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Red Hat Releases 2nd Quarter Financials
Booker writes "Red Hat, Inc. has released their 2nd quarter financial results. You can see the press release here. Operating at a loss, but then we all knew that would happen for a while. Revenues up 95% over last year.
Kinda ironic that an Open Source company has to join The Man on Wall Street before their balance sheet becomes publicly available. :)
There are two components to a "loss": an accounting net loss and a cash net loss. A company might lose money for accounting purposes, but still not be losing that much cash on the operating side. (For example, because much of their loss is caused by non-cash compensation expense, or amortization of goodwill).
Now a company like Red Hat is probably burning cash at an amazing rate in order to build up their business. To keep this up, they need to get more money through financing activities such as selling bonds or stock. Hence the IPO. They tell the investors that they plan to use the money to invest in the business, which at some future date will result in incoming cash flows from operations that more than make up the invested cash and/or allow them to service their debt. So long as they can keep getting people to invest money in their company, they can keep running losses.
The Motley Fool has a saying on their website concerning P/E and growth:
"In a fully and fairly valued situation, a growth stock's price-to-earnings ratio should equal the percentage of the growth rate of its company's earnings per share."
I don't believe that the market always accurately specifies the value of future earnings, for exactly the reason outlined in the quote above. Those who buy at low PEG ratios and who short at higher PEG ratios are making their stock moves on more than intuition. This is more than I can say for the people buying and selling RHAT like its going out of style. =)
Let's try not to let fact interfere with our speculation here, OK?
A $3.1 million loss would be fine and dandy if it wasn't for the many closed source companies not posting $3.1 million losses, with not 8 full time developers but 50. In fact the existance of other companies making profits makes it hard to connect a $3.1 million loss with wide acceptance of open source software. What I see is RedHat spending enourmous amounts of money on PR and CD printing to get a very large amount of users to try it, but they're not retaining users and while they spend lots of money on the basic system, they're doing nothing to create productivity applications, further aggrivating the high turnover rate.
I would tend to discount the article you cite somewhat as it has a natural bias as it is written specifically from a perspective of looking at Red Hat. They mention three Red Hat contractors and "someone from Hungary," decidedly an incomplete list.
The VA Ubergeeks are responsible more for "userland" stuff, although:
Zubkoff is responsible for quite a number of SCSI drivers that are in the kernel.
Ted T'so is responsible for lots of all around stuff including taking over ext2 from Remy, architecture of Kerberos, /dev/random, amongst other kernel stuff.
H.J. Lu was responsible for libc5, and is heavily involved with GLIBC, NFS, and Bintools. That's not largely in the kernel, but the kernel is pretty useless without a way for "userland" to get at it...
The main big kernel thing that it appears VA has been working on lately is IA-64 support; that won't be visible until Intel releases product.
The real point I'd make is that you are merely questioning one point that I'd made, and really just quibbling over "who's got more kernel hackers," which is merely quibbling over the strength of one of four points.
If you're not part of the solution, you're part of the precipitate.
I suggest you reread the article.
The only quote in that article that claims to involve Linus' words says:
The authors of the article indicate (but do not quote him directly) that
What this says is that Linus listed nobody as ``core confidants.''
Not Alan Cox, not Stephen Tweedy, not Donald Becker, not Ted T'so, not anybody.
Apparently Scott Berinato decided that since Linus declined to provide a list, and despite the fact that Linus indicated that such a list would be likely to be offend people (as well as to confuse anyone that doesn't read carefully to realize that this isn't Linus' list ), he decided to make up his own list.
The three people you named (plus some unnamed developer in Hungary) is the Scott Berinato's List of People He Guesses Might Be Amongst Linus Torvalds' Confidants.
It is not the Official List of Linus' Kernel Confidants.
It's not me that looks silly when you draw conclusions based on some guesses made by some writer at Ziff Davis...
If you're not part of the solution, you're part of the precipitate.
That means that you don't pay any tax (generally speaking) until you sell the stock. And a dollar of tax deferred represents some portion of a dollar of tax that is avoided.
The rate of taxation on the gain doesn't matter nearly as much as the fact that it is deferred.
It might sound like a neat idea to force stock to be revalued annually, thereby crystallizing gains (and losses) for them to be taxed.
On the (by some theories) upside, that would, by now, have forced Bill Gates to both pay a whopping big tax bill of on the order of many $BILLions of dollars as well as to sell off the vast majority of his holdings of MSFT (in order to pay the Tax Bill).
The "Bill Gates" scenario display ways in which it is not so good; it effectively represents the government grabbing, as if it were income, parts of any sort of "increase in value" of an enterprise.
Another disadvantage is that "continuous revaluation" requires having a department that are constantly attaching values to things. There are lots of opportunities for horrid Unanticipated Consequences.
If you're not part of the solution, you're part of the precipitate.
OTOH, if the restaurant is under inspection by the health department...
Special today at the restaurant. Cockroaches.
Better visit the stand for a sip of sweet caffeinated lemonade...
You are severely confused, value is determined in numerous ways. One way, market capitalization, takes into account the price of the stock in an open market, this is the 1200% increase you meant. The 95% is an increase in Revenues only which really doesn't work as a "value" indicator, other than it is a better indicator that the company is doing things well rather than having revenues decreasing. Of course really this is basic business 101 and certainly cna't be summed up in a /. post......I suggest looking up Revenues and Capitalizations in your nearest Investing 101 book..........
Funny and I thought Perl == Paid employment recently located
In an article over at ZDNET, they are talking about the IPO for andover.net, which is (according to ZDNET) the parent company of /. How much money are our various ramblings here worth? I had the impression that this site made a few bucks, but not a fortune.
Dog is my co-pilot.
...why? Before they were private. That's how it works. Once you go "public", you have to release certain financial info quarterly. Duh.
has the RedHat corp. EVER had even one single profitable quarter?
If you look at their SEC filing, two of the five quarters listed therein were profitable. In fact, right now revenues have been going up considerably too. "So, where's all that money going, then?" you ask...
Expansion. They're sinking a lot of it in expansion right now. Go read some of the news items regarding them in the past few months. Think of it as them taking out a loan from themselves to make an investment in their own future.
I think you may also find this comment educational: Re:Economics question.
Berlin-- http://www.berlin-consortium.org
DNA just wants to be free...
OK, time for me to play total finance newbie: Could someone explain in a reasonably simple fashion, exactly how a company can operate at a loss? What the mechaincs of "We're a great company, we keep losing money!" are? The company I work for (10 people) can't operate at a loss. If there is a higher payables than receiveables, we have to dip into the savings account. If we get paid late, then we can't cash our paychecks until we are paid by our clients. And its not like we are doing small business, but I think in the eyes of the business world we live hand to mouth..
ZOMG I WOULD LOVE TO KNOW ABOUT YOUR FEELINGS ON MACINTOSH VERSUS WINDOWS, VI VERSUS EMACS, AND HOW YOU'RE NOT A DORK
"Increased acceptance of the redhat.com Web site as a leading destination site for communications within the growing open source community. The site had 33.3 million page views in the second quarter and has begun carrying paid advertising."
Not to slam anybody's web site, but since when has redhat.com been a community for open source minded people? I visit redhat.com occationaly, but only to go to their errata list.
Am I off base here? Who here goes to redhat.com for open source community related things?
"Red Hat's Web site, redhat.com, is a leading online source of information and news about open source software and one of the largest online communities of open source software users and developers."
Can somebody please validate/debunk this? Since when does someone go to redhat.com over slashdot.org or freshmeat.net?
I'd like to see redhat do well, but I am afraid they are setting themselves up for a big disapointment on the portal idea by counting hits on their site for something they are not.
This sig is false.
Very true, and I wouldn't want to argue that Red Hat is worth $7.4 billion at the moment. On the other hand, Red Hat does have approximately 100% year-over-year revenue growth. They can't keep that up forever, to be sure, but six years of that would give them about $1 billion in annual sales, earnings of over $100 million or so, and a stock value within shouting distance of what they have today.
So, what's the value of those future earnings? Whatever the market says it is. :-)
King Babar
Babar
You must be talking about a different "Dell" than the one I'm thinking of. Dell Computer (symbol: DELL) has been one of the best performing stocks of all time. If you don't believe me, take a look at this. Adjusting back in time for stock splits, the price has gone from $0.05 per share in January, 1990 to $48.81 per share at the end of August.
Gosh golly, I could use a stock that tanked like that, couldn't you?
Just to make sure, I checked Dell's performance over the last year; creams the S&P 500 over the last year, and over the last 3 months. If all you're talking about is some very short term "sell on the news" fluctuaions, well, fine. Feel free to try and make money off of that if you like.
King Babar
Babar
On the gripping hand, what if this resturant were the only one in town? No MickeyD's, no Burger King, no Pizza Hut, etc. Taking this further:
MSFT's would have food that was visually pleasing, but bland tasting (except to those that never ate anywhere else and know no better). Also, you weren't always allowed to finish your meal. The staff ignored you, unless you gave them big tips. The chefs got a cut of the bar tab so they don't care too much about the overall quality of their product, after all, who will eat anywhere else?
Of course, the selection would be enormous. Everything from pasta to saurbrauten and moon cake to rice pudding. Still, all rather bland tasting and not necassarily tasting the way it should. Whenever another resturant in town opened up, MSFT's would either:
1) announce that they intended on making the same dishes the competition made, and everyone would avoid this new resturant, salivating in anticipation of this new food at MSFT's
2) buy out the resturant and put the chef's in their resturant
3) undercut their business by threatening to starve out anyone who works for this new place or tries to eat their food
4) closely hold on to the recipe so noone has a clue what kind of animal parts MSFT's is using
Of course this lemonade from the corner stand is not from a secret recipe. Everyone kinda helped make it by contributing ingredients so you know it is safe. You can even add more sugar if you like. People buy from this stand because the kid looks wholesome, the drink is more refreshing than the sludge they serve at MSFT's to those that bothered to take a taste, and it comes with a note on how-to drink.
Foogle pointed out that claims like "Works with RedHat" and "RedHat Linux Compatible" are going to be increasingly important as companies continue to affirm the importance of Linux in general, and usually RedHat specifically.
...)
In the differentiation game which RedHat and others are going to have to keep playing if they are to survive, this is one thing that having the best-known brand name will make possible.
Does RedHat currently charge for such use, and if so, to what level of Compatibility do they ensure? Or do they charge for software but not for hardware, or vice versa? (I can see some arguments for that sort of arrangement
Insight appreciated!
timothy
jrnl: http://tinyurl.com/c2l8yr / foes: http://tinyurl.com/ckjno5
Companies that appeal to the advanced user (i.e., hacker) would use such a tactic, because obviously a hacker wouldn't have much trouble playing with his new Linux box (not that most such individuals couldn't put together their own, anyway).. However, companies like Dell try to appeal to the average end-user, not the hacker.. Therefore, including official documentation, an official CD with the Red Hat distro on it (not unlike they do with Windows), and being able to tell the consumer that they have official support because it is the official product seems the way to go..
~ Kish
My memory was that the old saw was "you can make money off of free software." And I can guarantee you that there are (former) RHAT stockholders who have proved that this is true. Profits are a more interesting thing, in that there is sometimes a big incentive to postpone having any.
In this case, we're talking about a company that does a public offering in order to raise capital so that they can grow more quickly. They then report revenue growth of 95% on a year over year basis; yes, that does appear to be fairly healthy revenue growth. So where did that revenue go? A lot of it (over $1 million, I believe) went into R&D, that is, paying people to design and code stuff (hmm...guess those people are profiting from free software). Another chunk went for more marketing and advertising. If all goes well, the revenue stream will continue to grow, and grow faster than their costs, and then you'll see some serious profits, not the $100K they probably could have gotten this quarter if they went for the immediate bucks.
Of course, they might not make enough money to justify a $7.4 Billion market valuation, but they could potentially get $20 million in sales this year, which is incredible given that their product is, well, free.
King Babar
Babar
RedHat may be at a loss right now, but I think it's obvious that pretty soon they're going to be making money hand over fist. The Linux market is booming and companies like Dell and IBM are just itching to make deals with Linux companies. RedHat in particular it seems. I'll wager that we're going to see even more items that are labelled as "RedHat Linux Compatible" or "Works with RedHat Linux" as this trend continues. It's not a bad thing, per se, but RedHat is certainly going to have a lot of clout, as they come into more money to throw at Linux application/kernel developers.
Disclaimer: I don't know anything about how to run a business, don't own RHAT stock, and don't track their activities, so please be very gentle with me. :)
I always thought that the way Red Hat would make its dough was by signing deals with major computer makers.. After all, they could download whatever Linux OS they damn well pleased, and most would want to put the most popular distro on their computers. However, without permission from Red Hat, they are not allowed to call the distro on their computers Official Red Hat Linux. Therefore they would have to sign a deal with Red Hat that allows them to use the name. If Red Hat was smart, they'd charge the big bucks (or at least enough to make a profit in the long run) for each preinstalled system with their distro on it.
Obviously the sales of their distro directly to the end-user without the benefit of a computer maker middle-man are going to drop like a rock when preinstalled Linux desktops (desktop meaning "with modem" in this case) are churned out by the major computer companies.. And, like others, I don't really buy into this "they're going to make their money doing support" thing all that much. However, doesn't the example in the preceding paragraph seem a little bit more viable to anyone?
Besides, I would think that the computer companies would want to include Red Hat's nifty little guides along with the computer system, too. Again, they would need to sign a deal with Red Hat (and probably pay a pretty penny for each copy).
~ Kish
- Big companies like Dell and IBM have staff that remember what happened when some uncareful deals were made with Microsoft.
- It may be cheaper to keep several Linux vendors alive and kicking than to commit to one.
- Playing the My Kernel Developer Is Better Than Your Kernel Developer game is none too safe.
- The Only Works With RedHat Linux label came long ago, and can't afford to stay.
This should not be misread as a prediction of impending failure, but merely to say that the commonly misperceived "infinite clout" just isn't that "infinite," even if they do have some on-paper billionaires...If it hadn't been for some real sharp intellectual property lawyers, Microsoft would probably have been a bit of "IBM toe jam."
After all, Macmillan Publishing was "devoted" to Red Hat Software until they became "devoted" to Linux/Mandrake...
Look, for instance, at the VA Linux Systems Ubergeek List. Note that they've "got" Ted T'so and H.J. Lu, amongst quite a list of important "Kernelmeisters."
Red Hat has some notable kernel hackers, notably Alan Cox and Stephen Tweedie; it is not vastly apparent that they have infinite clout in this regard.
If you're not part of the solution, you're part of the precipitate.
The last quarterly earnings for MSFT I could fine states MS brought in revenues of $4,331,000,000 for the quarter ending March 31st. Versus $4,400,000 for RHAT.
Or put another way, it takes Microsoft a little over 131 minutes to bring in revenues equal to what RHAT brings in during a quarter!
DrLunch.com The site that tells you what's for lunch!
Why does everyone keep saying that they're going to turn a profit eventually?
Their business model is unsustainable. They sell support, and at a flat-rate fee that doesn't cover the cost of support for those who use it. The only way they could turn a profit is to have the vast majority of people who buy their product need little or no support. Sooner or later people are going to figure out that it's stupid to buy the retail package just because they might want the support at some point in the future. After all, they can try to install it for free and then pay for the support only if they need it.
The revenues they have now are a mix of Linux-boosters who are giving charity and ignorant people who don't understand that the software is free.
They will never sustain big corporate clients, because an in-house Linux expert is cheaper and more useful.
Red Hat is never going to turn a profit, unless it becomes a fashionable charity. Yet another high-profile, high-price stock with nothing behind it.
No, it is not a requirement that companies have to eventually file an IPO. There are many companies out there that are privately held (not publicly traded).
A public offering is basically the sale of ownership of a portion of the company - this allows RHAT to receive a bunch of $$$ to finance their continued growth (which they're going to definitely need, as we'll see later). The other option is to NOT file an IPO, and continue to finance their growth expenses from their tiny current revenue stream.
Investors are willing to pay a huge premium now for two reasons: #1, based on the revenue growth rates (i.e. 95% per year), this company COULD be making a ton of money 5-10 years from now, and #2 they read all about it on Slashdot (OK, maybe not).
Why does RHAT need such aggressive growth? Well, 5-10 years from now, their business model indicates that they will be primarily a services company (remember, the base product is free). So, they don't make money selling millions of copies of RHAT linux (which one person with a CD burner could do in their basement). Rather, they make money providing support and customization services for millions of copies of RHAT linux (which requires thousands of service provider gurus worldwide). Without very aggressive expansion, they can't achieve that.
Note the cycle here - RHAT needs $$$ to continue to grow, and investors only value RHAT primarily on the growth it displays (for future returns). So, if they can't continue to display astounding growth quarter after quarter, the stock goes in the tank. That's why announcements like these are important - even though the company is losing money, the revenue stream is demonstrating growth.
Slashdot is entertaining like pro wrestling is entertaining
I still can't figure out how a $4 million revenue company (quarterly) with a $0.09 per share loss (quarterly) can be worth $7.4 billion. It makes no sense. There are companies with over $1 billion in annual sales reporting huge profits not valued that high. Linux-Mandrake sales in July (10,445) more than doubled Redhat sales (4802). SuSE apparently is a profitable organization. My only guess for its high evaluation is because it is the sole pure linux stock available right now. When more Linux companies go public, watch for Redhat's stock to drop some.