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Red Hat Files For Followup Stock Offering
An anonymous reader writes "Red Hat has filed with the SEC for a followup offering of up to 4 million shares. The goal is 'To provide working capital and for other general corporate purposes including geographic expansion and possible strategic acquisitions or alliances.' The S-1 filing can be found
here. "
This is what he said:
I hate...people who care about karma
So whatever the hell he was talking about, it had nothing to do with karma envy.
Some still think Redhat and other commercial companies do this in the good in themselves and not the money! Hey Slashdotters, Slashdot posts this kind of news because they like you, not because they own stocks. LOL. They wouldn't dare post something bad, oh no!
((oh, stop it(big boy))) (said with lisp)
... ain't hard. Red Hat's already done it three times: that little San Francisco web design company; Cygnus; and Hell's Kitchen.
So, is that why you can't download the latest version of the cygwin compiler? Interesting.
jik-
The Texas Freedom Network Education Fund is a 501(c)3 non-profit organization whose purpose is to balance the influence of the religious right in the public dialogue over public education and individual and religious liberties in America.
/. beats the sh*t outta me.
As to what this has to do with
Especcially if you look at how much it costs for Joe Average to stamp out 1000 CDs, packaged and shrinkwraped it is right around $1 (maybe 2 if you get extravigant with the jacket booklet.) Do a search, I was amazed at the profit one could make with a small investment in time and $$.
Unfortunately, $1000 is more then I can comfortably risk on such a risky venture....but for anyone that can, free software is a great get-rich-quick scheme. And all you would have to charge is $10 a CD to make a $9000 profit.
jik-
If the price holds up, that's strong. It means $500 mm of real cash money thinks this company is worth that much. You can go argue with *that*.
If the price doesn't hold up, if it cracks and falls day after day (see e.g. the way LNUX is behaving), then you are right, the current high price is an artifact of short supply of shares.
The info you quote is standard speak for SEC filings. They have to disclose all possible problems and downsides to their business.
Nobody expects Redhat to earn money in the short term.
However, with this secondary offering, they're increasing working capital from about 80 USD million, to almost 600 USD million, with only minor dilution of shares.
If they succeed, I expect their shares to rise *fast*.... It will mean they'll be able to grow a lot more aggressively, or keep losing money for a lot longer, before they need to show profitability. And that is a good thing in this market.
The thing that confuses me on the other hand is why only 6 insider shareholders are selling. I can't believe that there aren't other other people by now at RedHat with vested options who wouldn't want to sell some of their holdings if given the opportunity to do so. Don't forget that insiders are typically required to sign lockup agreements with the underwriters to not sell any shares for 6 months after the IPO. It's common knowledge that a (good time to buy / bad time to sell) stock in a high flyer IPO is just after the lockups expire. I'd be curious if other individual RedHat shareholders were given the opportunity to sell in the secondary IPO and declined or were just never asked.
It's kind of like how the market didn't rally off of Y2K news -- the smart people already figured out that Y2K wasn't going to be a big disaster, and they already had the "no Y2K disaster" rally in December.
A stock market is full of very smart, very well-informed people who see and react to news even faster than Slashdot.
You're partly right. But that's also why Redhat is so agressively pursuing support contracts, their portal (did you see what they did to Salon's share price?), and other income sources beside their Linux distribution. The distribution is more of a way to build brand awareness and to grow the Linux market than it is intended to be their primary source of revenue.
I don't think that deal makes sense but they could do it if they wanted.
And no, they likely don't think they've done the best they can with the capital raised in their IPO, since they haven't spent nearly all of it - just a tiny fraction so far.
Raising money in a secondary offering is something that is business as usual on wall street. They've had a great run up in their shares after the IPO, and can now get a huge amount of extra working capital with an extremely low dilution of shares.
If they hadn't prepared a secondary offering with those numbers, they would have been incompetent.
So there's no reason the shares should take a beating - Wall street has already been aware of all of the above for a long time, which normally means that it is already accounted for in the share price.
Personally I expect a continued increase. And I've backed that up with money ;) I don't own much Redhat stock, but I do own some. And if you're right and their shares take a beating, I'll surely take the opportunity to buy more.
Revenues for Imprise are actually quite similar to those of Red Hat Software. Microsoft and mismanagement pretty much destroyed Borland(Imprise). They have neat products, and a core of dedicated users, but not that much revenue.
Re: "I trust that Linux will win out in the long run, but I'm by no means certain that RedHat will be the ultimate victor -- the barrier to entry is just too small."
I wonder how many day-traders know that Macmillan makes more money selling Red Hat Linux than Red Hat does -- and Red Hat doesn't get any of that money...
Then why are you squeezing my ass?
John Katz the royal canadian buttplug should be on your list.
But his buttplug is not as fancy as yours, you pretty little thing...
HuH?
I think its about time Slashdot.com gets a little heat from TFN. This really is becoming a lame piece of journalism, don't you agree.
Red Hat isn't worth the paper its printed on. A service company is NOT worth the millions it is currently valued at...period.
Neither is Andover.net for that matter.
Where do you get $500 million fro the IPO in august? It was more like $70 million, if I'm not mistaken.... 10% of the 63million original shares (now x2 after the split) or 6,000,000 shares, were sold at $14 yielding $70,000,000 capital. Of the 6,000,000 original shares sold, 800,000 or 1.2% went to "friends and family" The second IPO is where the *real* money will be made by Red Hat (and R. Young, M. Szulik)
This is false. The executives don't get a penny from the secondary IPO, since the money goes to the company. If an employee of Redhat gets anything out of it, it would be as if he stole money from the company vault.
Mr Donkey, your comment makes you seems like Mr. Ass. Red Hat is an 18 Billion Dollar company. Silicon Graphics is an 1.8 Billion Dollar company. These numbers may not mean much in the non-finance world, but in the finance world it means Red Hat has much more currency than SGI. Currency that it can use to buy companies. In today's environment, Red Hat can easily raise enough cash to buy SGI. If RHAT approaches SGI offering 3 Billion cash, there is almost no way that SGI can say no.
You're information is incorrect. 2.75 Million shares are new issues but 1.25 Million are owned by the investors. Here is the $$$ each person will get -- these numbers are CASH - real money and NOT paper. Robert Young = $42 Million Marc Ewing = $43 Million Matthew Szulik = $5 Million Frank Batten (investing through Landmark)= $71 Million Manoj George = $1 Million David Shumannfang = $287,000 Beanchmark and Greylock are not selling any. However, this means that Young and Ewing believe that they should take money out of Red Hat and invest it in something else. They would NOT do this if they were confident that Red Hat's stock price is overvalued. In effect, they are betting that REDH will go down in value.
Are there coputers in Indonesia? Don't they all eat human stew and throw sticks at each other?
You're information is incorrect. 2.75 Million shares are new issues but 1.25 Million are owned by the investors. Here is the $$$ each person will get -- these numbers are CASH - real money and NOT paper.
Robert Young = $42 Million
Marc Ewing = $43 Million
Matthew Szulik = $5 Million
Frank Batten (investing through Landmark)= $71 Million
Manoj George = $1 Million
David Shumannfang = $287,000
Beanchmark and Greylock are not selling any. However, this means that Young and Ewing believe that they should take money out of Red Hat and invest it in something else. They would NOT do this if they were confident that Red Hat's stock price is overvalued. In effect, they are betting that REDH will go down in value.
They may bill it as a merger, but let's look at the facts: * T/W gets 1.6 shares of the combined compayn. AOL gets 1.0 shares of the combined company. * AOL stock dropped after the rmerger announcement. * T/W stock soared after the announcement. * Usually, the buying party's stock drops, the bought party's stock soars. Face it, AOL *bought* TimeWarner. Harry
That's fine, but he should let somebody else do this work then.
Don't you dumbasses know that this was a troll? Heh.
It's likely that other people holding shares can sell, but that they don't have to report on the S-1. If you have access to Form 144 filings, have a look at those.
You guys are seeing what the company is worth on paper on Wall Street. That's NOT what a company is worth! Yahoo isn't going to sell for $70 billion in cash! Redhat has *no* operating profits and has always been operating at a loss... who in the hell would rate them higher than SGI who actually has manufacturing and support facilities?
Oh I dunno.. maybe because Be is stable and the interface is probably 100 times better than anything that exists for Linux? It would probably mean also dumping X but oh well.. have you seen the sweet fluid motion of BeOS doing graphics and video?!
It'd be nice if they took this opportunity to make up for those who were disappointed in the initial offering - like those of us who are 'unfortunate' enough to live in the UK, and who received the initial invitation only to find that they weren't allowed to participate.
Take some basic finance before trying to sound out.
Companies can raise moeny a number of ways. The most popular are (1)Reinvest earnings (2)Debt (3)Equity. Since earnings are nonexistent, option 1 cannot be pursued. That leaves option 2 and 3. When a company decides to use equity or debt it is sending a signal to the marketplace. This is called an asymetrical information problem -- since investors know less information than insiders, any info that outsiders through to investors is heavily considered. When it issues equity, it is saying, we want to cash in some of our shares today because they may not be as valuable tomorrow. This is in contrast to the company saying, we think our shares are undervalued (meaning that they'll go up in the future) so we are going to issue debt so we can hold onto the stock ourselves for a longer time. Even if you as an uneducated investor don't understand this, the bankers working for Redhat (Goldman Sachs) does belive this. The decision they come down to is: equity or debt. If the shares are undervalued, they do a debt offering. If the shares are overvalued, they do an equity offering. Hence, no matter what Goldman Sach's analysts say, when the time came for Goldman to put $ on the table and bet whether RHAT was going up or down, it said it was going down.
------------
Unfortunately for us today, shares do reflect a supply/demand market quite well. This is unfortunate because this effect overwhelms and traditional valuation model (and hence we can insanely priced stocks). I'm not going to run through the equiations for you since this format is not approproate. However, for empiracal evidence, simply look at the initial internet stocks 2 years ago. When the IPO pipeline began pumping, many Internet stocks fell since there was now more supply and investors had more choices.
utter rubbish and bullshit in my opinion!~!!! oh and its communistic and zealous!!!
Don't you hate it when those suckers get filthy rich while you're still slaving away on Linux for free? Commercial Linux distros are the biggest scam in the history of mankind.
These two possibilities are not mutually exclusive. That is, original poster could be a gay commie whilst the first AC continued to be unintelligent and unable to articulate a valid comment.
I suggest that this is, in fact, the case.
Jon Katz is canadian? Ah, fuck.
Maybe you are unintelligent and unable to articulate a valid comment.
You are truly pathetic.
Grow up, get a life, and stop reading slashdot for at least a month (preferably a year). Such hatred and karma envy (wtf? why envy karma?)is unbecoming and indicates that you are in great need of social skills and exposure to sunlight. Get away from the comp, and keep your petty posts to yourself.
I hate the following people: losers who hate others for having more than them, especially when the item in question is useless.
Takeover Be? I think every rational person would admit that with Be's next release (which will fix their currently terrible networking among other things) they will have a significantly better and more organized OS than linux. The only problem for some people being that it's not open source. I don't think red hat could handle throwing all the years of work down the drain just to switchover to be. As for Inprise, I really hope not. They make such great tools and are likely pulling in far more money than red hat will for many years to come. As mentioned in another article, red hat will be filing to sell more shares. This isn't a good thing, it means they aren't making enough money to run their business properly.
Hmmm, A clear analysis of who owns Red Hat would be interesting... Doing the math, it seems to me that Red Hat stock valuation doesnt quite add up. While I am a loyal Red Hat user and follower for the last three years, I can't see how they can be "worth" $18,000,000,000 now. As far as I can see only a small fraction of their shares were sold at $14 each (now valued at 2 x $130 after the stock split), so the stock market hype that has boosted their value has mainly had the effect of making the Red Hat principals wildly wealthy ($billions) on paper, ever though the IPO only actually raised about $80,000,000 working capital for the company). The paper valuation of the remaining unsold shares allowed them to acquire Cygnus, etc. for huge nominal $ amounts, but actually only paper, not cash, changed hands. So *now* both the company and the principals like R. Young, etc. are going to cash in on the high prices that speculation in the small fraction of shares that are publically traded has caused. I guess this is capitalism at its finest, and now that Red Hat inc will get some serious cash (much more than the IPO yielded), I hope that this will help improve Linux. But I would be really interested to see a clear and careful analysis of Red Hat stock ownership and value to understand where exactly all this wealth is coming from and where it is going too. What is paper and what is "real" ? Looks to me that the way these IPO things work, is that the company founders initially sell a small number of shares just to create a nomimal market value for the residual shares (most of which they have retained), and the "friends and family" are instrumental in hyping the share value (and can cash in themselves for some $ thousands , as a reward for helping to make $ multi-milllions on paper for the principals). Of course, if the principals suddenly sold all their shares (which the SEC forbids them from doing), the price would collapse, so they have to do it in small doses, like they are doing now, to turn some paper stock value into cash for themselves. Can someone write a careful analysis so us mere nerds can understand what is really happening here?
Okay, that's it. I'm filing my IPO. I'm releasing 200 karma shares of slashdot. Yeah, that's right - for $45 / share you too can have insanely high karma on slashdot. Simply send me your credit card, DOB and expiration date of the card, and I'll send you back some karma points. =)
http://www.tgwbp.addr.com/cgi-bin/wwwboard.cgi
So the people who bought those shares are entitled to 10% of Red Hat's assets and earnings.
Now the owners of the company want to sell another 3% of the company. They are coming back to people who want to invest money and saying "do you want to buy some RHAT? Fine, we will sell another 3% of the company to you for cash."
Companies do this for the cash (obviously), and also because some of the current owners want to get cash for their shares. The company will probably use the money to: acquire other companies; hire more people; run some advertising campaigns; fund more engineering work.
The price this time will not be $14 per share ($7 adjusted for that 2-1 split), but more like $130 per share. That's why companies raise money one round at a time rather than selling the whole company at the IPO for $7 per share!
It's not about the books per se; it's about the mindshare. O'Reilly owns the market for Unix technical books. If any one Unix vendor (such as Red Hat) owned them, the other Unixes would not be documented as well or as thoroughly as O'Reilly's owner's brand of Unix.
Don't bet on RedHat taking over O'Reilly, as the latter is not publicly held.
I'm not a businessman nor a lawyer but what a secondary offering essentially is a further request for more money in trade for stock. In the IPO, Red Hat sold out only about 10% of the company stock. Now they want to sell a bit more for additional money. They might be doing this now instead of all during the IPO because the stock is worth 30x what it was during the IPO. Naturally you can expect the stock value to drop a bit when more shares come to the market. I'm kind of surprized the stock value hasn't dropped already since the anouncements. It might be that so many people have had their investments appreciate already that they are willing to tolerate a drop.
Although, there are nearly 140 Million shares of RHAT, only 12 Million of them are currently traded over the stock market. The rest are owned by employees and pre-IPO investors. RedHat is now adding an additional 4 Million shares to the 12 Million. If you are a shareholder, this should be scary for you.
It is easy to argue that RedHat's valuation (the reason its stock price is so high) is a question of supply and demand. Since there are only a few Linux shares out there, investors who want to own Linux have to outbid other investors for the small number of shares. In essence, Red Hat's stock price is so high, becuase shares of Linux companies are rare. What this secondary offering is doing is decreasing the rarity of the shares - by at least 33%. This means that since the supply of shares is going up, the price will most likely go down (barring any other occurences). If this is still difficult to understand, you can equate it to why gas prices are going up now. They are going up since OPEC has decided to make less gas. When more gas is made (like last year), the price goes down substantially. Here, RHAT = gas.
To all the people who propose that Red Hat acquires all those great companies -- let me remind you that the shareholders of the latter don't necessarily view Red Hat's stock as a currency as good as as cash, because it's so obviously inflated. Quite simply, they might not be willing to sell for Red Hat's stock because it may tomorrow be worth a tenth of today's value.
Let's see how long it takes for (void)LinuxOne
to copy this one.
Wrong.
There are 12M shares circulating (was 6M but they split 2:1). The company is selling more stock, but the real story is the founders are starting to sell out.
You don't sell stock unless you think the price will stop going up.
- Adam L. Beberg - The Cosm Project - http://www.mithral.com/
Can some businessperson of the /. community (hey, we've got Lawyers, why not?) explain to us what a secondary offering is, what kinds of things secondary offerings do, etc.?
No one has really explained why a company such as dell, gateway, or ibm would not want to just roll their own distro? After finally getting an opportunity to get out from under microsofts thumb, why would they rush to get under Redhats? They have developers on staff. They have huge amounts of tech support on staff who would need little retraining ("from now on, use this database if it's a Linux question")...
I think that that's the next wave. Vendors may even say that their distro is based on RHATsfor a while to get the public used to the idea of them being equals, but in the end there'll probably be Dell Linux and IBM Linux etc... some vendors will maintiain the status quo... others will try to differentiate their products with proprietary enhancements and end up incompatible with the rest of the crowd...
That's what i see at least...
IBM's been bullied by Microsoft for so long, I'm sure they'ed much rather support their own OS rather than deal with another potentially obnoxious vendor.
And the only business they're trying to get out of is the retail PC business... They make a killing with DB/2, support, Lotus Notes, etc... And supporting Linux would play right into their business plan. Rolling their own distro wouldn't be much of an issue:
Grab a copy of Debian
Update the kernel
Update Apache
Include a free 5 or 10 user version of DB/2, and all of a sudden they've got one of the most compelling web platforms in the world....
Mark my words, if anyone does it, it will be IBM that builds their own distribution to bundle with their systems. Redhat has a name amongst the geeks and to an extent wall street (who just stand there wondering how it could be worth that much, but might as well buy some because it'll probably go up some more), but for the layman (whom i judge as my parents), they don't know redhat from slackware from debian from caldera. All they know is that Linux exists and it's an alternative.
For those people, IBM Linux would be much more trust worthy than Redhat Linux.
Someone's getting confused here. It's not a secondary initial public offering. It's just a secondary offering. They've already gone public. They made $14/share, when they did that. They've since split, so those share were effectively sold for $7. Now they're going to sell some more shares at $150 or whatever the market will take. That's all. It's a secondary offering.
Only in the Software Industry/.com World are companies valued at what their potential could possibly be. Most of the time, as companies announce earnings and growth, analysts up their expectations and set new price targets, etc... Everythings been turned upside down recently (the past few years) as people scurry around looking for the next Yahoo's and Amazons, etc...
As for your comment about Engineers being more important than sales... Engineers just make a product. Sales and marketing actually earn the money for the company. How many companies have gone under while having an awesome product but aweful sales. And how about everyone's least favorite company around here, which has an inferior product, yet killer marketing and therefore they're the most valuable company in the world...?
And as for their profitablility... if they stop their attempts at growing, their value will drop like a rock. There's not much profit you can have with $12 million in sales that makes a $20 billion dollar market cap look worth while.
here this is not really a priority
.0000001 %
:)
what percentage of people here care about this or
is relevent to them directly ?
less then
so shut up and stop talking about it
You're missing a very important point: IBM wants out of the software business. Completely. They want absolutely nothing to do with the OS business (remember their last escapade?). They're porting Linux to every machine that they make in a bold attempt to remove themselves from this market. By 2010 IBM wants to be 80% services, and 20% hardware. If Linux allows them to do this cheaply, while retaining complete control over the hardware, then they would be fools to not. Right now you can't swing a dead cat without hitting an MCSE, but the Linux equivelant is still elusive. They can position themselves to be the experts, which furthers both their "services" and "hardware" plans.
/. finds me to be 20% Troll, 80% Funny
more take overs, eh?
The first thing i thought when i heard this was that redhat had over extended themselves from just this sort of activity and needed the extra money just to keep going at their current pace. I'd be pretty surprised if Redhat could take over O'Reilly, Netscape(owned by people with $$), SGI, or Inprise--despite the current linux IPO buzz these companies have much more market proven businesses and would demand HUGE prices. Take away the stock market madness and its still pretty hard to turn a profit off of giving code away, i know i'm not very damn rich, but if Redhat could take over some business(es) that turned a profit off of more things than tech support it would put them in a much more stable position for the future--like next year when the suits stop giving a shit about linux IPOs and the next cash cow darling comes along.
That was my point, kind of...
I strongly believe that trying to be clever is detrimental to your health. -- Linus Torvalds
That's all fine and dandy. What about SGI's market cap? I'm (almost) willing to bet RHAT could buy SGI now...
I strongly believe that trying to be clever is detrimental to your health. -- Linus Torvalds
Try that version:
This is a bit of an understatment, but there is no way AOL can possibly even touch Time Warner. They may be able to snatch up divisions that spin off of Time Warner, but there is absolutely no way for AOL to takeover Time Warner.
Time Warner is just too big. AOL, even with all of it's big name corporate ties, is still a relatively small entity.
Yeah, I know AOL Time Warner is supposed to be a merger... Is it really?
I strongly believe that trying to be clever is detrimental to your health. -- Linus Torvalds
SGI is a hardware company - RedHat is clearly not.
Troll Tech is Qt, and RedHat seems much more focused on GTK.
You want them to buy Netscape (from AOL) just to GPL it? Why would they do that? That's worthless, especially since it's already Open Source.
BRU and Arkadia also don't make much sense. RedHat used to package BRU with their distro and it didn't do them much good.
O'Reilly might make sense, except that it would be a waste of money to buy an entire publishing company for the sole purpose of developing documentation. Better to hire good writers.
As for ApplixWare... well, they're really not that great.
-----------
"You can't shake the Devil's hand and say you're only kidding."
Methinks it'll be time soon for a mutual fund that invests exclusively in Linux companies and does so across the board.
:)
While it's easy to agree with this statement given short-range hindsight to recent events, I'd think some of you would be old enough -- like me -- to recall wizened old stockbrokers telling you to "look for a low P/E ratio & good, sound earnings fundamentals." That sounds anachronistic in this day of e-anything-&-everything-must-be-great, but that's due to emotion and not bottom-line logic, IMO. Remember, we cannot be certain when or if we will achieve sustained profitability is what they said [emphasis mine, naturally].
When companies that have never seen anything but a sea of red ink (I'm thinking Amazon now, not Red Hat, but this applies to both and many others) get overhyped, little-guy investors will get nailed in the end, IMO. In the meantime, I've seen a number of fundamentally sound ideas go begging for VC money (in part this is my failing, I wish I were better at hype than I am) with scant/no media attention and hence no investor attention, despite being in the black & having a good, specific business plan and fun, unique products.
Oh well. I predict a lot of "evolution" in the market this year, with possibly even a few extinctions (not thinking about Amazon OR Red Hat now, and I won't say who I AM thinking of). Disclaimer: I am not licensed to give investment advice (and not only that, many people think I'm an idiot).
JMR
Try e-gold - (contact me). I'm NOT e-
SGI - cool hardware
This is a bit of an understatment, but there is no way RedHat can possibly even touch SGI. They may be able to snatch up divisions that spin off of SGI, but there is absolutely no way for RedHat to takeover SGI.
SGI is just too big. Redhat, even with all of it's big name corporate ties, is still a relatively small entity.
-----Transmission Complete----- If you want to email me...Don't
Existing shares will not necessarily fall..... the issue of new shares can show that the company has confidence in it's future and is growing fast (and therefore needs the cash).
If the Market believes that Red Hat will use the cash wisely (good acquisitions, investment, recruitment etc.) then the presence of this war-chest will increase the percieved value of the entire company, and the shares of existing shareholders will rise.
Shares don't conform very well to standard analysis of supply and demand.... you're right that there is a known total supply but demand curves fluctuate a lot based on changing expectations and market conditions. Hence financial economists tend to worry more about estimating future cash flows than trying to fit a dodgy model of supply and demand.
AOL Market Cap: 141 B RHAT Market Cap 18 B
Several days after the positions vacant e-mail a request was sent to post a mail advertising a $AU3,500 5 day Red Hat training course. From my understanding this is the first time it's been offered in Australia.
Red Hat are setting up office in Brisbane in the state of Queensland. It's a pacfic rim city, closer to Asia than Sydney, and a number of large IT firms are setting up offices there to manage the Asia-Pacific market. I guess big American companies still prefer to setup shop in english speaking countries? Or maybe than just fell for the shrimp on the barbie line?
Psike.
Meta note: somewhere between Preview (which was really slow today) and Submit, all the HTML in my previous posting was deleted.
So, they think they've done the best they can with capital raised in their initial stock offering to create a profitable, money making operation. Yet, they still see additional un-realized opportunities to do more great things in the same vein they'be been doing, if only they had the capital. So it's time to offer additional stock.
...
It's great for them if they can get the money, but I think they're blowing it
The Original Celebrated Curiously Strong GHOST (mentha lemures)
While the free (in terms of $) nature of Linux is often used as an argument for purchase it is not the only or even primary benifit of Linux. First off Linux and BSD are in many ways very similar to UNIX, while be able to run on hardware that costs substantially less. Sun (which use Solaris) and SGI (which use IRIX the SGI variant of UNIX) workstations cost a whole lot more, and are harder to get then an x86 machine. Secondly, looking at you other example, NT. Linux is cleaner and more stable then NT by a long shot. How many companies reboot their NT servers on a weekly basis as a part of preventative maintenace, more then you would expect. On the other hand there are Linux machines that have been up for years without a reboot. Thats what happens when you have a community that is truly interested in making a better product, rather then milking their customers for every dime they can. Above all this is the real reason to chose Linux, the freedom it gives you. Don't like the way something works in Linux, or find something broken in Linux, you can fix it yourself, given sufficent knowledge. Lets see you do the same with NT or even most of the UNIX variants out there. You'll end up waiting weeks or months for the provider to provide you with a patch or hotfix. Linux in and of itself may turn out to be hype in the end, but the open software revolution it has started marks a substantial shift in the way software companies will do business for all time.
"You can't fight in here! This is the war room" --Dr. Stra
No one has really explained why a company such as dell, gateway, or ibm would not want to just roll their own distro? After finally getting an opportunity to get out from under microsofts thumb, why would they rush to get under Redhats? They have developers on staff. They have huge amounts of tech support on staff who would need little retraining ("from now on, use this database if it's a Linux question")
You may be underestimating the importance of the support angle. Re-training a whole segment of your staff from being Windows support people to being Linux support people is not going to be as trivial as you suggest. It's probably going to be more cost effective for a big firm like IBM to outsource the development and support for Linux to Red Hat, SuSe, et. al. than to build their own custom distribution and support staff.
There's also a public perception angle. On the one hand, a big company like IBM still isn't as well recognized in the Linux field as any of the existing distributions, so they can get some extra customer confidence by going with a well known and respected distribution. On the other hand, IBM at the very least doesn't have a completely spotless reputation in the computer community. If they create their own distribution, there are a lot of people who are going to get very suspicious of their motives, particularly whether they want to fork the code and tie people in to their slightly incompatible version. They can avoid that suspicion by using an existing commercial distribution.
There's no point in questioning authority if you aren't going to listen to the answers.
Isn't "secondary initial public offering" (or ... "secondary IPO") an oxymoron? Just thought it sounds a bit odd to be using the term IPO with what RedHat is doing. Granted, it is an "offering", but it's hardly their initial offering.
Actually, RHAT could probably take over SGI if it really wanted to. As of Friday, RHAT was worth $18.2 Billion on paper and insiders (aka executives, founders, VCs) still own 91% of the company. That means they have at least 16 billion to play with.
SGI, on paper is worth $1.6 billion. And 70% of that is "in play" (the insiders have 30%). So if RHAT really wanted to buy SGI, I bet SGI would listen.
..., saboteur Belluzzo, clueless directors/managers and suicidal pricing policy did to SGI.
Contrary to the popular belief, there indeed is no God.
With Linux, it's not the product, it's how much support you can expect for the product, and that's a direct function of how many top Linux people are on staff at the company you're dealing with. To underestimate the value of that talent would be a big mistake -- a mistake that IBM etc. are not likely to make.
-E
Send mail here if you want to reach me.
Australia must seem like a haven of sanity in the midst of all that hatred, and it's no surprise that people build their Asia-Pacific HQ there rather than in some place where they might peeve potential customers.
-E
Send mail here if you want to reach me.
One of the exhibits mentions that RedHat is buying OpenSource.com.
-- Tom Rathborne
I'm part of a team working on a decent, GPL'd, accounting package for Linux. We're not quite Quicken yet, but we're working on it! Check out (with CVS preferably) Gnucash.
Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)
#ifdef PLUG
I'm part of a team working on a decent, GPL'd, accounting package for Linux. We're not quite Quicken yet, but we're working on it! Check out (with CVS preferably) Gnucash.
#endif
Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)
Considering the amount of shares tied up by insiders adding 4 million shares to the tradeable market will devalue all the shares. Then once the insiders can start selling some of them will, maybe to buy a new car or a new house. The point is that soon there will be a lot of shares for sale, and that will drive the price down.
I like Redhat software, use it regularly. I think they will last as a compnay, but I think their stock will go down as far as it has gone up before they turn a profit. They simply aren't going to make money any time soon, and some investors seeing how high the stock has gone will cash in.
Anyone who cannot cope with mathematics is not fully human.
Mindshare is important, but it's not quite as important for commodities like Linux as it is for other products. When consumers decide they want Linux, they'll quite often be persuaded to buy a competing offering if it's "just like [RedHat] only $20 instead of $50". And because of the GPL, the consumer is pretty much guaranteed that the competing product will actually be equivalent.
Another point: most of the money that comes from selling OSes doesn't come from purchases off the shelf; it comes from OEM bundling with new computers. When Linux truly goes mainstream, there will be an incentive for computer manufacturers to go with RedHat in order to get use of their trademark, but that trademark must be worth a lot if it overrides the cheaper alternative of just bundling a RedHat-clone. Because of that interplay, RedHat will have to keep its prices down, which doesn't bode well for the success of its stock, which is what this thread is all about.
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
Red Hat has real financial problems. [...] They should have become profitable as soon as they had any reasonable volume. like a hit record. But they're not. This raises real doubts about the business model.
You could not be more wrong without refering to a differnet industry (oh wait, you did).
Red Hat is not a singer belting out a tune. That would become profitable practically instantly becuase the publishing company would already exist. However, if you saw a music publishing company come into existance, you would not expect them to become profitable instantly because they need to build out the infrasturcture to support further records, distributuon, deals, etc.
The same is more true in the software industry. Contrary to popular belief, engineers are cheap. They're expensive compared to many employees, but on the bottom line of a company, they produce more profit than just about anyone. Sales, marketing, PR, HR, facilities, product managers, senior management, accounting/finance and the many other employees are much more expensive in terms of profit produced vs expense (though sales is right up there with engineers in some companies). Then there's the expense of making a name for yourself, maintaining a public comany (not cheap!), growing into foreign markets (way expensive!), acquiring stratigic companies (actually not much more expensive than expanding into foreign markets) and many other operating expenses.
Just as a reality check: let's say Red Hat wanted to build a marketing, distribution and sales enterprise that could rival, say... Microsoft. If that were the case, how much money do you think it would cost to build that infrastructure? Personally, I think they could spend the whole wad they got on the first IPO and still have a long way to go. It'll take years. If they just wanted to be profitable, they could stop spending money on growth at any time. That's not really the point.
Red Hat is planning for the long term, as well they should. They are building a world-class software company, and that will take time and money. If they don't show a profit for another year or so, I'll still be very optimistic about them.
It's easy to confuse oneself with the meaning of "barrier to entry". Technical people such as yourself, who are accustomed to associating that phrase with the name of a certain software giant (hmmm...) often mistakenly believe that the only meaningful type of entry barrier is a financial or legal one. Big Evil Corporation secures exclusive contracts with manufacturers and retailers, and procedes to engineer their products further and further away from compatibility with the products of other products.
:-) who populate slashdot, then an equally powerful barrier becomes important: mindshare.
True, Red Hat cannot hope to produce this sort of barrier. For one, there is the nature of the GPL, for another, the ethics of the community that is fostering their growth from a seedling startup to a major force.
But if Linux ever becomes a product that is sold primarily to the mainstream customer and not to the elites (real or self-deluded
The average consumer is unlikely ever to choose an OS based upon its most technical details. In reality, people who pursue computers to accomplish unrelated work rather than as a hobby get their purchasing information from friends, trade mags, and marketers, not from the spec sheet. They are provably unlikely to purchase an unknown product if a name brand is beside it on the shelves. Look at the respective popularites of K-Mart and The GAP.
The real difficulty a startup Linux company will have in the next decade is not pressing CDs but differentiating itself from the competition. This can only be done by promoting their brand into consumer households. It's a race for mindshare, not technical superiority. And Red Hat has a gigantic head start.
-konstant
Yes! We are all individuals! I'm not!
-konstant
Yes! We are all individuals! I'm not!
Some possible interesting takeover targets for RedHat
Buying Cygnus made sense. Some of the others you've listed also make sense. But the last thing I want to see is for Red Hat to overstretch itself. They aren't showing signs of it yet, and I don't want them to forget what they do and simply start growing through acquisitions.
That said, I could see them acquiring one or more of these. You've cited reasons for each of them, and good ones. We'll have to wait and see what they want to do with the money. I assume they aren't allowed to say much about it until the shares hit the market.
The net will not be what we demand, but what we make it. Build it well.
Something nobody seems to have mentioned - because this is GPLd software, nobody needs to buy multiple copies. One hosting operation with a thousand servers - one shrink-wrapped Red Hat box.
Redhat has 137,590,000 shares circulating. If they sell another 4M shares, that's a pretty small dilution, so we wouldn't expect the stock price to drop that much. At today's price, $132, they raise $528M. At the rate they're burning $$$, they could use a half billion shot in the arm.
A secondary IPO allows the company to offer many of the shares not already on the public market to the public. This means many more shares will be available for trade after the secondary IPO.
In the age of Internet stocks, secondary IPOs have become a way for execs at companies with high-flying stock prices to cash in. While normally executives at publicly-held companies must wait 6 months or so and divulge all scheduled sales of stock, secondary IPOs offer those same executives a chance to cash out on a large percentage of their stock.
-- jar
A typical reason for a secondary offering is that a company has had a great IPO and a great run-up afterwards, but most of that money ended up going to early investors, not the actual corporation. For instance, Red Hat sold something like 7 million shares at $14 each for a total of around $100 million in cash. If they had sold those 7 million shares at today's prices, they would have taken in over $800 million to use for corporate purposes. Actually, though, they plan to sell 2.75 million (plus some more personal shares from top holders) for about another $300 million.
Look at the obscene prices they had to pay for Cygnus and Hell's Kitchen when they paid in stock. If they had been able to pay cash for HKS, they would have gotten it at a fraction of the cost. With this new cash infusion, they'll be able to make deals like that, as well as generally invest (as a minority holder) in the new wave of open source startups.
--JRZ
I doubt that they are going to make many large acquisitions. The money would be better spent, at this point, in improving distribution channels, securing large partnerships with hardware manufacturers, opening foreign offices, building more internationalized distributions (easier with Linux/X/GNOME than with most other OSes) and generally becoming the only distribution that people think of when they think Linux. Buying out one of the other competing Linux vendors might also be the way to go.
I say this from a financial point of view, but of course, I still cheer when I see things like Mandrake and TurboLinux. We need a more competitive market than the computer industry has had. It's starting to shape up to be a lot like the car market, and that would be a (reasonably) good thing.
Red Hat should buy Intuit (or at least become a major shareholder in them). Then we'd get Quicken / Quickbooks for Linux and many people would be able to wave Windows goodbye.
HH
Yellow tigers crouched in jungles in her dark eyes.
She's just dressing, goodbye windows, tired starlings.
Time for a new Slashdot Section: IPO'S.
It seems like every other day some company raised X million capital, or has filed for an IPO. Or maybe just a business or finance section could accomodate this type of news. Just an idea.
Some possible interesting takeover targets for RedHat (some already mentioned here, some not):
There would be a lot of good possible takeover targets! This will be interesting to watch.
--------- Webmaster, http://www.cpureview.com and
We have incurred operating losses in four of our previous five fiscal years, including our most recent fiscal year ended February 28, 1999, as well as in the nine months ended November 30, 1999. We expect to incur significant losses for the foreseeable future[.]
[W]e cannot be certain when or if we will achieve sustained profitability. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.
And neither am I certain, from this vantage (albeit from the vantage of someone who missed out on the initial ipo frenzy). I plan to continue to use RedHat's products for the near future, just as I do with many IPOed companies' products which are being sold as a loss-leader, but it'll be some time before I plan to buy any of their stock. I trust that Linux will win out in the long run, but I'm by no means certain that RedHat will be the ultimate victor -- the barrier to entry is just too small. The winner might not even exist on the field at this moment.
Methinks it'll be time soon for a mutual fund that invests exclusively in Linux companies and does so across the board.
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
Red Hat has real financial problems. Despite that $30 billion market capitalization everybody looks at, they only have about $500 million in assets from their IPO. They're trying to capture some of that market cap for their own use with a secondary IPO, and get another $350 million. But why the big rush? Because the insiders own about half the stock, but can't sell for six months after the IPO. The first restrictions on insider sales run out in February, at which time the founders can cash out, put the carpeting in on the yacht, and retire, if they so choose. Those sales can dwarf the number of shares in the secondary IPO, as the SEC filing points out. This will tend to drive the stock price down. But the real trouble is on the current-accounts side. Red Hat is a company that sells a product that they didn't pay to develop, can manufacture cheaply, sells for a reasonable retail price, and they still lose money. They don't have to pay for huge manufacturing plants, billion dollar wafer fabs, or building retail stores in malls. They should have become profitable as soon as they had any reasonable volume. like a hit record. But they're not. This raises real doubts about the business model. How's it supposed to ever become profitable? If it's not working now, why will it work later? If you don't know who the sucker is in the game, you're the sucker. (Buffet - the investor, not the singer.)