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Open Source & Embedded
Embedded Geek writes "Jack Ganssle has posted a column at embedded.com pondering whether Red Hat and other open source companies serving the embedded community are due a shakeout similar to the dot com collapse. He cites Red Hat's March cuts in their embedded division and their losses of $80M to $140M a year. He admits, though, that because the embedded market is smaller and many companies are privately held it is difficult to get a pulse on what's going on behind closed doors.
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Right now, it's more like "Which company isn't having financial issues."
This stuff is getting rather old. Everyone is having a tough time being profitable and I don't believe "opensource" is the reason why RedHat is struggling. You name the company, products and services that were selling well in 97-00 are no longer doing that well. EMC and Sun which used to be very profitable at what they did are having to switch gears. Cisco is having it's share of problems. Software or hardware everyone is struggling and Opensource companies are still trying to figure out how to make a profit on a service model.
Folks this isn't news and really doesn't need to be argued over but Opensource isn't the next "Dot com bubble" that is going to burst. Opensource, Redhat, whatever... everything is having trouble right now. Let's not make this out to be more than it really is.
Open Source companies aren't really built on the hype and hyperbole of the DotComs. Having a substantial product allows for more longevity (sp?) than a web based retailer.
Think nothing is impossible? Try slamming a revolving door.
I don't think many Open Source projects will ever be considered "finished," because that is exactly the point - the source is open - thus allowing for additions/changes, and it will never be "finished".
And anyways, just what exactly does "finished" mean when talking about OSes? From the way I see it, a complete operating system would be a very difficult thing to "finish," especially an open sourced one where many, many people around the globe contribute.
Everyone having problems now? No, microsoft is making profit, oracle also makes profit.
Microsoft and Oracle are everybody? What he means is the economy in general, as well as most of the tech industry is experiencing a down turn. Providing exceptions doesn't change the stats quo that is happening at the moment
Think nothing is impossible? Try slamming a revolving door.
Red Hat's March cuts in their embedded division and their losses of $80M to $140M a year.
Do I need to explain the concept of "Goodwill" yet again? Why do people keep this shit up? Are they holding short positions in RHAT?
Goodwill is the amount of money a company pays for another company, that is above the value of the tangible assets of the aquired company. This may include brand names, patents, and other intangibles. If a company buys a company that turns out to be overpriced later on, then the buying company will have lots and lots of goodwill that must eventually be charged against earnings.
Red Hat did not lose those large amounts of "real assets", rather, almost all of that "loss" was a write down of goodwill from previous aqusitions.
Look at it this way.
1) RHAT IPOs
2) RHAT stock becomes grossly overvalued
3) RHAT makes a secondary offering, cashing in on their grossly overvalued stock in a big way.
4) RHAT goes on a buying spree, spending their money that they got for free, buying companies like Cygnus.
5) Cygnus was also pretty overvalued, so a lot of goodwill ends up in the "assets" column of RHATs balance sheet.
6) RHAT has to write off chunks of this goodwill against earnings later on.
The key is that RHAT got this money for free. Had they not made the secondary offering, they wouldn't have had the money to make the aqusitions in the first place. Sure, that money ultimately came from idiot investors that paid $200 a share for RHAT, but it didn't come from any direct business or financing activities that had an opportunity cost for RHAT (such as debt financing).
So no, they aren't losing those staggering numbers each quarter, in fact they are breaking even for the last 3 quarters or so.
Goowill can be abused. "One-time-charges" can be abused (see Cisco writing off billions of real, tangible, inventory).... but in this case... there is no money lost, just worthless monopoly money that no longer exists, and hasn't existed for years, subtracted from a column on a balance sheet.
I've had enough abrasive sigs. Kittens are cute and fuzzy.
I created the user-mode half of an Open Source embedded system - a program called busybox. It's everywhere. It is hosted on Linux much more often than BSD. People don't seem to need BSD licensing on the kernel that much.
The problem is not a lack of customers. Linux is the standard for embedded systems these days. The problem, if you call it a problem, is that a lot of vendors aren't profitable at offering embedded Linux. It's too easy for the customer to get along without those vendors. And I have no problem with that.
Thanks
Bruce
Bruce Perens.