One of the intriguing battles I have been watching over the past couple of months is a silent battle between Sun Microsystems and Red Hat.

It's silent because it is being played out deep inside the New York Stock Exchange and, unless you're actively watching, you'll have missed the tussle.

At the same time it is an fascinating battle that represents many things: the old versus the new, Linux versus Unix and investor sentiment.

When the NYSE opened on Tuesday morning Sun Microsystems, once a titan of the IT industry, had a market capitalisation of $2,94-billion.

Red Hat, a relative newcomer representing Linux and open source, on the other hand had a cap of $2,55-billion.

What makes this remarkable is that Red Hat had revenues of $627-million in its last financial year while Sun's topped $13-billion.

Which says a great deal about how much faith investors have in Sun's attempt to re-engineer itself from being a hardware company to being an open source company.

It is also a vote of confidence in Red Hat's Linux strategy which sees its share price now sitting at well over $13 a share.

Even CEO Jonathan Schwartz's recent video blog about the future of Sun, in which he said that everything was on track at Sun and the company was looking forward to a solid future, has done little to allay fears among investors.

In fact, in the week since that video release Sun has slipped below the $3-billion market cap point for the first time in months.

Once a hardware seller of note with its big iron in every major enterprise around the world, Sun has been trying for some time now to transition itself to being a success in the open source software world.

The problem is that revenues lost in hardware sales are not easily made up by open source software sales.

As ZDNet's Larry Dignan points out, "the revenue gap from morphing Sun the mostly hardware company today into Sun the Red Hat of tomorrow is about $11,4-billion in annual revenue".

That's not an easy ask.

Ask Novell who has been trying to make up for lost revenues in its traditional proprietary business with Linux sales with only a modicum of success.

This is not to say that Sun can't regain some of its strength - the company still has a broad range of businesses to call upon - but, as Matt Asay says, Schwartz may not be worried, but he probably should be.

In the meantime Red Hat looks well placed to - perhaps just symbolically - take Linux and open source into the mainstream.