Online retailer Amazon.com shaved millions of dollars from its technology costs last quarter by switching to the Linux operating system, a disclosure that could provide some guidance for other companies seeking to cut expenses in a stagnant economy.

In a filing with the Securities and Exchange Commission, the e-commerce giant said it was able to cut technology expenses by about 25 percent, from $71 million to $54 million.

The reduction was attributed primarily to Amazon's "migration to a Linux-based technology platform that utilizes a less-costly technology infrastructure, as well as general price reductions for data and telecommunication services due to market overcapacity," according to the filing.

"We've recently...found that Linux--if you look at the overall cost of ownership including the hardware, software, staffing, and purchasing and retirement costs--ends up being significantly less expensive than Unix over a three-year period for things like Web serving," said IDC analyst Dan Kusnetzky.

For 1,000 users tapping into a Linux server, the total cost is about a fifth to a half that of a Unix system, Kusnetzky said. The cost of administering a Linux system is about the same percentage of the overall cost for a Unix or Windows server, he added.

Cutting expenses is certainly important for Amazon right now. The company trimmed its losses by 30 percent in the third quarter, posting a net loss of $170 million. Amazon has pledged that it will be profitable on a pro forma basis by the fourth quarter, and with revenue inching up only $1 million from the year-ago quarter to $639 million, every little bit helps.

According to Internet research firm, Amazon's Web pages are dished out by Linux servers running Red Hat's Stronghold Web server, a derivative of the open-source Apache project.

Linux can cut costs in several ways. When a company first obtains the operating system, the software can be downloaded for free, or a single copy purchased from a company such as Red Hat or SuSE can be installed on as many computers as a company wants. Secondly, it comes bundled with other software for sending Web pages to people's browsers or running company e-mail.

In many cases companies don't have to pay extra licensing fees for the computers that connect to Linux servers. And finally, Linux is often used on inexpensive Intel computers, sometimes generic "white box" machines and sometimes older computers seeing a second life.

Linux has enjoyed strong penetration into the server market, accounting for 24 percent of server operating-system shipments in 1999 and 27 percent in 2000, Kusnetzky said. That's second to Windows, which went from 38 percent in 1999 to 42 percent in 2000.

"People are looking at Linux as a replacement for Windows," said Chad Robinson, an analyst at Robert Frances Group. "Not that people are switching en masse, but many corporations are exploring that area" chiefly for special-purpose desktops such as bank teller computers.

In late September, independent consultant Rob Valliere published the results of a business study that convinced his small-business client to adopt Linux for a 24-person company. The bottom line: Switching the majority of computers to Linux would provide nearly the same functionality as an upgrade to Windows 2000 and save the company more than $10,000.

The study concluded that Linux applications could provide solid alternatives to nearly every Windows application, with the possible exception of the scheduling and e-mail integration of Microsoft Outlook.

In the study, Valliere found that licensing fees for 24 copies of Windows 2000 and Office 2000, along with a Windows 2000 server and necessary memory upgrades, would cost about $15,000. Installing Linux on the server and 20 of the computers--with the remaining four upgraded to Windows 2000--would cost slightly more than $5,000, including consulting and installation fees.

Another financial incentive to use Linux on the desktop is that Linux's open-source licensing makes it simpler for a company to make sure its computers are in compliance with license restrictions, as opposed to Microsoft's per-seat licensing plans that can result in costly and legally daunting audits.

"Staying in compliance with licenses is something a lot of companies are scared of right now. It's more difficult, and the ramifications of being out of compliance are becoming more and more onerous," Robinson said. "As of the last year or so, Microsoft has been going after companies where they've gotten tip-offs or had other suspicions."

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