red Hat is also in a good position in the database management services market, as analysts project enterprises to increasingly turn away from Oracle Corp. (Nasdaq: ORCL) products in favor of various Linux-based systems in 2012. But for all that success, Linux is still something of a niche product. What about the everyday user of technologies? That's where privately held Canonical Ltd. comes in.

London-based Canonical, owned by Mark Shuttleworth, is the creator of Ubuntu, a popular Linux-based operating system. And Shuttleworth wants to make his company the next Apple.

But how can an open-source company possibly make profits on par with a giant like Apple? Apple, which single-handedly powers gains in the stock market, makes Red Hat -- the most profitable open-source distributor in history thus far -- look bush league. Further, can Shuttleworth and Canonical, which haven't been profitable in any of their seven years in business, possibly be the one to reach that level?

If they do, it won't be because of professional service subscriptions. Rather, it would be the result of some good PR work and a range of good, Ubuntu-powered products. Naturally, Shuttleworth is working on both of those.

Canonical, unlike many of its peers, has an almost single-minded devotion to simplifying Linux for the masses. That's not to say that other companies haven't put effort into the end-user experience of their products, but Ubuntu is the one that's walked away with a reputation as the “casual” computer user's Linux-based OS.

That fact, firmly solidified, facilitates every move and product Canonical is and will be making, like the recently unveiled Ubuntu for Android, an OS that enables multi-core smartphones to become desktops when plugged into a monitor, keyboard, and mouse. There's also the upcoming Ubuntu tablet, and the Ubuntu loaded computers produced by Dell Inc. , Lenovo Group Ltd. (Hong Kong: 992), Asus (LSE: ASKD), Acer Inc. (LSE: ACID), and Hewlett-Packard Co. (NYSE: HPQ), of which Shuttleworth expects to sell 20 million in 2012. And how could I forget UbuntuOne, Canonical's iTunes-esque music program, already operational and equipped with cloud capabilities.

Shuttleworth has his fingers in the TV market as well, expecting the first Ubuntu TV units to be available within a year. The system is expected to be able to host TV channels in US and EU formats, while also offering shows and movies on demand. The ultimate goal is for the user to have access to all purchased content on every Ubuntu-loaded device. All of a sudden, the possibilities seem a little greater.

Of course, Ubuntu probably still doesn't have the brand recognition necessary to rival Apple's profitability, if that even needs to be said. But how many people in the 80s expected Apple to turn into the juggernaut it is today? Companies seem to be built much more quickly in the 21st century, so there's no harm in keeping your eye out for the Ubuntu bandwagon.