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Red Hat Closes SF, Office, Lays Off Staff
pmccallick writes: "Wired is reporting that Red Hat just closed its SF office. The article goes beyond stating the facts to suggest that RH's business model is flawed." To be fair, the article also quotes an analyst who points out that Red Hat "has $320 million in cash on hand, that it consistently meets quarterly revenue expectations, and that its gross margins are improving."
So something, once designated 'critical' will be critical for eternity? When I decide to drive to the store, my car is 'critical' to my 'plan.' Then, I notice the time, and the store is closed. My car is no longer 'critical' to my plans, because the plans have changed. Oh, look, a grocery store has opened in the bottom floor of my apartment building. Now I can sell off my car. Doesn't mean my finances are down the toilet. :-)
A poor analogy, but an analogy none the less.
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1) The cost of running an office is fairly significant - especially in a costly city such as SF. With the other two CA offices, I can see why they might chose to close it. Sucks for those staffers who want to live in SF though.
2) The comments on RH management are from a former RH executive. Salt. Pinch.
3) The web strategy has been constantly "evolving". Can you say Yahoo! ? From search engine to portal to AOL-wannabe.
4) They're meeting their forecasts - generally a sign of management that understands what they're doing.
IMO, Redhat is a good $500M operation. They have lots of cash, are doing well with expectations, and are slimming down operations in the post-dotcom-internet-irrationalstockblitz era.
Investors tend to hate on redhat now because they paid an irrational amount of money for the stock. However, the stock was good but just far to expensive. It is like paying $1000 for a sack of idaho potatoes. They will be great mashed with some roast garlic...Mmmmm. They were not worth the $1000, but they were worth a buck or two.
The IPO was raised and raised and raised because everyone wanted redhat, and it went through the roof, and it was always an interesting model worth some attention, but a 25B market cap was insane! That is close to GM right now! I think redhat can sell to a small audience, but it won't ever be a 25B dollar operation.
Target price: $3, and then it gets an ACCUMULATE rating.
Just what is Redhat's business model? Long term, how are you ever going to build a business as successful as people were predicting Redhat was going to be, selling something that is free?
Sure, they can sell some CDs and some training, that's could amount to a pretty successful business, but not a software empire like Microsoft or anything of that magnitude. This is the reason that RH's share price is tanking hard.
I personally think Redhat is a good thing to have around because they employr programmers that work on things I use, but as a business they reek.
All of which are true. But until RHAT starts making money, it's still not necessarily a good investment.
It's a better buy at $6.50 than at $150. But that doesn't make it a good buy.
With $42M in revenue, you're still paying about 25 years' worth of revenue for every dollar's worth of stock you buy.
The comparables for the rest of the sector are 12 years, and for the rest of the market, two years.
Just 'cuz a stock is inexpensive doesn't mean it's cheap. Don't confuse your feel for the future of the technology (Linux) with the future of the stock price (RHAT). The market's littered with the corpses of people who've made that mistake.
The stock market's about making money, not about boosting technology. It's neither good nor bad - it just is.
>who are they marketing to, exactly?
A few months ago I had the opportunity to meet Redhat COO Tim Buckley at Penn State. I am a marketing major and I asked him about Redhat and marketing. Basically I asked him, what Redhat is doing to market to people who don't have a very strong idea about computing. I said that if someone perceives Linux as being too complicated to use, it is too complicated for them because a fundamental concept of marketing is the customer's perception is their reality. Ie. you can say Linux is easy to use until you are blue in the face but if people disagree, then you are wrong.
He said that is a major concern of Redhat's and they are working with Eazel and Gnome to make a better user interface, to ultimately make Linux easier to use.
He also went on to say that they want to agressively go after the pda market.
Pretty interesting stuff. He was a really positive guy who said he liked working for Redhat because he truly believed in the philosphies behind Linux.
Ben
They still have an office in Oakland (and another in Sunnyvale). The San Francisco office is related to the acquisition of a Web development company (Atomic Vision) there. Maybe they decided they didn't need to be on both sides of the bay?
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Sun Microsystems today announced their intention to lay off a third of their Marketting staff in their Solor Robotic Lab which employess three people.
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Many businesses either over-expand or have to re-strategize their spending. Unfortunatly, investors and the like tend to react and think that the company is going down when it does something like this. I think RH is stepping up to the plate by aggressively consilidating their resources. This is not a bad thing IMHO.
:).
On another note, I'm sure many of the employees that where part of the "review" in SF where quoting Office Space frequently
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What a crap article.
/etc and /var make a GUI to handle them.
How many other dot coms have plunged steeper over the same period, and have no product on the shelves at all? Quite a few. At least RH has real labs, real contracts, real projects and a real product.
Half a staff of 25 in a closed San Francisco office gets job offers in Oakland and Sunnyvale. Not to be insensitive, but out of 550 employees, this is hardly "a crisis" for RedHat.
I'll be the first to admit that RedHat has made/is making/shall make serious mistakes, but this closure is very mild (unless you're part of the half with no offer, that would/does suck, I've been there)
My advice to RH is the same as it has always been:
1) Drop the dumb subscriber model -- have a free login that is as good as Debian's Apt (you could learn a lot about packaging by watching "apt-get update; apt-get dist-upgrade" run on a debian box!)
2) Have a "silver/gold/platinum" tiered subscription model, in addition to the free one, w/ guaranteed response time/login (higher level == better performance/response). Be willing to sell "one time" tickets as well as annual subscriptions.
3) Somehow, someway, accelerate the various Gnome/Nautilus/Glade and other development tools such that its easier to manage and handle projects, create docs, etc. I know there are people out there working on "javadoc" like things for c/C++ -- hire them and make it nice.
4) Consider starting/sponsoring a project to CLEAN UP
5) Consider dropping your distro and adopting Debian. I know you are proud of RH, but the realeases appear to have significant flaws...7.0, 6.0, 5.0 were all disasters.
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The headline makes it sound so bad, when it really isn't.
You're missing the point. RH had claimed that the SF office was critical when it opened, and now they are closing it? And what about that business model? It's hard to plan long-term when you base your plan on a certain market cap, and then that market cap gets slashed by 1/10th and more...
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i used to work in a computer store and it was only the people that had a vague idea about computers but were trying to pose as expert users that considered commercially packaged linux.
I'm a student of cs in Germany. All of my fellow students use Linux one way or the other and all of them have bought pre-packaged commercial Linuces in the past.
(Of course, one of them would buy Suse 5.1 and give it to the rest, then the next gets 5.2 and gives it to the rest etc., but there is no systematic borrowing going on. I had four boxes of consecutive Suse editions lying around here before I switched to Debian recently.)
But still, I think the ratio of buyers is quite high here. Probably mostly because downloading is more expensive and less convenient over here. Still, the morale is high, too. I enjoyed ordering Suse boxes for the companies that I worked for, because I knew it supported a product, a company and a distribution scheme I like.
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Half sounds like a lot until you realize its only about ten people. The headline makes it sound so bad, when it really isn't.
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Before we all start saying that the open source business model doesnt work, simply because redhat is laying off people, there is a company that does make money at this. Its called Suse. The open source model for a software business can work, now whether redhat can make it work or not remains to be seen. I think redhat's problems have more to do with overextending itself with acquisitions, and the fact that there are so many other linux distros that are better. I dont want this to be distro flame war, so if redhat works for you, great, I'm happy for. I just prefer debian or mandrake.
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