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Red Hat Announces IPO
The first of the big Linux IPOs is here: Red Hat has announced they
have filed for an initial public offering. Details are sketchy,
but the word on the street is that the stock will be very difficult to get ahold of. Now, when's the
VA IPO? :)
They've been saying they had no plans to do this for a while.
So far, I've liked Red Hat for their stronger ethical stance on free software. Recently, they have been the best distribution from a free software/open source point of view, other than Debian. As such, I opposed SuSE and similar, which wrote their own proprietary software, put in other people's proprietary packages, and had no free software stance. Red Hat only used free software in their distribs, and released everything they wrote under GPL. Red Hat is loosing control of their own product by IPOing. Now, they may no longer be able to do that. They may keep majority share in the hands of ethical people initally, so they'll continue to be good for a while, but it's still a slippery slope. It's really east to sell a few stocks when you need some cash, and before you know it, you're controlled by greedy investors.
I guess they're still better than SuSE or Caldera, but they may no longer be one of the two saints amongst the distribution. Oh well. As Bob Young always says, if Red Hat starts misbehaving, it's GPL, so we can stop buying it from them. There's no harm in letting them grow. We should probably hold off judgment until they do something bad.
Oh yeah, and I'm guessing this is the first post (you can moderate me down for that).
Debian already does this, in a sense. Unlike Red Hat, SuSE and Caldera, Debian isn't a CD-selling company, but a volunteer project that doesn't sell CDs.
We make ISO images of "Official Debian GNU/Linux" available (via cdimage.debian.org ) which are put on CD by numerous vendors (see the Debian CD vendors list).
Thus, we don't control the price directly, but it is kept low through competition. A number of vendors offer Debian CDs in the $10 range; many offer a way of donating say $5 to Debian.
I suspect that marketing ("brand placement") is a lot more important than price when it comes to shifting the balance between the distributions, which is one of the reasons I'm happy about Corel chosing Debian to base their Linux distributioon on.
Unlike other software companies, RedHat can't be betting the farm on shrinkwrapped software and the typical upgrade cycle. While RedHat may selling tons of copies now, they market is going to figure out pretty quick that there's no reason to spend $50 when you can spend $3. (And if they try to take their installer proprietary, there's always Debian.)
Where they will make money is on per seat/per year support agreements with companies who deploy Linux. They also can sub-contract to Dell, Compaq for integration and support services. There's also for hire device driver development, system tuning, and per call phone support.
The picture here is that they will be selling services, not so much products. Growth in the services business is much more linear, so I wouldn't expect a huge exponential boom in revenues/stock price.
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Business. Numbers. Money. People. Computer World.
That's just what Corel is doing with Debian -- adding value by including wordperfect with the installation. Which is great if you really need WordPerfect, but I would guess the demand isn't enough for them to corner the market that way.
The only thing that RedHat really sells now is the warm fuzzy feeling of a manual and installation support. Once people figure they can do it themselves, their shrinkwrap market is going to dry up immedately.
--
Business. Numbers. Money. People. Computer World.
Since I work with a large financial firm, I did a little research and got the IPO form that Redhat filled out. I gave it a quick glance over, and found some interesting facts out of the risks section. The following quotes are taken directly from their Registration.
OUR ABILITY TO GENERATE REVENUE FROM SALES MAY BE ADVERSELY AFFECTED IF USERS
CAN QUICKLY DOWNLOAD RED HAT LINUX FROM THE INTERNET
Red Hat's historical business has been based on the sale of Official Red Hat
Linux. Using a standard telephone connection, a user can download Red Hat Linux
from the Internet free of charge in approximately 36 hours. To avoid this
significant download time, users can purchase the shrink-wrapped version of
Official Red Hat Linux. If hardware and data transmission technology advances in
the future to the point where increased bandwidth allows Red Hat Linux to be
more quickly downloaded from the Internet, users may no longer choose to
purchase Official Red Hat Linux. Any resulting decrease in product revenue, if
significant, could have a material adverse effect on our business, operating
results and financial condition.
WE EXPECT TO INCUR SUBSTANTIAL LOSSES IN THE FUTURE
We have incurred operating losses in three of our previous five fiscal
years. We expect to substantially increase our sales and marketing, research and
development and administrative expenses in the immediate future. In addition, we
are investing considerable resources in our Web initiative. As a result, we
expect to incur significant losses for the foreseeable future and cannot be
certain when or if we will achieve profitability. Failure to become and remain
profitable within the timeframe expected by investors may adversely affect the
market price of our common stock and our ability to raise capital and continue
operations.
OUR PRODUCTS ARE DEVELOPED AND LICENSED UNDER THE GNU GENERAL PUBLIC LICENSE
WHICH MAY NOT BE ENFORCEABLE
The Linux kernel and the Red Hat Linux operating system have been developed
under, and licensed pursuant to, the GNU General Public License (GPL). The GPL
states that any program licensed under it may be liberally copied, modified and
distributed. We know of no circumstance under which the GPL has been challenged
or interpreted in court. Accordingly, it is possible that a court would hold the
GPL to be unenforceable in the event that someone were to file a claim asserting
proprietary rights in a program developed and distributed in accordance with the
GPL. Any ruling by a court that the GPL is not enforceable, or that Linux-based
operating systems, or significant portions of them, may not be liberally copied,
modified or distributed, would have the effect of preventing us from selling or
developing our products. This would have a material adverse effect on our
business, operating results and financial condition.
I'm not trying to produce FUD in these area's, but these three things would be very scay to any PHB's out there, combined with the fact that they lost 130 million last year, don't expect the stock prices to go up like a rocket. I have the complete public report if anyone would like it.
Yeah, but will they let their friends at slashdot get in at IPO price (say $15) instead of trying to buy at market price (say $50 at 9:30:01 that day).
Pattern of super hot IPOs lately is for it to hit the market at triple pricw and trickle downward. Nobody makes money short-term.
the term "GNU/Linux" is offensive to people, but everyone's happy when Redhat calls their distribution "Redhat Linux"
From what little I understand of the Open Source movement, GNU, and related stuff, "Linux" is the proper name of the operating system started by Linus Torvalds and developed by hundreds of others. "GNU/Linux" is a misnomer inserted into the mainstream by a group (members of the GNU project?) trying to claim some control over Linux for virtue of it being developed using tools from the GNU project (am I way off here? correct me pwease.)
Red Hat Linux, on the other hand, is the name of a distribution of Linux. Like Debian, Linux Mandrake, Caldera OpenLinux, and the like, it's the name of a particular distribution/flavour of Linux. Red Hat isn't trying to usurp Linux's brand name with it's own version; it's simply the brand name for a particular distribution.
Someday, you're going to die. Get over it.