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Red Hat Software Businesses Linux Business The Almighty Buck

Red Hat — Stand Alone Or Get Bought? 199

head_dunce writes "It seems that this economy has inspired a lot of businesses to move to Linux, with Red Hat posting profits that beat everyone's expectations. There's a dark side to being a highly profitable company in a down economy, though — now there are talks of Citigroup and Oracle wanting to buy Red Hat. For a while now, we've been watching Yahoo fend off Carl Icahn and Steve Ballmer so that they could stay independent, but the fight seems to be a huge distraction for Yahoo, with lots of energy (and money) invested. Will Red Hat stay independent? What potential buyer would make for a good parent company?"
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Red Hat — Stand Alone Or Get Bought?

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  • JBoss... (Score:4, Interesting)

    by wandazulu ( 265281 ) on Friday March 27, 2009 @11:59PM (#27367605)

    Whereas I'm not too concerned about Red Hat Linux (especially since Oracle already has a version of it they brand as their own), my *real* concern is for JBoss, one of the best app servers out there.

    If Oracle had not bought BEA, I'd think they'd buy up RH and replace oc4j/App server with JBoss, but since they *did* buy BEA, they now have WebLogic and JRockit; they'd probably just put JBoss out to pasture, which would leave a lot of folks who have deployed JBoss high-n-dry.

    Yes, they wouldn't do it right away and yes, there's always the possibility of a fork, but it would make it that much harder of a sell to the boss who wanted to go with JBoss because it was a lot cheaper than what Oracle wanted for their app server.

    • Re:JBoss... (Score:4, Interesting)

      by Nutria ( 679911 ) on Saturday March 28, 2009 @12:25AM (#27367747)

      they'd probably just put JBoss out to pasture, which would leave a lot of folks who have deployed JBoss high-n-dry.

      Just before they sold themselves to Compaq, DEC sold it's self-written DBMSs (the relational Rdb and DBMS, a CODASYL system) to Oracle.

      We all thought that Big O would quickly force us all to migrate to RDBMS, but too many Important Customers doing Important Things rely on Rdb/OpenVMS, so 12 years later it's still under active development. (Of course, mostly by greybeards who have been working on it since the 80s...)

      Oracle 11g on Linux, though, is winning lots of converts, so I wouldn't be surprised if it "soon" goes into maintenance mode, coasting along another decade until HP finally puts VMS out to pasture.

    • Re:JBoss... (Score:4, Insightful)

      by upside ( 574799 ) on Saturday March 28, 2009 @06:18AM (#27368939) Journal

      I am worried. RedHat has embarked on a patenting strategy and the company may be bought by someone with less scruples.

      • I'm more concerned for the employees. I work for a company that was recently assimilated by a very big three letter company. I have never seen so much incompetence and selfishness in all my life. They come in promising roses, but really they want to screw every last employee of the company.

        • by Znork ( 31774 )

          Well, the good thing with Redhat is that as they've been very consistent with avoiding proprietary components, the employees could easily quit and start a new company off CentOS or something, and the customers would probably come along with them.

          Redhat is rare in the computing field in the sense that the customers they have are their customers completely by choice. Many other companies wouldn't survive a day in that situation; their customers would slam the door with the sales guys head still inside.

        • Re: (Score:3, Interesting)

          by rtb61 ( 674572 )

          I see you really have no understanding of why a big three letter company buys a small company. They buy it because the big company lacks expertise and they are trying to buy it in. Perversely the existing employees at the big three letter company now go into job preservation mode and attempt to undermine and remove (fire or force them to quit) employees of the small company because they threaten the jobs and promotional opportunities of those that have clearly demonstrated their incompetence, after all the

  • I can't think of a good match. Maybe IBM just because IBM's service arm seems to be doing really well, but then that would be bad for the whole industry for IBM to own an enterprise Linux distro.

    It would be kinda funny if Microsoft bought them and actually tried to make money off Red Hat Enterprise Linux, though....

    • but then that would be bad for the whole industry for IBM to own an enterprise Linux distro.

      You do realize that there isn't much preventing IBM from spinning their own, right?

      • I'm surprised that IBM doesn't have their own edition of Linux, but it's probably a very complicated set of considerations that they must weigh.

        • Re: (Score:3, Insightful)

          They want to be agnostic, sell you support for everything. They don't care what you run, they have some non-native english speaker somewhere that can help you with it.
    • Re: (Score:3, Insightful)

      There is no good match. There isn't a company that would be willing to buy them that has also had the commitment to open source that Red Hat has. Losing Red Hat would, IMHO, be a big blow to Linux for years to come, even if it was lost to a buyout to an company like IBM.
    • by Znork ( 31774 )

      Yep, there isn't a big company available that would be capable of running Redhat; most of its value both to customers and community (and through that to shareholders) is derived from the strategic consistency and reliability. IE, the huge amounts of goodwill available to the people that make up and control the company. It's unlikely that that would survive through a takeover, and both customers and employees could easily move along to a derivative.

      I hope and think IBM is smart enough to understand that Redh

    • by arth1 ( 260657 )

      The money isn't in the OS -- it's in the support, add-ons and switches.

      If IBM bought Red Hat, for example, expect some leveraging of "managed hosting" (like WebSphere and DB2) and "managed support". And once your managed web hosting solution inevitably strains and croaks, you sell them z-series mainframes. After all, you can run Red Hat on those too, and IBM will be just too happy to help you with the required porting.
      If IBM buys Sun, the benefit would be even bigger. There are an awful lot of java shops

  • oh noes. (Score:5, Funny)

    by girlintraining ( 1395911 ) on Saturday March 28, 2009 @12:05AM (#27367631)

    Does this mean we're going to have those "What's in YOUR wallet" commercials switch to "What's in YOUR computer?" I can see it now...

    "Hi, I'm a Mac."

    "Hi, I'm a PC."

    "Hi, I'm a viking maurader. Bleeeeaaarrrgh!"

    Red Hat Linux: Sneak attack, bitches.

    • That would so own... seriously.
  • SCO (Score:3, Funny)

    by Anonymous Coward on Saturday March 28, 2009 @12:06AM (#27367633)

    SCO is the obvious choice.

    • SCO is the obvious choice.

      Yep.. I can just picture Daryl trying to get his head around GPL..

      • Let me help:
        Daryl puts hands up to sides of his head.
        ahhh... AHHH... EARRRGH... *pop*

        That was the family version. The Indiana Jones version involves flying skull shards and globs of pulpy brain goo.

  • Buying Red Hat? (Score:5, Insightful)

    by Lorien_the_first_one ( 1178397 ) on Saturday March 28, 2009 @12:14AM (#27367691)
    So Oracle and Citigroup are thinking of buying Red Hat, eh? Perhaps they envy the freedom that Red Hat possesses. Perhaps they wish to control Red Hat in a way that no others could. Did they hear a whisper from Microsoft?

    I think that the worst possible thing is for Red Hat to be consumed by a larger company such as Citigroup or Oracle. Their statements and actions demonstrate little understanding or regard for the culture in Red Hat.

    Their wish to buy Red Hat is akin to the wish to put a flowing river in a bucket. Once the water is in the bucket, it is no longer flowing.

    To put it differently, to derive the benefits of Red Hat, they would either just buy the software they produce and use it, or buy their stock and sit on it. But as soon as they try to control it at their own whim, that which was free and living, will squirm away, somewhere else.

    Imagine what will happen to all the customers, developers and channel resellers who trust Red Hat now. It will simply not be the same with a new master.

    I hope Red Hat can maintain their indepence for the sake of everyone who depends on them.
    • by eln ( 21727 )

      Oracle already takes RedHat's work and rebrands it. Buying RH itself and paying for those developers out of its own pocket makes little sense when they already have what they need from RH without spending a dime. The only thing RH can do for Oracle at this point is reduce their profit margin.

      I suppose they could buy it just to bury the brand, but that seems like an awfully big expense to bury a company that's not really doing a ton of damage to Oracle's business anyway.

      A couple of years back, the "Oracle

      • I think the idea here is that a large company would want to buy RH not for any technological reason, but rather so that they can take credit for RH's profits. The technological pros and cons don't enter into it, what's much more important to them is that the analysts are happy, so that their share price stays up while the economy tanks.
      • Worse: managing developers and getting them to play well together is tricky. When one team freewheels well, another has a micromanaging leader who is really _good_ at it, and another is using Agile programming, getting them all under the same corporate umbreall is awkward. It's compounded by merging in-house technologies: employment listings, accounting systems, webpages, Active Directory versus LDAP, CIFS versus NFS versus local storage and backup for file sharing, Perforce versus Bitkeeper versus CVS for

    • So Oracle and Citigroup are thinking of buying Red Hat, eh?

      No. The article summary is totally fubar.

      Citigroup analysts think Oracle might want to buy Redhat. That's it.
      Citigroup is a finance company, them acquiring Redhat would be like Bank of America buying Microsoft.

    • Potential buyers want to care for Red Hat the way SCO cared for Linux.

    • Re: (Score:3, Funny)

      by monoqlith ( 610041 )

      'Their wish to buy Red Hat is akin to the wish to put a flowing river in a bucket.'

      This sentence would be better expressed in Haiku form.

  • It wouldn't surprise me to see IBM end up owning Sun, Red Hat and Microsoft in the end.
  • Intel, please (Score:5, Insightful)

    by Chris Snook ( 872473 ) on Saturday March 28, 2009 @12:32AM (#27367787)

    When I was at Red Hat, I assumed the scenario would be that Oracle would make a hostile takeover bid, as they are wont to do, and then IBM would come to the rescue with a competing offer that wouldn't gut the soul of the company quite as badly. Now that IBM is in talks with Sun, that seems less likely, unless the IBM/Sun deal falls through, in which case it's a no-brainer for IBM.

    Failing that, the next best candidate, in terms of the good of the community, would be Intel. I mean no disrespect to AMD in this regard, because it's not really about hardware, but rather Intel's role as a technology mutual fund that happens to have CPU, chipset, and networking hardware in its portfolio. Adding a Linux vendor would further establish them as a developer of core computing technologies, in a role as a partner rather than a competitor to Oracle and IBM. Intel has a long history of working well with the open source community, which has certainly played a role in their acquisition of some top Red Hat talent over the past few years.

    With all due respect to the many dedicated Linux engineers at Oracle, I don't trust Larry Ellison as far as I can throw him. Nor do I trust the Red Hat shareholders, who are overwhelmingly financial institutions on the brink of bankruptcy, to take any sort of long term view when considering competing offers, which is why I would not be shocked to see them cash out to Oracle, even knowing full well how the company would be gutted, because they so desperately need the money right now just to stay solvent. I just hope that when Oracle makes the move, which seems all but certain if the IBM/Sun deal goes through, that there's someone else around with a genuine commitment to the community and deep enough pockets to make a cash offer, since a stock deal under terms typical for large acquisitions wouldn't give the institutional shareholders the liquidity they need.

    • And how would Microsoft react to such a deal? Can Microsoft side with AMD and not hurt itself as much as it would hurt Intel, if it so chose?

      • Why would Microsoft care? They certain don't want to get into the hardware business. Intel is already in the software business, which is why this might make sense for them.

  • by Anonymous Coward on Saturday March 28, 2009 @12:43AM (#27367835)

    That should be made clear.

    It was only a Citi analyst that raised the possibility of Red Hat being a takeover target.

  • And the winner is... (Score:5, Interesting)

    by MrWin2kMan ( 918702 ) on Saturday March 28, 2009 @01:18AM (#27367955) Homepage
    Larry Ellison and Oracle are beginning to lust heavily over Red Hat...I fear most of the best parts of RH would get lost in the catacombs of Oracle and never see the light of day again... Sun seems to be busy playing coquette to IBM (although HP would be a better fit). Novell would be a logical choice and would (finally) promote some consolidation in the Linux realm. Apple already has an OS based on a (flamebait acknowledged) superior Unix derivative. I would instead look to Cisco or Dell. Cisco has no in-house OS (other than IOS of course) and with their recent entry into the server hardware market it would be a smart buy, although not necessarily for RH. Dell would be an ideal combination, as Michael Dell is already a Linux proponent, although of a slightly different flavor. Dell isn't as integrated as their main competitors and has no real software presence, however their close association with Redmond might be a giant monkey wrench. If Dell wanted to grow up and really play with the big boys (the ones who are left anyway), they would grow a pair and go bold. Who else has $4-6 Billion in cash lying around looking for more software presence...Adobe? Google?
  • by OlivierB ( 709839 ) on Saturday March 28, 2009 @05:24AM (#27368759)

    in TFA there is no mention of Citigroup looking to buy Redhat; just a mention that a Citigroup stock analyst upgraded his target share price to $17 and kept the recommendation to "hold".
    Once again everybody on ./ has gone and commented on how Oracle culture would be compared to Citigroup's whereas that's not even the point..
    Sheesh people, the linked article is probably under 250 words. Could you not have given it a read? Did it not strike you as something strange that a bank would want to buy a software vendor?

    • Re: (Score:3, Interesting)

      by Hognoxious ( 631665 )

      the linked article is probably under 250 words. Could you not have given it a read?

      New here?

  • by Alain Williams ( 2972 ) <> on Saturday March 28, 2009 @06:49AM (#27369035) Homepage
    With a technology company its value is made up of:
    • Intellectual Property - I, stuff that other people cannot use without a license - everything that RH is open source. Some management/internal s/ware might not have been published
    • Intellectual Property - II, Patents - RH has a few for defensive purposes. I don't know how new owners could use them against other FLOSS users: if they wanted to
    • Contracts & customer good will, if you piss off your customers this can evaporate quickly
    • Good staff/employees. In a few months the good ones could leave.
    • Bank account, buildings, computers, etc.

    The most important of the above is the RH staff. If citigroup/... were to buy RH and do the ''wrong'' things the staff would simply decamp, create another company ('BlueBoot'), take a copy of all the source code (its all GPL remember) and the RH customers would follow the staff for their support.

    Any clueful potential purchaser would realise the risk that what they bought could just evaporate.

  • A good buyer for RedHat? I can't see one, because anyone big enough to buy that, imho, is not suitable to control it.

    Any company some involved with computers/sw will have vested interests in steering it towards their own goals and in the towards damnation. Any company totally unrelated to computers would be in it for the money and we know how that story usually ends.

    A good owner for RedHat? I'd say Torvalds or Cox, but I don't see either one on the potential buyers list...

  • you did good so far, and beat expectations even in a global recession. that means you're doing it right.

    there is no need to bring in additional executive board/shareholder meddling by getting bought.

    keep what you are doing on your own.

  • This is how Citigroup is going to spend OUR bailout money.

    Cue the lynch mob.
  • There's a dark side to being a highly profitable company in a down economy, though

    While being profitable does raise the incentives to buy Redhat, being profitable also lowers the incentives to sell Redhat. On the flip side, it may make sense to sell if the buyer is more profitable, but then the buyer doesn't have as much incentive to acquire.

    It's not a dark side. Even if Redhat does sell, it's because their shareholders wanted to sell. It's only going to happen if shareholders on both sides perceive a ben

  • If you set aside the already mentioned IBM, Sun, and Oracle.. I suppose Hp could be considered.. You could throw in Dell too, but that would probably make people actually cry.
  • Redhat once paid people to write crazy programs like Enlightenment. Then they focused on a little less crazy ideas like web servers. Now they'll take the next step & become even more boring. Wonder if anyone is still there from the glory days of 1997?

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