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Red Hat Breaks Even, Beats Street Estimate
jfinke writes "Linux Today is running an article about Redhat's financial situation.
The company reported an adjusted net loss of $600,000, or break even per share, for the fourth quarter of fiscal 2001, compared to an adjusted net loss of $5.6 million, or $0.04 per share, for the fourth quarter of fiscal 2000. On a reported basis, the net loss was $24.2 million, or $0.14 per share, compared with a net loss of $24.6 million, or $0.17 per share in fiscal 2000." Congrats to all the folks there.
1 x 10^9 is one thousand million (or a milliard), you stupid colonial rube.
A billion is 1 x10^12.
Since no one really answered your question as to why they can adjust, the answer is that although they actually lost more than $600k, those were all "one time charges". Meaning they aren't losses that will repeat quarter to quarter and only affects that quarter (such as restructing charges, lawsuits, etc...). So they only report the quarter to quarter number which is "break even". However, since I'm posting this anonymously, you'll probably never read this and get your answer.
Probably a good idea. If they can rake in more money by offering more training and charging for their update services, as as Linux increases in popularity (which WILL happen), I can definitely see RHAT at $15-$20 later this year, easily.
:-) September strike $10 calls are going for $1. If it gets to $15 by then you quintriple your money!
But stocks are for wimps. Buy options.
Correct, but I generally just prefer to sell options for a quick profit, rather than exercising them. So if it gets to, say, $8 within a couple months, you could still double your money with the things.
Quintriple is 5X.
Like the previous poster said, but elaborated a bit...
RHAT September 10 calls give you the right to purchase RHAT stock at $10 on or before the third Friday of September. So if the stock is at $15 before that point, you can either
1. Excercise the option, paying $10 per share plus the original $1 for the option and if you wish, sell at $15 for a $4/share profit. You still have to fork out $11/share, but since you can sell them immediately, the $10 is not really risked (unless the market tanks between the time you exercise the option and sell the stock, which is unlikely since the whole process only takes a few minutes).
2. Say RHAT gets to $15 by mid August. You could already make $4 by exercising that $1 option and selling. However, there's still a month left on it and someone will no doubt believe RHAT will go up in that next month. So most likely the stock will sell for $6 or more. So I usually prefer this method of making money with options.
Speaking of options trading, I think I have sinned. I traded Microsoft call options this week. Now, anything involving MSFT just doesn't feel right. But the proof that it was a sin: The after commission profit was exactly $666! I'm not kidding......
> paper, shrinkwrap and support.
Not to mention convenience (automatic updates) and expensive training classes.
I think RHAT has a reasonably bright future.
What the heck, you're right. Just checked on dictionary.com. You learn something every day. I'm *sure* I've heard it used before, and I've used it a number of times.
Double, triple, and quadruple are words. Does anyone know what the word for 5X is, if any?
- A.P.
--
* CmdrTaco is an idiot.
"Remember when the U.S. had a drug problem, and then we declared a War On Drugs, and now you can't buy drugs anymore?"
Only on Wall Street can somone lose enough money to buy a house and still "break even."
Down that path lies madness. On the other hand, the road to hell is paved with melting snowballs.
I read the internet for the articles.
Yes, that story has been posted to Slashdot directly.
Is it hard to sell support for Windows because of its easy-to-use GUI?
But then again, I'm biased. I work for MontaVista Software; we support companies using linux for embedded systems development. I can't give you any specifics (and we aren't publicly traded, so you can't look it up) but the three-year (or so) history of our business shows our model to be no "losing proposition".
At this point, I'm beginning to think I've fallen into a troll pit. Nevertheless...
"Funny how you edit my post to omit the point where I discuss P/E and then say that I didn't mention it."
Oh, for god's sake fine. Here's the one place in your post that you mention P/E:
"Red Hat would have to double revenues without increasing costs to get to a P/E of 10."
So what does this show us?
1) You grasp the numeric relationship of P/E to P/R.
2) You really like to use P/E without a context (So RHAT's P/E would be 10. So what? You still don't tell anyone why thats high, outside of saying that "Red Hat...faces competition.")
"Bwwwaahhhaaahhaaahahaa, ok you find a company with a P/E of one that has not had major accounting irregularity accusations or the like made. A P/E of one means that a billion dollar market cap company makes a billion dollars profit in a year."
Look, man--I'm not the one who said (in the previous post) that "in sane market conditions" a company's P/R should be 1. Since you obviously accept that a P/E can be greater than 1 in "sane market conditions," you've set yourself up. Your statement limits the trading multiple of a company to the costs of doing business. I think this is silly.
"A P/E should normally be in the range of about 15 to 30, representing a return on investment of 7% to 3.5%. Companies with very high growth can justify higher P/Es - but these should be rarities not the norm."
Holy @$%#! Now you're comparing P/E to ROI? What guru taught you to do analysis? Why don't you just accept it: P/E should be used in the context of earnings growth. When E = 0, you should use the PRG ratio instead. When R = 0, you should walk away from the stock (IMHO).
"Conflating a PEG ratio of one and a PRG ratio of one is insane - that would only hold for a company with 100% margins, something no packager of free software can hope for."
Which is why I didn't do that. I said that, in a fully and fairly valued situation, the price/revenue/revenue-growth should be 1 (or close to one). This works because P/R and P/E are related by a constant factor--1/costs--at any given point in time. As long as you use revenue growth in a PRG and not earnings growth, then you can do the same sort of analysis as you would a PEG.
Look, my point is (and was), that you didn't use the PR ratio in any sort of meaningful context--which you didn't. If you want to be a bear, then fine, go right ahead--be a bear. Don't, however, expect to go around making silly, talking-head-analyst valuation assesments without expecting to be called on them once in a while.
Let's try not to let fact interfere with our speculation here, OK?
"folks even in the software sector a price/revenue of 1 billion to 100 million/yr is pretty rich."
You watch too much CNBC. P/E or P/R ratios in isolation are meaningless. Saying that a stock is overvalued because it has a P/R ratio of 10 (or 20...or 30...) is like saying that a stock is overvalued because the CEO is short.
For example, is a stock overvalued at a P/R of 20 if it's expected forward growth rate in revenue is 20%? How about 50%? This is why the PEG ratio was invented--it allows you to use the P/E ratio in some sort of context, which is critical...
Let's try not to let fact interfere with our speculation here, OK?
From what I've heard, Bill Gates is about 40 years too old to appeal to Ellison's taste. And his skin a few shades too light.
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
(110 - 100) / 100 = 10% increase
(15 - 5) / 5 = 200% increase
Or, in other words:
if you invest $100 in the $100 stock, your investment will be worth $110 in a year.
if you invest $100 in the $5 stock, your investment will be worth $300 in a year.
But I'm sure you knew that and it was a simple mistake.
___
___
If you think big enough, you'll never have to do it.
I think it's because RedHat is acquiring businesses. That's not included in your profit-and-loss because they are one-time expenditures.
Engineering and the Ultimate
http://www.redhat.com/about/presscenter/2001/press _Q42001.html
I haven't been able to reach the article since it appears to be Slashdotted, but I would be surprised if it is anything more than a rehash of the press-release with the obligatory journalist missunderstandings and confusing rephrasing.
A quick-n-dirty summary/analyzis from someone with *some* economic education and experience:
Red Hat's fiscal year 2001 ranges from February 28 2000 to February 28 2001 and that's what they have released figures for.
They made a "reported net loss" of $24.2 million, compared to a net loss of $24.6 million the year before, which by first look might seem like an extremely small improvement. However, their revenue rised by 100%, from $42 million in 2000 to $84 million in 2001, hinting that they are expanding rapidly so their losses are likely to come from investments that haven't payed off yet.
However, their "adjusted net loss" changed much more, from $19 million in 2000 to $5.9 million in 2001. It's very typical that a company that makes large aquisitions/investments wants to spread the cost over a few years and that's most likely what they have done here. This is actually good since it keeps the company's result level (and thus its shareprice) a bit more stable. You can't make your big cost magically disappear, you can only spread it over a few years.
The thing that Red Hat emphasizes is that they only made an adjusted net loss of $600.000 for the *LAST QUARTER*, trying to give the impression that they are on the virge of going break-even. However, remember that this is an _adjusted_ net loss, so they can have done some magic here, but I do find their statement believable considering their rapid increase in revenue, but we can't know for sure until we see the next report.
What I find to be most promising is the rapid increase in revenue. Up 100% compared to a year ago. That shows to me that Red Hat is on the right track.
No biggie -- it's just this is the second time in as many days my posts have been mis-interpreted.
An egoist would blame the educational system in this country. I know better -- I'm not being as clear as I should be. Sometimes it's because I'm lazy, sometimes because I'm trying to convey information through subtlety and nuance -- either way, I'm not listening to the lessons taught by Hemmingway...
One of these days, I'll get it right :)
"Beware by whom you are called sane."
Potato chips are a by-yourself food.
Without a really close examination of the books, NOBODY knows. Publicly traded companies have to meet a truckload of regulations, but in the end, there is a lot of accounting chicanery going on.
More money than you can shake a stick at, plus the stick.
It's in the NASDAQ Corporation Handbook. You get that when you get the decoder ring and learn the secret handshake.
When Bill Gates gets down on all fours and lets Larry Ellison bugger him.
"Beware by whom you are called sane."
Potato chips are a by-yourself food.
Unfortunately, most of the time companies do better than they forcast. They sandbag as much as they can, because "beating First Call estimates" sounds a lot better than "oops, did we look under the couch cushions?"
Don't get me wrong, I'm proud of what RedHat's done here, but it means little in the long term. What I see from RedHat is more than a quarter-by-quarter strategy, and more of a next-ten-years strategy. This is the reason MSFT is such a great stock, and Microsoft such a worthwhile company to invest in.
As soon as you see RedHat Labs budget cut, run, don't walk, to the nearest exit. It means RedHat's ready to sink.
"Beware by whom you are called sane."
Potato chips are a by-yourself food.
I'm glad you're passionate about this -- if you read my post again, you'll notice that you agree with me 100% I'm NOT (repeat NOT) advocating a quarter-by-quarter strategy
To reiterate, MSFT doesn't live by the quarterly returns, as witnessed by the gobs of money they spend on research (some of which is pure research). Now, Bob Cringely has commented that this money is spent now, to be revoked if MS needs it to make their quarterly numbers look good. Maybe, maybe not.
Here's a summary, just to hammer the point home: I don't think a quarter-by-quarter strategy is good. I think a next-ten-years strategy is good, and I see some signs that RedHat gets this. Clear enough?
"Beware by whom you are called sane."
Potato chips are a by-yourself food.
In the up coming months whether Redhat will be agian a hot stock. With the economy slowing down it is good to see this company making it.
It's fair though. A net gain of $600,000 would still be considered "break even".
0 1 - just my two bits
...DOTCOM, or should I say DOTGONE
Yup, they're going to end up on the dot-compost heap sooner or later.
Sorry, but one bad pun deserves another..
0 1 - just my two bits
Actually in IBM's Q4 2000 conference call they credited Linux and specifically RedHat with a big portion of their 390/z series and midrange server sales. If you recall were it not for the huge (100%) increase in midrange and 390 sales, IBM's earnings would have been much worse.
Overall it seems IBM really is commited to Linux and seeing tangible benefit from it.
The adjustment's never factored in, 'cause, well, they did make those $4.6M somehow. Now, it would be nice if someday they showed an operating profit, but this is still good news.
Whoops! That's REALLY annoying. I guess that's why they have the preview button.
I can see it already:
Ask Stock Market Analyst Prakesh Patel of W.R. Hambrecht & Co. about Redhat's Financial Statements
Actually, I wouldn't mind seeing that interview. I listened in to the Redhat analyst's conference call last night, but don't really have the background to understand much of it.
Thats how you get strange numbers.
I like the market cap per employee.
MSFT 300B / 20,000 (est) -> ~15,000,000 per employee
RHAT 949M / 200 (est) -> ~4,700,000 per employee
I don't know what it means though.
This Fool.com article goes into a bit more detail on the results (free reg. required).
Specifically it notes that while their revenue doubled to $27 million, $5.5 of that was from it's acquisition of Planning Technologies.
Also, there's this little blurb on ZDNET.
Hey, my companies breaking even on it's linux consulting business. True, sold $0 worth of services, but hey, i had $0 in expenses.... Woo hoo!
Breaking even isn't that impressive, considering they really don't have to spend much on R&D except for say RPM.... What else has Redhat done? On the other hand it's rather impressive that they've suckered that many people into buying what is otherwise a free product.
yes, but wasn't alan cox already working on linux before they hired him? Basically a waste of money, most of their operations are... they should ditch the entire distro and development idea and just sell support - except that'll die out as GNOME ane KDE become easier to use...
a losing proposition, selling free software...
My opinion.
What gave you that idea? They've turned their back on the Linux community and, in my opinion, betrayed us - deserving nothing but contempt (aka "I'm never buying anything with Corel's name on it").
the redhat fiscal year started february 28. last year.
/. doesn't mung up the url:
i cker=RHAT&script=1800&layout=-6&item_id='rhat_faq. htm'
if
http://www.corporate-ir.net/ireye/ir_site.zhtml?t
- Entertaining Bits from the Ancient Kernel Tree
All things considered, only breaking even on your core business is still not very good.
All things considered, breaking even on your core business after many, many quarters of being in the red is a very good thing (or, at the minimum, a cause for celebration).
It's certainly not making megabucks in profit, but coming from where they've been, it's certainly an accomplishment.
--
Whoever marked that as a troll obviously didn't read it, or doesn't understand money, or both.
Sure, MSFT may have had a better earnings/share, but look at their revenue growth: 18% over the last year vs RHAT's 106% growth. Indeed, RHAT had more growth between quarters (20%) than MSFT did all year.
I know where I'd put my money. (Of course, when you're small, it's easier to get large percentage gains. That works against you when you're large. The rolling average (filters out daily fluctuations) on MSFT's share price has been steadily downward for the last year.)
-- Alastair
News is News becuase its SURPRISING. Given the current stock market climate, I think many have become conditioned to think no one can make any money these days with technology products unless they have been here since the 70's.
This is really impressive, RedHat have done something many many other relatively recent internet boom start ups will never achieve. They have proof that their existance doesn't leak money and that is a cue for their customer base to increase exponentially (when you know your supplier is financially comfortable, you don't mind using them). The same game rules for all corporates apply to Open Source / Free Software companies too. Business is after all, business, but RedHat have one very large difference.
This is good for everyone in the Linux and Free Software worlds. It means RedHat can be pretty confident in gaining more funding, employees and clients and can further fund Free Software development for us all. Those of you not into this will benefit (albeit later) from the poker this provides those 1970's companys to improve their offerings, and I hope you enjoy seeing their profits knowing that money could have staying in your pockets.
While I personally don't see corporate success (at least in the distribution vendor sector) as synonimous with Linux's and Free Software success, it is nice to see that the world isn't locked into its technological straight jackets just yet.
Well done to them.
Red Hat lost $600,000 in the 4th quarter of fiscal 2001.
They lost over $5 million in the 4th quarter of 2000.
That's what the submitter is trying to say. I agree that the wording is a littlle bit confusing.
It's less than a penny per share. It's a negligable amount by Wall Street standards.
Could someone who knows more about accounting explain how a company that really lost millions of dollars can say they broke even, after adjusting the score to losing only $600,000? What do they adjust, why do they get to adjust, and when is that adjustment ever factored back in?
I'm really confused here and I haven't been able to find an good answer.
Ok, explain it to me... How is -$600,000 break even?
It seems ever since Corel committed their GPL violation about a year back (quickly corrected btw), the linux community has had nothing but scorn for Corel. Slashdot is full of comments trashing Corel and Corel Linux or Corel's CEO or what have you.
I'm reminded of the stories in recent days about Mac OS X bringing UNIX to the masses. Well, a year and a half ago, Corel Linux was an honest attempt to bring Linux to the masses. But by not supporting, and worse, openly bashing the effort, I think the Linux community shot itself in the foot.
So how can you blame Corel for scaling way back on Linux? If their help is not appreciated, why should they bother wasting their time?
Hooray! They lost money!
If I lost $600,000, I'd have to take a beating from Vinnie in the back alley... he'd probably break both my legs and an arm as well.
Spread that out over a million or so shares, and it doesn't look as bad though, right? I mean, that near break-even status is fantastic news compared to the bath that all the shareholders have taken if they got in at the IPO...
I'm not trying to bash Red Hat as a company... I think they make a fantastic (albeit relatively shitty) product and I think they're involved in a good (albeit financially stinko) cause. I wish them well. Just don't say congratulations when your money would have been better invested in shares of Krispy Kreme.
As many others have pointed out, accounting tricks can get you where you want to be.
People concerned about the survival of Red Hat or any startup/high-growth company should usually look at cash flow as an indicator of health.
Now of course every company reporting "losses" isn't in bad shape with cash, and definitely every "profitable" company isn't in a good cash position.
So how's Red Hat's cash flow?
> When can I look forward to seeing MSFT's
> earnings report with a tip of the hat to them?
Last time I looked Microsoft were convicted
of breaking the laws of America. So unless you
are into cheering other criminals then it shouldn't interest you.
I am afraid for Redhat, I think IBM cosy relationship as a "partner" could turn ugly with
the gorillas need for service revenue too
GnuCash
"If you have done 6 impossible things this morning, why not round it off with breakfast at Milliways" -- hhgg
Just for some perspective:
Foolish perspective
Red hat got those numbers by cutting costs and through an aquisition. The business still has some growing to do, and remember... they are still a reletively small company. Lets all hope they can pull it off.
-pos
The truth is more important than the facts.
The truth is more important than the facts.
-Frank Lloyd Wright
I'm a fool-ish investor as I read the fool daily, (BTW: a Fool is the opposite of the Wall Street Wise. You know... the ones who tell you to trust them as they trade your money away and stick you with commisions and "marketing fees".) and one of the points that all long term growth companies share is a moat around their business. This makes it hard for competition to take away their business and ensures that they stay king even if the market punishes them (for whatever reason) or they go in the wrong direction for a while.
MSFT and Palm do this through their monopoly of their respective software worlds. Coca-cola does it by having the most recognizable product in the world. With Intel it is the high barrier of entry to chip fabrication that makes it impossible for a company like AMD or Transmeta from wiping them out. Some (actually most) also use patents to keep other businesses out of their houses.
I have no idea how RHAT could possibly maintain a moat around their business if they are giving away their software. I think Brand recognition is their best bet.
Linux might be unique; RHAT's business model might be unique; Money is money. I don't see how they can ever be as profitable to an investor as MSFT has been. I wish it weren't that way.
-pos
The truth is more important than the facts.
The truth is more important than the facts.
-Frank Lloyd Wright
Mod this up. This is damn funny! (At least the first part of it.)
;)
BTW> Netscape lost money because its browser sucked ass, not because it gave it away.
PS> Redhat does suck. They're the Linux equivilant of Microsoft. The only thing that saves RedHat is the fact that Linux is so stable and secure to begin with. (And the fact that other people write the code
A deep unwavering belief is a sure sign you're missing something...
From the Debian About page: "Although Debian is non-profit." Thus, Debian made *no* profit last year. Also, I doubt Linux will ever make much money on the desktop, but I can see them making quite a bit of money in the corporate world, where support costs usually outweigh license costs.
A deep unwavering belief is a sure sign you're missing something...
> I'm in Costa Rica
Sorry for the 20 questions, but I'm curious:
How is net access there? Are Cable modems or DSL available?
How much does a nice house go for?
How long have you been done there for? Would it be a good place to retire?
i believe that the editor meant to say fourth quarter of 2000, not 2001.
just my $.02
E.
-
-
This Post has been brought to you by the letter "E".
The last time I looked at their burn rate versus
cash, they had a few years worth of cash.
Now their burn rate is nearly zero. So they can go even longer without rasing more capital.
The project a profit for next quarter.
This doesn't sound like a deterirating cash position.
They are doing a lot better than eToys.
Disclorure: I own stock in Red Hat.
"We can't solve problems by using the same kind of thinking we used when we created them." -- Albert Einstein
This puts a huge smile on my face. At least one of the Linux companies has some serious potential to make money.
I guess this proves that when you do it right, you CAN make money off of Open Source. Free stuff making money. That is just too cool.
"Red Hat not bleeding money out of every orifice anymore!" GO OPEN SOURCE GO. What exactly is this "article" proving? The viability of open source-based companies? I thought we were supposed to hate them because they were charging for services? When can I look forward to seeing MSFT's earnings report with a tip of the hat to them?
Easy does it!
This comment has been submitted already, 276865 hours , 59 minutes ago. No need to try again.
Essentially as the linux market matures the
best Red Hat employees will do better for themselves
by setting up their own consulting companies than
working for Red Hat.
Umm, not really. I don't know if I can be considered one of Red Hat's best employees, but I'm sure some of them think about this just the way I do.
Yes, I could probably make more money by setting up my own linux consulting company, but money isn't everything.
I think I'm doing much better for myself when I'm doing what I like to do (hacking on open source code) than getting more money by setting up systems and possibly having to take care of financial matters.
If I'm ever fired, I'll probably do just that - but I'd much rather stay with Red Hat where I can do fun stuff almost all the time.
This message is provided under the terms outlined at http://www.bero.org/terms.html
Redhat exceeded its own expectations. Nice but hardly surprising since I'm sure there is a margin of safety in the expectations they set for themselves. The question is now, are they making money yet? The answer is still no, but they are losing less money per share than they were a year ago.
This just doesn't seem like a sterling endorsement to me. Hey we still haven't made dime one, but were losing less money than we thought we would. This coupled with the fact that much of redhats customer base was probably now defunct tech companies doesn't fill me with enthusiasm. The information revolution is, in many ways, almost over and where is their steady income going to come from now?
So far I've gotten all my Karma from telling people they are wrong... :)
If Linux is such a great product, and open source is the business methodology of the future... how come it's a breakthrough for the biggest of the Linux distros (PR-wise) to break even? How much profit did Debian make last year? How can any software development firm make profit when they program for free, and have no concept of intellectual property? NOTE: These are actual questions and concerns, don't take them as stabs at your OS. /. users hate Windows or think Microsoft is out to get them!
____________________
Remember, not all
Prevent linux based DDOS's!
http://linux.denialofservice.org/
Unfortunately, most of the time companies do better than they forcast.
Yeah, but it's not often that a company beats the street estimates.
Here is a link to an analysis by the Motley fool group http://www.fool.com/news/2001/rhat010323.htm?ref=e m_fwcm2
--
--
I like to watch.
Such posting on /. does nothing but provides more ammunition for the 'outside' word to see /. readers and /. in general as being one sided.
/. readers? When was the last time /. ever posted an article about nothing but on earning for other companies, be it positive or negative?
/. wants to attract serious journalism for the tech. sector and see it that the outside word take it seriously when it talks about open-source and anti-MS posting, than we better stop being one side. But than again, the tag line for /. is "News for Nerds. Stuff that matters." Makes me wander if *my* posting will be taken seriously.
I mean, why is such news relevant to
If
---------------
Sig
abbr.
Karma stuck at 50? Add 2-5 inches.. err.. 2-5x Karmas Count to your pen1es.. err.. Karma all naturally and private
The +600K number seems to come from considering revenue from the merged units without considering the costs associated with the acquisition. It's hard to tell until the 10-Q comes out.
Actually I'm feeling kind of "Up" on this news...
And, here, all along, I had thought that a good business was one that actually *made* money. Heh. Silly me.
If you celebrate Xmas, befriend me (538
75% of all stocks trading at under $5 will be out of busness in 10 years.
To barrow from the motly fool would you rather have one share of berkshire hathaway inc BRK.A
Or would you like 12,000 shares of redhat RHAT
Ascii artist &
It's that new revenue stream from the formerly-free RedHat Network.
Got 10 shares of RH when it was about $.50 more than it is now. Looks like it's time to buy more.
DanH
Cav Pilot's Reference Page
Cav Pilot's Reference Page
UNIX - Not just for Vestal Virgins anymore
Rapid growth happens in small companies, not large ones, and that's where the greatest returns are to be found.
Playing this kind of odds game is definitely risky. Once the money is invested, treat it as gone and then you'll be pleasantly surprised if you get anything at all back.
Okay, okay. I guess they "broke even" because -$600,000 divided between millions of shares is less than a penny loss per share. That I can _kind of_ see.
But what I want to know is how, exactly, do they figures for Fourth Quarter 2001 in March? Maybe I just don't know enough about finance, but that sounds strange to me.
Josh Sisk
The link should have pointed here instead.
In financial markets this is a very good thing.
Positive news for a technology company these days is great news for everybody on slashdot. Linux needs a company that can be held up in board meetings and pointed to --> Hey these guys are doing business, the street likes them, linux has some base, let's give it some thought.
I explained linux to my grandfather last night and opensource made him very incredulous. A bunch of random people writing code isn't going to break down conservative barriers. A large successful corporation whose business is linux will break those barriers. Positive news on Redhat is great from this perspective, especially given the present market conditions.
You are correct, but in theory if you had a limited amount of money to invest, you could invest more in the $5 stock, thus yielding a bigger return because you could buy more shares.
Moon Macrosystems. Sun's biggest competitor.
...some good news about Linux based businesses for a change.
Sure beats the news coming out of Turbo, VA, Eazel, SuSE, and Corel of late. I only they can sustain this growth.
"The words of the prophets are written on the Slashdot walls."
On a reported basis, the net loss was $24.2 million, or $0.14 per share, compared with a net loss of $24.6 million, or $0.17 per share in fiscal 2000.
They only broke even for one quarter using adjusted numbers. The actual losses are actually quite stunning. The term adjusted losses is just accounting voodoo to hide the company's deteriorating cash position.
I would sure hate to see the numbers for the companies that went (are going) under....The $15 million that the Eazel folks spent comes to mine...I am no expert but I bet if you gav half of that ($7.5 million) to a big group of qualified Linux hackers and their moms (the moms would be for the Human Factors stuff -- you know the old joke of "when my mom can use it")....they could come out with a version 1.0 file manager and have a little extra left over for Pizza and beer.
(+1 Funny) only if I laugh out loud.
. . .
. . .
How much of this is from Corel (who was cutting in on Red Hats market for a little bit.)Dropping out. It may be that in order for some Linux distros to make money some will need to go out of business or really grow the market a lot. In the end it is good to see this it gives hope for the long term.
As to their accounting (the difference between the $24 million GAAP net loss and the $600k adjusted loss), this is allowable by the SEC and reflects mainly one-time or non-cash charges. Although this sort of manipulation should always raise eyebrows, it is usually subject to intense scrutiny by the outside auditors in a company like this (by "like this" I mean small tech company with a big recent drop in stock price.) The outside auditors often are named as defendants in shareholder lawsuits because they (and the D&O insurance provider) are the only ones with a meaningful way to pay the claims.
The meaningful differences between GAAP and adjusted are:
- Goodwill amortization: this is a non-cash charge to account for a company that was acquired. Excluding this (as an investor) makes sense if the company is not in the business of acquiring companies - if it was unusual (everything here is IMHO, if I need a disclaimer);
- Stock-based compensation: although there are several explanations for this, the most usual one is that a company gave out options before they were public and the SEC said the strike prices were below "fair market value" later on - the difference needs to be amortized over the vesting of the options. Again, a non-cash charge and should be ignored by the investor if the company is not continuing to give out cheap stock;
- Merger, acquisition and other: this is usually the abused bucket. It's hard to know what is in here, if the expenses are cash or not, and if the expenses are actually recurring and not one-time (the company will say they are, of course, but hard to evaluate the truth of that, is what I mean). Luckily, it's the smallest of the numbers.
The proof will be next quarter - assuming they do no more acquisitions, will their operating cash-flow be positive? The only real value in a business is its ability to generate cash in the future, not its reported GAAP earnings. That is what RHAT is trying to tell the street with its adjustments: we are very close to generating cash with our business. Up to you if you believe them or not.
Milo
If you're looking for ROI (return on investment) via growth, it's all about the slope, baby! I'd rather invest in $5 stocks that increase to $15, than invest in $100 stocks that increase to $110.
The more appropriate question, is whether Red Hat will exist in five years. (Of course, some ask the same about MS.) It's considered by most a bad idea to invest in companies that won't exist in a few years.
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D. Fischer
ShoutingMan.com
GnoCash
i wish i was but oh well
A positive example of Linux marketability, stability, and recources to show the corporate infrastructure who seem to be locked into the old ways - IBM being a vocal exception. Wouldn't it be nice to see a lot less BSOD, more functionality, and Linux in even more markets?
*shrug* Maybe I'm just ranting and dreaming, but I buy shares of RedHat just in case ;-)
Dream as if you'll live forever.
Live as if you'll die tomorrow.
~Anonymous~
"REDMOND, Wash. -- Oct. 18, 2000 -- Microsoft Corp. today announced income before accounting change of $2.58 billion for the quarter ended Sept. 30, an 18 percent increase over the $2.19 billion reported last year. Revenue totaled $5.80 billion and diluted earnings per share before accounting change were $0.46. Diluted earnings per share for the Sept. 2000 quarter were $0.40 after including the required adoption of Statement of Financial Accounting Standards No. 133 "\
Microsoft's Earnings
Or...
"RESEARCH TRIANGLE PARK, N.C.--March 22, 2001-- Red Hat, Inc., the leader in in developing, deploying and managing open source solutions, today reported revenue of $27 million for the fourth quarter ended February 28, 2001, an increase of 106% versus the $13.1 million reported for the fourth quarter of fiscal 2000 and an increase of 20% over the third quarter of fiscal 2001"
Red Hat
You Decide....
Corel is probably one of the few big name companies that I still do not resent. I will forever use their products and couldn't give a rats ass if you didn't. Everyone is entitled to your opinion, but you have no right to bash Corel. We'll just ignore all the financial problems it has to begin with. We'll also ignore the fact that they ported what is IMHO the best word processing suite to a platform that badly needed one. We'll ignore the countless number of paid staff they sent to help with countless Open Source projects, including Wine. We'll ignore the fact that their "betrayal" was because of a lack of revenue and the change of management.
We'll just look at it black and white and think: Jee...why the fuck would a company with an honest initiative ever "betray" a bunch of unappreciative, unsupportive morons who have done nothing but bash them?
Very tough question to answer isn't it?
The main impact was on the research dollars. I may be a Fool, but I don't agree that RHAT needs to keep investing at such high levels, now that we have IBM and other major players doing some of the work. If it wasn't open source, this might be a problem, but a 15 per cent investment in research is more than enough.
Also, note the stock is up 18 per cent today. Wish I'd bought some more back when it was down, but I'm only holding about 1000 shares in all my accounts now.
This is turning out to be another tech bubble in the stock market - just like with autos (4000 companies and only 4-6 survivors), TVs (thousands becoming three), and radio (ditto).
The trick is to buy the long-term survivors who understand the essentials - branding, marketing, cash flow, quality - when they're cheap. Not when they're hyped.
IMHO, RHAT is still cheap. The current price is still a good one to pick up and put in your IRA for retiring on, just as MSFT was back in the days. But don't have more than 5 per cent of your dollars in it, and don't expect to sell it in less than 5 years. And if you ever find yourself holding more than 20 per cent in it due to stock growth, liquidate some.
If you do this, you can join me in retirement in Europe and the Caribbean along with the other millionaires.
Oh, the rest of your money? Stop buying tech and shove it into an S&P index fund (e.g. Vanguard) and leave it there. Stop trading all the time!
--- Will in Seattle - What are you doing to fight the War?
what's the downing-in-submissions dept. ? :)
My reading of the blurb is that the $600,000. figure is for the quarter while the other is for the year.
I give Redhat total Kudos!
They sell somthing they offer for free. Somthing that you can buy one package of and distribute throughout a whole of thousands of computers. The return with only a 600,000USD loss? Damn... I am impressed.
I guess MS put their foot in their mouth when they said you can't profit from somthing that is free.
~AdmrlNxn
Whistler is to Zeus as Linux is to Hercules
~Admrlnxn
"I got your mom in my trunk"
The company spends thousands of dollars to pay developers to work on it, simply because developers are very expensive people. Very high input price.
Legally they cannot charge anything for it, so they try and make it up by charging for paper, shrinkwrap and support.
A traditional software company being traded does that too, but also charges for the software itself. There is a reason for this, and no, it's not because they are "greedy".
The reason is because you cannot offset the development costs for software with mere shrinkwrap and support (unless your software is so crappy customers must spend hours on the phone with you a day). Also given the fact that anyone can simply download the software and read the book online, something of a disincentive to even buy the shrinkwrap.
Thus the rate of return for a traditional software corp is going to be much higher than for any linux software corp. As an investor, I would of course go for the high rate-of-return place.
The days of the linux software corp are numbered. Linux should be developed along with other products..such as how ibm distributes servers with linux on them. They make the money from the server, not the software.
My prediction: redhat is going to merge with somebody like IBM, or perhaps even someone like microsoft (sounds crazy, but remember..this isn't about morals it's about money)
I'm no economist or anything, but thats the most likely scenario I can see. Don't make investment choices based on this post. :)
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if i go download linux, i get exactly what i will find on the cd. With napster, songs have varying quality, from very good to piss-poor. Also, with the linux shrinkwrap, what do you get..a cool expensive box? Not quite the same as having a music cd with the art in it. Also, on napster, it's very hard to find every song from an album. I usually can only find the more popular ones. If i could find every song from an album on napster, i probably *wouldnt* buy any cd's.
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No it's not; it's not even a word. But if it were, it would mean "three medicine women."
"Patriotism is your conviction that this country is superior to all other countries because you were born in it." -- GBS
enough for other companies to stick with it and give investors hope for the future.
With the number of companies laying people off and stock prices under 20% of IPO value I think the investment world was getting wary of ever putting money into tech firms ever again. It's nice to see things can go against the trend once in a while.
Way to go Red Hat!
Funny how you edit my post to omit the point where I discuss P/E and then say that I didn't mention it.
Oh, please. If you accept that a P/E could reasonably be greater than 1, you're saying that the multiple a stock trades at in sane market conditions (your term), is limited to multiple implied by the cost of doing business.
Bwwwaahhhaaahhaaahahaa, ok you find a company with a P/E of one that has not had major accounting irregularity accusations or the like made. A P/E of one means that a billion dollar market cap company makes a billion dollars profit in a year.
A P/E should normally be in the range of about 15 to 30, representing a return on investment of 7% to 3.5%. Companies with very high growth can justify higher P/Es - but these should be rarities not the norm.
What you have completely overlooked is that the PEG ratio of Red Hat is zero. Contrary to you original claim I know all about PEG ratios, the reason I did not mention them with respect to red hat is Red Hat does not have earnings.
The reason I sent you to the motley fool is that I thought Tom and David might knock some sense into you. Clearly I was wrong.
What I suspect you mean here is that the price/revenue/revenue-growth ratio should be 1, o-n-e, in a fully and fairly valued situation.
You sound like you have been reading too much Henry Blodget - the guy who told us to buy Amazon at $350 a share. Conflating a PEG ratio of one and a PRG ratio of one is insane - that would only hold for a company with 100% margins, something no packager of free software can hope for.
As other people have observed to justify a billion market cap Red hat needs to make a showing for EBIT of $250 million in five years. Even at their current growth rates my excel spreadsheet does not have them making it. The high growth rates you cite are due largely to acquisiton - so counting in the amortized goodwill is necessary.
Looking for an Information Security student project suggestion?
Try http://dotcrimeManifesto.com/
Red Hat would have to double revenues without increasing costs to get to a P/E of 10. I guess that is possible, just about. But Red Hat also faces serious competition and anyone and their brother can set up to compete at any time.
I would take the opposite tack, the cost of information approaches the marginal cost of production in a free market.
Red hat could make money on the consulting side but very few consulting companies are structured as public companies, they are structured as partnerships for very good reasons. Essentially as the Linux market matures the best RedHat employees will do better for themselves by setting up their own consulting companies than working for Red hat.
Looking for an Information Security student project suggestion?
Try http://dotcrimeManifesto.com/
Take a look at their Market Cap.
$1b
That's 1 Billion Dollars.
or $1,000,000,000.
or $1E9
one billion dollars for a company that takes a free product and puts it in a box. cardboard and shrinkwrap must be very needed in the linux world.
1 Billion Dollars.
it is a crazy world.
Given that fact, Aquafina should be worth at least 100 billion dollars on it's own. Considering that they just take something basically free (water) and package it.
________________________________
________________________________
"I'm the King of the Trolls!"
Ryan T. Sammartino
Ryan T. Sammartino
"Ancora imparo"
You are sadly misinformed. Check out Selling Free Software. Even RMS says selling free software is OK.
Also given the fact that anyone can simply download the software and read the book online, something of a disincentive to even buy the shrinkwrap.
Free MP3's on Napster, and yet CD sales are up. How does this figure into your argument?
Linux should be developed along with other products..such as how ibm distributes servers with linux on them. They make the money from the server, not the software
That's one model. Service + Support is another model. It remains to be seen how each model will fare.
Don't make investment choices based on this post. :)
On that we agree... in fact, don't make any sort of decision from what you read on /. :)
Ryan T. Sammartino
Ryan T. Sammartino
"Ancora imparo"
Yeap, I must of the been the one who helped Redhat make a profit, I bought a copy last week :)
In all seriousness, Redhat, along with SuSE will be the two commercial Linux's remaining, of course there will be obscure, forked-up versions out their for people to feel elite, however, the major of developers and newbies will stick to the mainstream distro's.
Matt
I am the resident BOFH (Bastard Operator From Hell) If you don't like it, you can go [# rm -rf
Has Red Hat actually reported a profit? Ever? I didn't think so. But they "will real soon now"? Has a familiar ring to those of .com companies of not so long ago... seems like the Linux bubble has burst at last also...
Regardless, this is a huge financial step for RedHat. If they can keep up this forward momentum, it's only a matter of time before they can turn a profit.
Slashdot: Open Source, Closed Minds.
I agree then that it is a valid point...but I don't think it is anything abnormal since virtually all large companies do this and stock analysts take this into account....similar to the way they take into account revenue from company investments in other new companies (rather than actual company revenue) and they mark down for that. Additionally, I am sure that Microsoft recognizes that their stock options are not as enticing as they were a few years ago, and their employees recognize that as well. Therefore, they are tipping the scale away from deferred money (stock options) towards salaries, bonuses, and what not. I don't see Microsoft going away anytime soon so I don't think they will crash and burn, but I am more pro-microsoft that most of the people on these message boards, so therefore my opinion is most likely biased towards them more than others on here.
I'm sorry but this all sounds a little pathetic. I don't see how having only 6 Million in losses should be something to celebrate.
Here are my guess for the "adjustments"
1) "Amortization of goodwill and intangibles" accounts for $16.2 million. This makes sense, as amortization is not really a cash flow issue. It's just something they put on their books. Doesn't cost them a penny. In fact it reduces their tax liability, should they make a profit.
2)"Stock based compensation" $5.1 million. This one is a little sketchier as to whether it should be adjusted. It definitely can dilute shareholder value. But I'm not sure what it represents. Is it the value of options granted, the cost of issueing or exercising the options? Again, it may not affect cash flow, but probably does impact balance sheet or tockholder equity.
3)"Merger, acquisition and other" $2.3 million. Well, thios makes sense as mergers and acquisitions are not normal operating expenses, though with net economy companies, I'd be hesitant on that too.
All these add up to about 23.6 million, so take that away from the 24.15 million net loss and you have about 600K.
So it looks like they are just about breaking even from operations, if you don't count stock options and merger and acquisition costs.
They're definitely running low on cash. Though other assets, like debt and equity, are growing, but who knows what that debt and equity is. If it's shares and bonds from Amazon.com, look out!
Excelsior,
ME
evanchik.net
Watch as I buzz around in a circle!
Oo, look! I buzzed around 20% more than I claimed I could. Wall Street will sure be impressed!
Invest in me, and I promise I'll lose less money than I say I will, too. Invest enough in me, and I might even buy enough profitable businesses to make up for my unprofitable main activity.
I mean, if I had hundreds of millions of dollars, and a main business that only cost a few million to run, I'm sure I could make up the difference somewhere, even without a head.
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Basically, the article claims it's a Ponzi scheme. They are paying their bills, creating the illusion of solvency, with new investment.
The tricky bit is where they pay a lot of their bills with stock, which they don't have to report as if they actually spent anything. Let's say they take a billion in revenue (because I'm too lazy to look up the real numbers; recent historical figures are available in the article), pay out $800 million of expenses in cash, and pay out stock options currently valued at $600 million. By MS's accounting, they make $400 million -- the $600 million worth of stock options is ignored as if it was never given out.
The reason the stock is worth enough, of course, is that there is a constant stream of new investment, because MS appears to be making lots of money. Once the illusion breaks, MS will crash in an instant.
Their real business is printing hip, trendy stock. If MS stock stopped going up, and employees wouldn't take options as payment, MS would be losing money very quickly, and the stock would crash and burn, like me with a frayed support string.
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A common saying is that stock is worth whatever people will pay for it. IOW, printing up double stock on the same assets doesn't deflate its value as long as the market doesn't seem to notice. When the market crashes, then you'll see lots of blame aimed at these practices, but not before.
Bill Parish is needlessly hostile in his wording, and so comes off as a conspiracy theorist, but he's got the facts right. Employees are getting stock options and selling them (or holding them); consider the exactly equivalent situation of Microsoft selling the stock options and giving the money to employees who then keep the money (or buy stock options).
If this happened, MS would be reporting a loss, because the money from selling stock options is investment capital, not revenue, and cash salary is an expense, though giving out stock options as salary isn't.
This is common practice, because funding your business partly with a Ponzi scheme lets you lower prices below cost, and thus outcompete competitors. If someone is doing it, everybody has to do it, or be driven out of business.
The problem is its fundamental similarity to a pyramid scheme: the ones who get in and out before the crash get rich, but an ever-expanding pool of capital must be tapped. When it reaches its limit, either by running out of new investors, or people realizing that eventually they're going to run out of new investors, it crashes. It can still go for a few years yet, though, maybe as much as a decade, before all the suckers looking for easy money, and all the retirement and college funds are tapped out. Even longer if messed up countries get their act together long enough for their citizens to accumulate real wealth to gamble on bubble stocks.
It could even lead to a third world war, if China and India decide that their citizens shouldn't hand off half the country to pay debts to foreigners who got out in time.
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