Red Hat Releases 2nd Quarter Financials 122
Booker writes "Red Hat, Inc. has released their 2nd quarter financial results. You can see the press release here. Operating at a loss, but then we all knew that would happen for a while. Revenues up 95% over last year.
Kinda ironic that an Open Source company has to join The Man on Wall Street before their balance sheet becomes publicly available. :)
'kernel clout' of Linux companies? (Score:1)
Again, I did not raise this silly point, it was you. But lets really consider the facts. (ie. source code) Lets bring out the code, lets improve Linux as fast as possible and everybody will benefit. And just forget the PR.
$7.4 billion Slackers... (Score:1)
Hmm, Mandrake does, FreeBSD does, Debian does, but Red Hat... Uh.. Red Hat who want's to "bring Linux to the Desktop" doesn't?
Sorry, but, someone had to say it.
hilarous (Score:1)
Sheesh. Where's rabbins when you need?
Does this include earnings from IPO? (Score:1)
Re:In the money. (Score:1)
Re:Does this include earnings from IPO? (Score:1)
(Mental note.. Go take some classes on this stuff..)
Novel Funding Models (Score:1)
Irrational exhuberance comes to mind. Cygnus Support/Solutions tried this model as well, and while they have made money, I wouldn't underwrite the IPO. Remember that underwriters work for the fees (7% of issue), not because of any great belief in the product.
No Profit = Good Thing (Score:1)
Re:Timing for MS trial? (Score:1)
Re:the man... (Score:1)
Re:A good question (Score:1)
Actually (Score:1)
i.e. if Amazon buys someone else, they don't have to count that one-time expense as a loss when calculating their yearly expenses.
Re:Profit? yeah, right... (Score:1)
But what about the possibility of consulting services? In this feature [slashdot.org] on the 30th anniversary of the internet, the point was made that IBM makes a slew of money on consulting and that Linux companies could as well:
RedHat would be silly if they just relied on sales and support of their distribution. If they are able to obtain a name for themselves, they can get in and be the leading Linux consulting firm able to step in and set up a network infrastructure or what have you better than any "in-house Linux expert" might. And with co-operation from other computer companies, Red Hat just might be able to get you a deal on workstations.
ian.
Where are we going? (Score:1)
I don't want to be a nay-sayer here, but as a member of the linux community we have a serious problem of DIRECTION. Here we have a large company sticking its neck out on the line based on the hope that in the future they will be able to provide service and support to their linux distribution. Service and support indicate corporate users. Not many end-users, or geeks, are willing to shell out money for a support contract, especially when you can go to Deja [deja.com] for free. But we have numerous technical debates and write-ups that linux is not keeping up in the high end server market. So why would I, a corporate user, use linux at work for a production server?
This argument is going to really plague RHAT and its investors as the true market for linux is explored. RedHat is lining itself up to have a great number of home and campus users using their product and supporting THEMSELVES online. I hope our friends don't get burnt on IPO stocks they have purchased.
Re:In the money. (Score:1)
I cannot imagine Dell making a Linux dist but it wouldn't be a big deal for IBM.
I think we have enough Linux dist's out there already so I hope each hardware vendor doesn't create a separate one. can you imagine the confusion?
Stock prices (Score:1)
just my $0.02
Have they EVER made a profit? (Score:1)
quarter?
da'fly
Re:Look at amazon.com. STILL hasn't turned a profi (Score:1)
IF investors were expecting profits from Amazon, then they'd be out of business by now. Instead, they're just waiting for them to stop buying up other companies and instead report it as profit.
Re:In the money. (Score:1)
Nothing...
Perhaps they should just ship their CD's for free, manuals for $10 or $20, and support for $25/call. That way, no one will try to do that to them... They'ed technically be a support company, giving out the product as a lead-in.
Re:Actually (Score:1)
Or along the lines of that.
Re:Economics question. (Score:1)
I think the way that companies like this actually manage is venture capital -- people who are willing to get a pre-IPO ownership stake in exchange for meeting the operating capital needs of the company. The risk is that the company may never become profitable and their ownership stake is worthless. The benefit is that $10M invested now may yeild $1B tomorrow.
Business idea (Score:1)
Someone could possibly make a nice business by becoming known as "The" Linux installation and support company. Instead of a Dell wasting all the money to do install RedHat in-house, just outsource it and the support to a company which specializes in tailoring any distribution and configuration for the particular computer sold. They could undercut the licensing fees of the RedHats and Calderas of the world by, say 50 percent, and still make a profit because they wouldn't have the Research & Development costs that those companies have. I know LinuxCare's there for the support, but I don't know whether or not they do the whole enchilada that I'm talking about.
Cheers,
ZicoKnows@hotmail.com
Re:hilarous (Score:1)
No, actually, I would have assumed that real day-traders would be the last peole to care about what the analyst forecasts were, since they've gone in and out of the stock five times during the earnings conference call. :-)
Seriously, I would assume day-traders would move on generalized news rather than specific earnings forecasts. Am I really wrong?
King Babar
Re:Thank Congress (Score:1)
Looks like there's a typo here somewhere... But, anyway, I'd like to point out that the best capital gains tax break actually does occur when the owner of the assets dies: the inheritor gets a stepped-up basis. No, that doesn't mean you can't get burned by inheritance taxes, but it's still one heck of a break.
And people have argued that this is just screwy, since it gives people a weird incentive to structure everything to look like a stock, or, more bluntly, to make every income stream look like a capital gain, because the tax rate is so much lower.
Hold it. That certainly doesn't apply to tax-deffered investment situations like your IRA, 401(k) or 403(b). Moreover, index funds generally don't give you the nasty capital gains problems that some other managed funds do (and perform quite nicely, too).
But there is a really good argument to be made for owning lots of individual stocks if you've got enough money to be well-diversified. In that case, you can generate your income stream by just selling winners and off-setting losers in the ideal proportion to reduce your taxes (to zero, if you like) and meet your investment objectives. Eventually, you will be rich, and you might even end up paying some inheritance taxes, but anything your heirs inherit will have that groovy stepped-up basis.
King Babar
Re:hilarous (Score:1)
Two possibilities come to mind. Even though Red Hat broadcast the fact they would be showing operating losses for a while, some of their investors might have been so optimistic that they really did expect either a completely trivial loss or even a surprise profit.
A second possibility is that some investors were actually taking analysts seriously when the consensus forcast came in for RHAT to lose $0.05 per share, when they actually lost $0.09 per share (Well, sort of...their IPO was this quarter, so the number of shares to use in earnings per share calculations is just an accounting fiction.)
The part I find weird is not the market reaction, since earnings were below forecast, but that anybody put any weight in the forecast itself...
King Babar
The lemonade stand and the resturant (Score:1)
Say MSFT were a suburban resturant that had annual earnings of about $173,240, or $554 on an average day. That would make Red Hat a lemonade stand with annual earnings of $176 or $0.56 a day (given everyone works 6 days a week).
If you were and independent investor, who would you throw your money at? This better be the best damn lemonade in all of christendom...
Ok, how about... (Score:1)
I'm stretching here. Help me out.
Re:No Profit = Good Thing (Score:1)
Re:Does this include earnings from IPO? (Score:1)
Re:No Profit = Good Thing (Score:1)
How about because if you never make a profit you WILL GO OUT OF BUSINESS!
Re:In house Linux experts? (Score:1)
The online community is far more useful than any isolated professional support, and you only need a computer staff clued-in enough to access it.
hey now, (Score:1)
the better investment... (Score:1)
Re:the man... (Score:1)
Re:Profit? yeah, right... (Score:1)
and ignorant people who don't
understand that the software is free. "
In the last 4 years I've spent $45 on
internet software. And that was a book called
"Internet Programming". The included disk had
everything I needed to get started.
I've just downloaded everything I've needed since.
So yeah, how are any of these companies making
money?
Re:Have they EVER made a profit? (Score:1)
He explains that he may lose a million next year
and the year after that. And that they will go
out of business in 50 years.
Deep pockets.
Re:In the money. (Score:1)
"Why can't IBM or Dell just roll their own distro based on Redhats, and then not have to pay any $$$ to Redhat?"
I can think of two reasons:
1) Brand recognition. Red Hat won't let them use their brand name for free. Since Dell, etc. want their customers to feel comfortable with the linux distribution included, it would make sense to use the most recognizable one, rather than creating their own. I'm sure the licensing costs won't come anywhere near the M$ tax for this.
2) Competence. They would have to hire a group of programmers/software engineers to put together and maintain their own distro, even if they just re-package the Red Hat distribution, since Red Hat obviously wouldn't be supplying the support. I'm pretty sure they don't want the headaches associated with this. Cheaper to pay Red Hat.
Regards,
Bun
In house Linux experts? (Score:1)
Re:In the money. (Score:1)
I doubt it (Score:1)
However, down the road, if RedHat continues to grow as the #1 commercial Linux vendor (at least, here in the US) they may be able to pull that sort of thing off. I make no claims as to whether this would be a good thing for them or not.
Re:In house Linux experts? (Score:1)
Re:In the money. (Score:1)
Everyone knew the results before they came out... (Score:1)
Maybe this will drop the price, so I can buy more (Score:1)
I just want it to drop so I can buy a few thousand shares. $40 would be nice, but under $70 would be ok.
Re:A good question (Score:1)
That sounds like a good reason to me.
Re:Novel Funding Models (Score:1)
Now Cygnus was a relatively small company (their equivalent in the Closed Source might be someone like Inprise/Borland)
So, if you scale that up to general purpose software, as Red Hat have, then you're looking at a lot more profit.
Yes, it's risky -- but the stock market is supposed to handle acceptable risks, otherwise everyone would stick to running Private companies.
Red Hat's PR will take a beating if the price re-aligns suddenly for some reason, but more likely it will just coast down over a few years until Red Hat goes into the black and everyone realises how undervalued it is
Open Source will never be profitable in the same way as MS, because their profits come straight out of the customer's pocket, no expenses involved. We can however expect Red Hat to be just as profitable as any other services company.
Your underwriter comment makes no sense -- you don't want 7% off the top of a major IPO? Not many people could say that...
Re:Thank Congress (Score:1)
But, being the way it is, a person who invests in stocks for the long haul (buying and holding), is in a much better position than someone who is investing interest bearing securities (bonds, cd's REIT's, etc...).
Investing in individual stocks is also a much better route than investing in mutual funds, which often have a capital gains tax every single year, not just when you realize a gain.
Taxes can cut into a huge portion of your savings and growth if you are not careful.
Re:hilarous (Score:1)
They just go on the momentum and charts.
If you believe what they do, a certain event will trigger a certain reaction.
I often make the mistake of grouping heavy traders in with day-traders as well. These are not peolpe who are in and out of securities each day, but still invest through momentum... they just might hold on to the stock longer, with several trades each month.
I group them together because I think both groups base their decisions on a very flawed philosophy.
Re:Redhat overvalues (Score:1)
Most people simply do not understand that price does eventually correlate to actual earnings. They simply see a stock that has done very well and it sounds like a neat company that could run Microsoft out of business.
The advent of investing on the internet has encouraged a lot of uneducated decisions in recent years... fortunately the market has been such where they have not been too hurt yet.
Yes... (Score:1)
Re:hilarous (Score:1)
Stocks will rise on the rumor, and decline on the actual announcement. Just people taking profits typically.
When it comes to earnings statements, the rumor is always that they will do a little better than analyst expectations. Recently, Microsoft had been on a tear for a few weeks, their earnings came out and blew away analysts' expectations. The stock then proceeded to take a dive.
Wrong. (Score:1)
Re:Thank Congress (Score:1)
gains tax break actually does occur when the owner of the assets dies: the inheritor gets a
stepped-up basis. No, that doesn't mean you can't get burned by inheritance taxes, but it's still one
heck of a break.
yup, there was a typo. I suppose there is not a tax on the capital-gains tax... Though I wouldn't be suprised if that were in the works!!!
The transfer on death agreement which gives you the stepped up cost basis is actually a brand new thing (this year). It used to be a horrible tax burden on beneficiaries, when many people had securities that were held on to for 50 years or so!
I think the current estate tax laws are horrible, and I hope to see some reform in that area in the near future. While it is intended to bleed as much out of the extremely wealthy after they pass away, it has ended up hurting the small business owners the most.
Hold it. That certainly doesn't apply to tax-deffered investment situations like your IRA, 401(k) or
403(b). Moreover, index funds generally don't give you the nasty capital gains problems that some
other managed funds do (and perform quite nicely, too).
While you will not be experiencing those capital gains taxes in a tax-deferred account, I would still much rather be invested in indivudual companies than mutual funds (where you have the yearly fees and hidden 12b-1 fees regaurdless). I would rather the CEO of a quality company be my money manager, than a so called profesional that tries to outguess the market.
I do believe that an index fund is a superior choice to most managed mutual funds (90% have lost to the S&P 500 over the past decade!), I still advocate being a direct owner of quality companies, than to owning shares in a fund.
Even if you are a beginning investor, and do not have enough money to diversify yourself widely... I believe you should start with a widely diversified company, and not a fund. There are many quality companies out there that own almost every product under the sun. As you have more money to invest down the road, invest in another diversified, quality company.... starting your portfolio that way, and more as you can. As oposed to sticking it into a mutual fund right away.
But, I am definitely in the minority with my opinions.... and hey, companies make a lot more money from you by selling mutual funds (they are products, afterall) over individual stock. So you are dealing with an industry lead belief as well.
Re:hilarous (Score:1)
anybody put any weight in the forecast itself...
Insert day-traders into this equation and you should not be suprised at all.
These are momentum traders... the actual earnings, expectations, valuations or even companies are not important to them in the least bit. What is important is the perceived reaction to an event in the market place. And because there are so many day-traders out there now, this often becomes a self-fulfilling prophesy.
I compare it to the number of people who might start leaving the stock market and invest in gold (or something stupid like that) before the year 2,000. These people do not really believe anything bad is going to happen, but they believe that there will be enough people who who will believe exactly what they believe.
Sometimes it works, more often it does not.
But you sure hear about it when it does.
Re:95% ? (Score:1)
But over time... it does start to correlate. Always has, always will. Because after all, what you do own, is shares of ownership in that company.
Re:Economics question. (Score:1)
Well, OK, you're right: in year 6 we're turning a strong profit, but the total balance is still a loss. However, if you expand the "etc" in my table out a couple of years though, your total balance is still a big gain. Optimistic? Yes, but that's the nature of the public's valuation of RHAT (and LCPBB).
Strictly speaking, there is no interest on the debt (remember, I'm Bob Young and this is spare change for me). I'm not taking out a loan, but there is the "opportunity cost" of not investing that money somewhere else (like FCOJ futures). Also, if I raise money via an IPO or a venture capital arrangement, there's no interest either - the investors are not loaning me money, they're buying part of my company.
Dell (Score:1)
Re:Dell (Score:1)
Re:A good question (Score:1)
However, it means the company gives up control to the public shareholders (represented by the board of directors), and all future actions are accountable to the public shareholders.
Re:No Profit = Good Thing (Score:1)
When they were private, the could pay employees from money received from VCs or borrowed, and for the near term they have the money from the IPO.
When that runs out, they need to be making money, or else!
Re:Redhat overvalues (Score:1)
Some shareholders are believers. Most are subscribing to the "bigger fool" theory that says there is always somebody who will buy the stock for a higher price later even if it is rediculously valued.
RedHat can't possibly live up to the hype and stock price. They are destined to fall, but when? Ahhh... If you only knew, you could make a fortune...
Re:Economics question. (Score:1)
as they have money or liquid assests. When they
run out, the company goes backrupt.
Startup companies get money from Venture Capitalists for a share of the company (or borrow money). When it runs out, they need to ask for more, or IPO (or be making a profit).
The whole point behind an IPO was traditionally to get enough money to fund a companies growth (allow them to spend more money than revenue for a while, to grow the business). IPO has instead become a way for investors to get rich quick, although it still serves the purpose of funding the company.
When the money RedHat got in the IPO, plus any reserves they had from before, run out, then RedHat will either need to be profitable, need to find a buyer, or go bankrupt.
So, the IPO money is the "savings account" they are dipping into, and it better not run out before they find some way to earn a living!
Re:In the money. (Score:1)
Most of RedHat's profits will come from services (Linux can be copied for free, right?). Growing a services business is slow and difficult (you need to hire many hundreds of linux experts, and find work for all of them).
Linux is a hot buzz word in the market, but most shareholders don't understand RedHat's business.
A good question (Score:1)
Unbounded market potential = huge valuations (Score:1)
Why does RHAT have such a huge valuation? Simple. The total future size of the Linux market is unknown (and therefore, from Wall Street's point of view, close to infinite) - thus justifying virtually any valuation you'd care to put on Red Hat.
We've seen this phenomenon before with Internet stocks. Who knows how big the market for fubar.com will be? So the stock goes through the roof!
But when a market gets some bounds around it, WATCH OUT. A company in a mature market where we have some sense of the ultimate market size will have much lower valuations.
ps: now's a great time to buy more RHAT stock!
Re:Redhat overvalues (Score:1)
Re:Economics question. (Score:2)
Now a company like Red Hat is probably burning cash at an amazing rate in order to build up their business. To keep this up, they need to get more money through financing activities such as selling bonds or stock. Hence the IPO. They tell the investors that they plan to use the money to invest in the business, which at some future date will result in incoming cash flows from operations that more than make up the invested cash and/or allow them to service their debt. So long as they can keep getting people to invest money in their company, they can keep running losses.
Bah. (Score:2)
"In a fully and fairly valued situation, a growth stock's price-to-earnings ratio should equal the percentage of the growth rate of its company's earnings per share."
I don't believe that the market always accurately specifies the value of future earnings, for exactly the reason outlined in the quote above. Those who buy at low PEG ratios and who short at higher PEG ratios are making their stock moves on more than intuition. This is more than I can say for the people buying and selling RHAT like its going out of style. =)
Fine and dandy if there wasn't any other company (Score:2)
Re:'kernel clout' of Linux companies? (Score:2)
I would tend to discount the article you cite somewhat as it has a natural bias as it is written specifically from a perspective of looking at Red Hat. They mention three Red Hat contractors and "someone from Hungary," decidedly an incomplete list.
The VA Ubergeeks are responsible more for "userland" stuff, although:
Zubkoff is responsible for quite a number of SCSI drivers that are in the kernel.
Ted T'so is responsible for lots of all around stuff including taking over ext2 from Remy, architecture of Kerberos, /dev/random, amongst other kernel stuff.
H.J. Lu was responsible for libc5, and is heavily involved with GLIBC, NFS, and Bintools. That's not largely in the kernel, but the kernel is pretty useless without a way for "userland" to get at it...
The main big kernel thing that it appears VA has been working on lately is IA-64 support; that won't be visible until Intel releases product.
The real point I'd make is that you are merely questioning one point that I'd made, and really just quibbling over "who's got more kernel hackers," which is merely quibbling over the strength of one of four points.
It's not Linus' opinion or his list (Score:2)
I suggest you reread the article.
The only quote in that article that claims to involve Linus' words says:
The authors of the article indicate (but do not quote him directly) that
What this says is that Linus listed nobody as ``core confidants.''
Not Alan Cox, not Stephen Tweedy, not Donald Becker, not Ted T'so, not anybody.
Apparently Scott Berinato decided that since Linus declined to provide a list, and despite the fact that Linus indicated that such a list would be likely to be offend people (as well as to confuse anyone that doesn't read carefully to realize that this isn't Linus' list ), he decided to make up his own list.
The three people you named (plus some unnamed developer in Hungary) is the Scott Berinato's List of People He Guesses Might Be Amongst Linus Torvalds' Confidants.
It is not the Official List of Linus' Kernel Confidants.
It's not me that looks silly when you draw conclusions based on some guesses made by some writer at Ziff Davis...
Unanticipated Consequences of Taxation... (Score:2)
That means that you don't pay any tax (generally speaking) until you sell the stock. And a dollar of tax deferred represents some portion of a dollar of tax that is avoided.
The rate of taxation on the gain doesn't matter nearly as much as the fact that it is deferred.
It might sound like a neat idea to force stock to be revalued annually, thereby crystallizing gains (and losses) for them to be taxed.
On the (by some theories) upside, that would, by now, have forced Bill Gates to both pay a whopping big tax bill of on the order of many $BILLions of dollars as well as to sell off the vast majority of his holdings of MSFT (in order to pay the Tax Bill).
The "Bill Gates" scenario display ways in which it is not so good; it effectively represents the government grabbing, as if it were income, parts of any sort of "increase in value" of an enterprise.
Another disadvantage is that "continuous revaluation" requires having a department that are constantly attaching values to things. There are lots of opportunities for horrid Unanticipated Consequences.
Re:the better investment... (Score:2)
Special today at the restaurant. Cockroaches.
Better visit the stand for a sip of sweet caffeinated lemonade...
Re:95% ? (Score:2)
What about /.'s balance sheets? (Score:2)
Re: financial info to "us"... (Score:2)
yes, they have. (Score:2)
has the RedHat corp. EVER had even one single profitable quarter?
If you look at their SEC filing, two of the five quarters listed therein were profitable. In fact, right now revenues have been going up considerably too. "So, where's all that money going, then?" you ask...
Expansion. They're sinking a lot of it in expansion right now. Go read some of the news items regarding them in the past few months. Think of it as them taking out a loan from themselves to make an investment in their own future.
I think you may also find this comment educational: Re:Economics question. [slashdot.org]
Berlin-- http://www.berlin-consortium.org [berlin-consortium.org]
Economics question. (Score:2)
redhat.com as an open source community?? (Score:2)
Not to slam anybody's web site, but since when has redhat.com been a community for open source minded people? I visit redhat.com occationaly, but only to go to their errata list.
Am I off base here? Who here goes to redhat.com for open source community related things?
"Red Hat's Web site, redhat.com, is a leading online source of information and news about open source software and one of the largest online communities of open source software users and developers."
Can somebody please validate/debunk this? Since when does someone go to redhat.com over slashdot.org or freshmeat.net?
I'd like to see redhat do well, but I am afraid they are setting themselves up for a big disapointment on the portal idea by counting hits on their site for something they are not.
Re:Some perspective (Score:2)
Very true, and I wouldn't want to argue that Red Hat is worth $7.4 billion at the moment. On the other hand, Red Hat does have approximately 100% year-over-year revenue growth. They can't keep that up forever, to be sure, but six years of that would give them about $1 billion in annual sales, earnings of over $100 million or so, and a stock value within shouting distance of what they have today.
So, what's the value of those future earnings? Whatever the market says it is. :-)
King Babar
Re:Dell (Score:2)
You must be talking about a different "Dell" than the one I'm thinking of. Dell Computer (symbol: DELL) has been one of the best performing stocks of all time. If you don't believe me, take a look at this [yahoo.com]. Adjusting back in time for stock splits, the price has gone from $0.05 per share in January, 1990 to $48.81 per share at the end of August.
Gosh golly, I could use a stock that tanked like that, couldn't you?
Just to make sure, I checked Dell's performance over the last year; creams the S&P 500 over the last year, and over the last 3 months. If all you're talking about is some very short term "sell on the news" fluctuaions, well, fine. Feel free to try and make money off of that if you like.
King Babar
Re:the better investment... (Score:2)
MSFT's would have food that was visually pleasing, but bland tasting (except to those that never ate anywhere else and know no better). Also, you weren't always allowed to finish your meal. The staff ignored you, unless you gave them big tips. The chefs got a cut of the bar tab so they don't care too much about the overall quality of their product, after all, who will eat anywhere else?
Of course, the selection would be enormous. Everything from pasta to saurbrauten and moon cake to rice pudding. Still, all rather bland tasting and not necassarily tasting the way it should. Whenever another resturant in town opened up, MSFT's would either:
1) announce that they intended on making the same dishes the competition made, and everyone would avoid this new resturant, salivating in anticipation of this new food at MSFT's
2) buy out the resturant and put the chef's in their resturant
3) undercut their business by threatening to starve out anyone who works for this new place or tries to eat their food
4) closely hold on to the recipe so noone has a clue what kind of animal parts MSFT's is using
Of course this lemonade from the corner stand is not from a secret recipe. Everyone kinda helped make it by contributing ingredients so you know it is safe. You can even add more sugar if you like. People buy from this stand because the kid looks wholesome, the drink is more refreshing than the sludge they serve at MSFT's to those that bothered to take a taste, and it comes with a note on how-to drink.
An income stream from licensing? (Score:2)
In the differentiation game which RedHat and others are going to have to keep playing if they are to survive, this is one thing that having the best-known brand name will make possible.
Does RedHat currently charge for such use, and if so, to what level of Compatibility do they ensure? Or do they charge for software but not for hardware, or vice versa? (I can see some arguments for that sort of arrangement
Insight appreciated!
timothy
I really don't think so.. (Score:2)
Companies that appeal to the advanced user (i.e., hacker) would use such a tactic, because obviously a hacker wouldn't have much trouble playing with his new Linux box (not that most such individuals couldn't put together their own, anyway).. However, companies like Dell try to appeal to the average end-user, not the hacker.. Therefore, including official documentation, an official CD with the Red Hat distro on it (not unlike they do with Windows), and being able to tell the consumer that they have official support because it is the official product seems the way to go..
Re:What about /.'s balance sheets? (Score:3)
Re:Red Hat's losses (Score:3)
My memory was that the old saw was "you can make money off of free software." And I can guarantee you that there are (former) RHAT stockholders who have proved that this is true. Profits are a more interesting thing, in that there is sometimes a big incentive to postpone having any.
In this case, we're talking about a company that does a public offering in order to raise capital so that they can grow more quickly. They then report revenue growth of 95% on a year over year basis; yes, that does appear to be fairly healthy revenue growth. So where did that revenue go? A lot of it (over $1 million, I believe) went into R&D, that is, paying people to design and code stuff (hmm...guess those people are profiting from free software). Another chunk went for more marketing and advertising. If all goes well, the revenue stream will continue to grow, and grow faster than their costs, and then you'll see some serious profits, not the $100K they probably could have gotten this quarter if they went for the immediate bucks.
Of course, they might not make enough money to justify a $7.4 Billion market valuation, but they could potentially get $20 million in sales this year, which is incredible given that their product is, well, free.
King Babar
In the money. (Score:3)
A thought.. (Score:3)
Disclaimer: I don't know anything about how to run a business, don't own RHAT stock, and don't track their activities, so please be very gentle with me. :)
I always thought that the way Red Hat would make its dough was by signing deals with major computer makers.. After all, they could download whatever Linux OS they damn well pleased, and most would want to put the most popular distro on their computers. However, without permission from Red Hat, they are not allowed to call the distro on their computers Official Red Hat Linux. Therefore they would have to sign a deal with Red Hat that allows them to use the name. If Red Hat was smart, they'd charge the big bucks (or at least enough to make a profit in the long run) for each preinstalled system with their distro on it.
Obviously the sales of their distro directly to the end-user without the benefit of a computer maker middle-man are going to drop like a rock when preinstalled Linux desktops (desktop meaning "with modem" in this case) are churned out by the major computer companies.. And, like others, I don't really buy into this "they're going to make their money doing support" thing all that much. However, doesn't the example in the preceding paragraph seem a little bit more viable to anyone?
Besides, I would think that the computer companies would want to include Red Hat's nifty little guides along with the computer system, too. Again, they would need to sign a deal with Red Hat (and probably pay a pretty penny for each copy).
Deal Making... (Score:4)
- Big companies like Dell and IBM have staff that remember what happened when some uncareful deals were made with Microsoft.
- It may be cheaper to keep several Linux vendors alive and kicking than to commit to one.
- Playing the My Kernel Developer Is Better Than Your Kernel Developer game is none too safe.
- The Only Works With RedHat Linux label came long ago, and can't afford to stay.
This should not be misread as a prediction of impending failure, but merely to say that the commonly misperceived "infinite clout" just isn't that "infinite," even if they do have some on-paper billionaires...If it hadn't been for some real sharp intellectual property lawyers, Microsoft would probably have been a bit of "IBM toe jam."
After all, Macmillan Publishing was "devoted" to Red Hat Software until they became "devoted" to Linux/Mandrake...
Look, for instance, at the VA Linux Systems Ubergeek List. [varesearch.com] Note that they've "got" Ted T'so and H.J. Lu, amongst quite a list of important "Kernelmeisters."
Red Hat has some notable kernel hackers, notably Alan Cox and Stephen Tweedie; it is not vastly apparent that they have infinite clout in this regard.
Some perspective (Score:4)
Or put another way, it takes Microsoft a little over 131 minutes to bring in revenues equal to what RHAT brings in during a quarter!
Profit? yeah, right... (Score:4)
Their business model is unsustainable. They sell support, and at a flat-rate fee that doesn't cover the cost of support for those who use it. The only way they could turn a profit is to have the vast majority of people who buy their product need little or no support. Sooner or later people are going to figure out that it's stupid to buy the retail package just because they might want the support at some point in the future. After all, they can try to install it for free and then pay for the support only if they need it.
The revenues they have now are a mix of Linux-boosters who are giving charity and ignorant people who don't understand that the software is free.
They will never sustain big corporate clients, because an in-house Linux expert is cheaper and more useful.
Red Hat is never going to turn a profit, unless it becomes a fashionable charity. Yet another high-profile, high-price stock with nothing behind it.
Re:A good question (Score:4)
A public offering is basically the sale of ownership of a portion of the company - this allows RHAT to receive a bunch of $$$ to finance their continued growth (which they're going to definitely need, as we'll see later). The other option is to NOT file an IPO, and continue to finance their growth expenses from their tiny current revenue stream.
Investors are willing to pay a huge premium now for two reasons: #1, based on the revenue growth rates (i.e. 95% per year), this company COULD be making a ton of money 5-10 years from now, and #2 they read all about it on Slashdot (OK, maybe not).
Why does RHAT need such aggressive growth? Well, 5-10 years from now, their business model indicates that they will be primarily a services company (remember, the base product is free). So, they don't make money selling millions of copies of RHAT linux (which one person with a CD burner could do in their basement). Rather, they make money providing support and customization services for millions of copies of RHAT linux (which requires thousands of service provider gurus worldwide). Without very aggressive expansion, they can't achieve that.
Note the cycle here - RHAT needs $$$ to continue to grow, and investors only value RHAT primarily on the growth it displays (for future returns). So, if they can't continue to display astounding growth quarter after quarter, the stock goes in the tank. That's why announcements like these are important - even though the company is losing money, the revenue stream is demonstrating growth.
Redhat overvalues (Score:5)
Re:Economics question. (Score:5)
Simple example: I'm Bob Young, I have $1 billion dollars in my pocket, and I want to start a company for my hot new product, Linux Cabbage Patch Beanie Babies. I anticipate that my expenses will be $10 million the first year, and grow at 10% per year as my company grows. Also, I anticipate that my revenue will be $1 million the first year, and will grow at 100% per year as my hot new product catches on.
(Excuse the ugly formatting on this table - I hope you get the idea):
Year Expenses Revenue Profit
1..... 10..... 1..... -9
2..... 11..... 2..... -9
3..... 12..... 4..... -8
4..... 13..... 8..... -5
5..... 14..... 16.... +2 (woo hoo!)
6..... 15..... 32.... +17 (jackpot!)
etc.
Now, suppose I'm not Bob Young, and I only have $10 million in my pocket. Based on the above numbers, I'm bankrupt after year 2. So, I need to find investors (either one big one, or lots of little ones) who believe that these LCPBBs are as hot a product as I think they are, and will finance this loss in the short term in order to reap profits in the long term. A corporate merger would give me one big investor - an IPO gives me lots of little ones.