And in acquiring Cygnus, Red Hat gets a chance to push its brand name into embedded applications, an area that Cygnus has explored vigorously.

The deal, which is expected to close in January, will see Red Hat issue 6.6 million stock shares to Cygnus, which puts the Cygnus price tag at $674 million as of Nov. 12, the last work day before the announcement. The roles of Alex Daly and Michael Tiemann, Cygnus' chief executive officer and founder respectively, are yet to be determined, although neither has indicated he will leave the company.

The deal brings together Red Hat, arguably the most famous of the commercial Linux distributors, with Cygnus, a veteran of the open-source movement. "Cygnus is one of the marquee names in the open-source marketplace," said Paul McNamara, general manager of Red Hat's enterprise business unit.

In fact, Cygnus was chosen by The GNU Project as the caretaker for GNU tools. GNU — a recursive acronym for "GNU's Not Unix" — is a project to build an open-source Unix clone; from that effort was built the operating system to which Linux is the kernel and which is now commonly called the Linux OS.

Cygnus is best known for tools such as compilers, while Red Hat is primarily an OS vendor, selling its prepackaged version of Linux as well as support services. Other Linux variations include Caldera and TurboLinux, and the Debian distribution created by volunteer programmers.

Tools from the likes of Cygnus are vital to the development of software applications, and Red Hat "felt it made sense strategically to get more involved in that space," McNamara said.

But Cygnus brings Red Hat the extra dimension of embedded software, including the eCOS real-time OS. For embedded Linux, Cygnus in September introduced its EL/IX API, which allows embedded applications to be built using desktop Linux.

"We believe that this merger accelerates this adoption of open-source end-to-end," said Alex Daly, chief executive of Cygnus.

Red Hat, for its part, sees embedded applications as fertile ground for expansion. "The embedded market is going to be a very large market both in terms of units and revenue," McNamara said.

What Cygnus gains is a brand name that has spread to the mainstream media thanks to Red Hat's initial public offering. "Red Hat has done a terrific job of productization," Daly said. Cygnus has done the same as a GNU-tool vendor, "but we've had more an engineering focus than a brand focus."

The merger was "not unexpected," said Bryan Sparks, chief executive of Lineo Inc. (Lindon, Utah). "Red Hat has a large market capitalization. We knew they would use their money to make an acquisition."

Lineo had also considered privately-held Cygnus as an acquisition target, Sparks said.

Lineo has been delving into the embedded Linux market for years under the name Caldera Thin Clients Inc. Still a subsidiary of Linux vendor Caldera Inc., Lineo is pushing embedded Linux on its own, and its head start should be enough for survival against Red Hat and dozens of other competitors eyeing the embedded market, Sparks said.

Some Linux advocates are eyeing the Red Hat-Cygnus deal with suspicion and concern that Red Hat is transforming itself into the Microsoft of Linux, but officials at both Red Hat and Cygnus insist they have the best interests of open-source software in mind.

"Every line of code that we write, we put back as open-source software," McNamara said. "We believe the operating system should be part of the public infrastructure and not the account of one company."

"I haven't seen any flak. I'm sure there's going to be some concerns, but that question can't be answered in one day or one sentence," Daly said. "Cygnus has always played by the rules."

Daly pointed to Cygnus' track record making money on open-source tools without having to corrupt the GNU philosophy. "We don't monkey with the technology. We're going to honor not just the legal aspects but the spirit" of open-source software, he said.