Red Hat Posts Its Best Quarter Yet

wrinkledshirt writes "Anybody remember the days when the naysayers said you couldn't build a viable business model centered around open-source software? After Red Hat's 2nd quarter report, well, insert(&mouth, FOOT); is all I have to say. Okay, okay, the hubris of a Linux zealot aside, the numbers look pretty good. Revenue for the quarter was $28 million, with net income at $3 million. You'd think SCO's blathering would have damaged them, but they're actually up the last couple of quarters after posting some net losses in previous quarters." Kudos to Red Hat. They must be doing something right.

Comments

Money for Lawyers

[L-s-L69]

They are goin to need all that cash to pay an army of blood suckers to fend of the laughable accusations of SCO

It's the distro I use

[ODD97]

But I haven't paid for it. I'm still using the demo account.

Sure, it doesn't act like "real" Linux for a lot of things, but it's very painless to install and very easy to run. It's almost to the point that a non-geek could run it.

And sure, they haven't directly contributed much in the way of new code, but they're been a big cash cow for a number of project developing groups.

Go RedHat!

Re:It's the distro I use

[ultrabot]

Sure, it doesn't act like "real" Linux for a lot of things,

Examples? Gentoo diverges most radically from the "real" Linux way of doing things, followed by Slackware. Red Hat is pretty conservative regarding this stuff, i.e. it uses sysvinit and does pretty much everything in the way things used to be done.

Re:It's the distro I use

[revtom]

It's the distro I use at home and at the server farm with which I work at my job. All of us systems persons at work could build our own distro if we wanted (we're all LI/U-NIX geeks). When Red Hat gets us 95% of the way there, we have no reason to build our own ($t2 - $t1 = $money). I don't build my own distro at home, because I have a life (as hard as that is to believe). I started to build my own Linux-from-scratch, but other committments got in the way (wife, family, etc.), so I decided to load up RH.

We chose Red Hat, because at the time we introduced Linux to the server farm, RH7.2 was the best ready -made distro for our purposes (with only a few tweaks). Now, other distros, I'm sure, would do just dandy, but RH is our standard and there is no reason to switch except for the sake of switching.

I now run tweaked RH9 (KDE) at home. The more I use it, the more I wonder why we don't dump MS all together at work. Maybe someday...

Anyway, It is good to see a open source based company actually making a profit. One of the major factors when making major corporate purchases is if it believes the company will be there 10-20 years from now. Up to a few years ago, MS was the only one (maybe Apple?) that could claim that on the desktop OS side, where the big money is. Now maybe RH, SuSe, and if the East Asian aggreement materializes, we'll have three more "solid" companys to choose from for OSs in the corporate world.

Doesnt surprise me one bit.

[HanzoSan]

I think the old model of selling products is dead anyway, its dead in the music industry, its dead in the software industry. Theres only so much software you can sell to people, what? You think Microsoft's model would work in the third world? You are wrong.

Redhat actually has a better long term model, a service model which will work despite the changes in economy. The service model basically says, take our software for free, but if you want help using this software, sign up for support.

This will work great for Operating Systems, Microsoft could easily give away Windows and charge for support, antivirus, upgrades, etc. China is now moving toward Linux, when big governments such as these move toward Linux, this means the revenue stream grows x10, government has the money to buy support, and they are the kind of customers who cannot afford to make mistakes and are likely to buy support.

School systems also are the type of customers, businesses I think at least the small to medium sized businesses can use the support, the large businesses can hire their own experts.

Re:Doesnt surprise me one bit.

[Anonymous Coward]

I think the old model of selling products is dead anyway

95% of all software companies disagree, including giants like IBM and Microsoft. Considering the number of "support only" companies veruses the number of companies that sell both software and support wouldn't you say so?

Redhat actually has a better long term model, a service model which will work despite the changes in economy.

Think again my friend. If the economy TOTALLY went down the crapper Red Hat could be supported by dirt cheap armies of people who have used Linux for years. That and well, the source is out there so it's not too difficult to hire a couple coders and fix things yourself.

and they are the kind of customers who cannot afford to make mistakes and are likely to buy support.

First, I have heard Red Hat's support is horrific. Like it or not that's what people tell me. Second, if you can't afford to make mistakes, hire your own coders and sysadmins. What's easier, to sue someone and hope you win or fire a coder who breaks your super duper mission critical system?

You have some truly "pie in the sky" ideas about how things work these days and how they'll work in the future. I appreciate your ideas but some of your statements are ludacris.

Re:Doesnt surprise me one bit.

[HanzoSan]

When did we even mention the home users? My point is, big corporate users are the first to migrate to Linux and the benefits will hit the home users later.

This means as more corporate users switch from word to Star Office, the benefits to open office are passed on to the home user.

People do not want to pay $500 for software every few years, the corporations dont want to pay it, the user cannot afford to pay it, and its just not going to work. People will however pay $500 in services.

The professional and business market (small and medium sized businesses) are where the money is at, but I'm a user, and it benefits me to get free software, I dont have the money to pay for the support, and its not important for me to have the support, if I were running a business I would definately go with Redhat.

Re:Doesnt surprise me one bit.

[Jaysyn]

Heh, cause that's what AutoCAD runs on, and AutoCAD is what the customer wants their drawings done in. See also: ArcGIS, MapInfo & LODE Data Corp.

Jaysyn

Re:Doesnt surprise me one bit.

[Andrewkov]

Interesting link ... Microsoft spends more on Marketing and Advertising than it does Research and Developement.

SCO Case

[Anonymous Coward]

You'd think SCO's blathering would have damaged them, but they're actually up the last couple of quarters after posting some net losses in previous quarters.

-----------------

So, wouldn't this actually hurt the Red Hat case? I mean I thought they were building it on the fact that all the SCO FUD was hurting buisness.

Re:SCO Case

[bobintetley]

You'd think SCO's blathering would have damaged them

You would think, but I think the SCO case has actually done more good than harm. Why? Listen to the publicity SCO are putting out - they are complaining that Linux is too good, it has all these enterprise features normally found in proprietary UNIX and their products and services can't compete with Linux-based companies out there offering similar services.

I can just see IT managers out there going "has it? can it? It'll save me how much? I want some of that!".

How many more business people have heard of the Linux and free software as a result of this?

No publicity is bad publicity as the saying goes...

Re:SCO Case

[Cooper_007]

I don't know what came over me, but for some reason I chose to RTFA. Sorry.

to say it has not affected us would not be accurate; we continue to spend a lot of time with customers around this. Those who are sitting on the fence are using this as an excuse to continue to sit there

It's rather silly to deny that it's costing them revenue, but I suppose it's a sign of a good business when they manage to deal with it and still post a profit in the process.

What's terrifying

[Anonymous Coward]

• Red Hat has a profit of $3 million this quarter
• Microsoft has so much money they can afford to just randomly toss off $8 million this quarter as a random aside just becuse dropping that money into keeping SCO afloat might generate bad PR from one of their competitors.

Implication: It is more than twice as profitable in the short term to become Microsoft's random lackey and wait for bribes from them than it is to make a useful, worthwhile product that competes with Microsoft.

Is this a sign of a company with too much power? Nahhhhhh....

Re:What's terrifying

[Pharmboy]

It is the job of the IT industry to enable their customers to do new things that weren't possible before, but also to make doing existing things cheaper.

The fact that there's less money to be made from selling software is good news for the economy. (Roughly speaking, there are exceptions..) They should be spending their money on business intelligence, not on infrastructure that is roughly speaking "solved".

Nice point. Cheaper software makes it easier for small businesses to grow, and large businesses still need the support and tech's to impliment this software, so they hire, spend, develop, and contribute (via GPL). Anything that lowers the cost to start up and grow a business is good for jobs, good for the economy, good for consumers who now have more choice in the market place.

Personally, I have a few rhn $60/year basic accounts (and they just gave me one for free). I also have servers that do not have the service yet but still benefit from it. It is nice to contribute toward the success of open sourced software in a small way, but more importantly, they offer a killer service that pays for itself in the first month or two.

Being able to update several machines while I am at home, in a web browser, has allowed me to manage twice the servers. We use older servers, and tend to run ONE service on each box. Each box is configured as a backup server for another server, so we have great fallover protection. rhn is pretty stable and reliable. In almost two years, I have never had a problem with any updates it installs. You can even install and uninstall software remotely.

They have done a few things I didn't like, like cutting off support for 6.x and 7.x too fast. It WAS dumb of them to allow their certificate to expire, causing a problem where everyone had to manually download and install two RPMs for up2date.

But I can speak as a satisfied customer, overall. Their lowest tier of support (Basic Entitlement) is offering value and a very good service for many of us.

And SCO claims OSS model "unsustainable"

[Solokron]

"Red Hat has defended its business model against a claim by the SCO Group yesterday that its dependence on open-source software development was unsustainable in the long term. " Hah! http://www.zdnet.com.au/newstech/os/story/0,200004 8630,20276904,00.htm

kudos? maybe, but not for making money

[Anonymous Coward]

Cowboy Neal wrote:

" Kudos to Red Hat. They must be doing something right."

Uh, because success is measured in dollars, right? In that case: kudos to Microsoft. They must be doing something right. Kudos to Enron. They must have done something right. Kudos to penis-enlargement spammers. They must be doing something right.

"Making money" is not necessarily the same thing as "doing something right." Redhat may or may not deserve kudos - that's a separate issue - but if they do, it certainly isn't for having a bank account.

OT: So, how is SuSE doing?

[ivi]

Does anybody happen to know how SuSE
- with its "demo-mode" CD-ROM d'load
(only...) is doing, ie compared with
RedHat, financially?

TIA

Re:OT: So, how is SuSE doing?

[hughk]

Suse is a German public company limited by shares (AG), but it isn't stock exchange listed so the accounting disclosure rules are negligiable. Unless they decide to list there is unlikely to be more information and the high tech market sector is dead.

German corporate taxes are painful so the tendancy is to minimise profites. When Germany's Neuer Markt was alive, companies could pay taxes according to their books filed under German law (HGB) but publish results according to IAS or US-GAAP. The tax man was held at bay by the agreements that supported disclosure in the Neuer Markt. Now there is no such segment and the tax man is very hungry - so any figures published will understate profits.

However, from the word going around, Suse aren't doing at all badly. They have always gone for a more corporate image which makes them appealing to big business. RH's hacker culture counts against them on this even though they have been very successfully climbing up market.

Re:Open Source Pie

[Anonymous Coward]

Yeah maybe...
But what I'm not sure about your Kudos is while RedHat is doing good how many others can play the same in the same boat.

And what is that comment supposed to mean? How many successfull Operating System producers do you see in the commercial world?

Considering that Red Hat is doing well with Linux's current marketsize and competition over services from every size of company ranging from IBM to independent software engineers show that there is space to grow.

Wether most of that growth will benefit Red Hat or up and comming competitors is a different question, but the market for Linux distributions/services is definitelly growing.

Why the bigger numbers?

[Pros_n_Cons]

Some things I'm about to say might be alittle harsh but Slashdot needs to take its medicine.
First does anyone remember when Redhat9 came out, a huge selling point for them was that you could beat the rush and get RH 9 a week early if you signed up for support? An aweful lot of people signed up for that (including myself) . so many infact it ended up killing thier servers speed to something around 5k. But guess what. Slashdot posted bit torrent within the first hour happy to offer non paying customers a better solution. So how many people will be buying support this time around do you think? Not as many I'll bet.

If Slashdot is always talking about morals and doing whats right with everything from patents to software. Why can't they allow a company that has argueably did more or atleast as much for linux then any other single company to earn a buck for just one week? Thats all folks. It's time we start showing as a community that we're not just a bunch of freeloaders, anarchists & hypocrites.

Real numbers or Enron-style accounting?

[SgtChaireBourne]

Here you can see that MS-Window and MS-Office pull in monopoly rents. i.e. 4-5 times the free market price. With everything else losing money, any price cuts in those two are going to cut deeply. Thus the panic to spread expensive lock-in techologies (e.g. Palladium/ WMP9) and licenses (License 6).

Given that software distribution can have nearly zero cost, RedHat, SuSe, Apple and others seem to have more viable model. Even the RIAA could learn from them, though for both Microsoft and RIAA, I think they've waited too long and would do the U.S. economy the best by leaving the playingfield altogether.

Re:RMS harps on Freedom, but he's not clear enough

[John Allsup]

The basic problem with RMS's positions on many things is that his views are based on idealism: the kind of 'right thing for society' that intellectuals like to debate. The problem is that idealism is not that great a motivator. Marxism may have been the starting point for the Soviet Union, but it took the arrogance of the Tzar and the mess being created by the Tzarina during WW1 for the people to get sufficiently motivated to ovethrow the previous rulers. (This is a gross oversimplification I know.)

So far as the software itself being free, that is a different, but still confusing way to explain the concept. What exactly freedom means for a human being is hard enough for interested parties to debate as it is. What does freedom mean for a computer program? Does a free piece of software have the right to refuse to be installed on a particular computer? (I know it often appears that GPL'd C sources have a right to refuse to compile, and the free will to exercise that right when they feel like it, but I suspect the cause of this is technical rather than political or philosophical...)

I'll not go on. Others can add thougts to this.