Red Hat Inc. sits atop the heap of Linux distributors. As the 11-year-old publicly traded Raleigh, N.C.-based company steams toward adolescence, it has nearly $1 billion in cash in the back with which to beat back Novell Inc.’s challenge in the Linux market while continuing to drive innovation and maintain its enterprise focus. […] Szulik joined the Red Hat world wide tour yesterday as it made its first stop in the United States and in this interview talked about the competition, Red Hat’s strategy and SCO.
Red Hat CEO: Business of Linux validated
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Eugenia Loli
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It must be noted that RedHat has an exemplary record of contribution to OpenSource. All of their tools are open source, and they regularly contribute changes back to the upstream developers. The business model that people assumed would not work has now netted them a billion dollars in the bank. Go RedHat!
I think the linux market is here to stay. Distros are making huge improvements in their desktops version to the point where people can officially use linux as a desktop even if they are not at the “hacker” level. Although I have to say I sort of understand now why Red Hat offically got out of the desktop business.
That being say desktop linux is severely lacking in one main area, development tools and a unified api. As a software developer and a person interested in software development I have been impressed with microsofts efforts at creating useable tools. Visual Studio.net is I think the bar for development tools now. And of course with windows you have one environment and one api to deal with.
not so with linux. You have 2 main environments and apis which is fine in my opinion but you also have like 5 or ten completely disparate tools. Obviously theres linux but after having used it for a few things I have been trully unimpressed with its development.
If someone somewhere in the linux communitte build a trully useable tool for building applications on desktop linux I think it would start taking serious markethsare from windows. And as someone who likes linux and is interested in developing applications for the platform I really hope this happens and soon.
Red Hat does the right thing, but it could do more. They have left thousands of NGOs across the world stranded by stopping support for Red Hat 8 a bit over a year after it was released. Thankfully there are always alternatives when it comes to Linux, although Fedora, even with the fedora-legacy support, isn’t one of them when it comes to servers.
I think, in this sense, Debian and possibly Mandrake are the true standard bearers about how to work with the community, something which is easier for Debian, which needn’t worry about staying profitable, than Mandrake obviously.
Still, I have a lot of admiration for Red Hat and for the most part they have been a wonderful citizen in the free software world.
>>>The business model that people assumed would not work has now netted them a billion dollars in the bank.
Those money comes from selling shares to the public and issuing a corporate bond — they don’t come from “profits”.
Secondly, they have $1 billion in the bank — even if they earn 2% interest on that money per year, that would be $20 million per year (or $5 million per quarter).
So they just announced that they made a “profit” of $5 million in the last quarter. In the press release, RedHat also announced that they made an “Operating profit” of $4.6 million in the quarter — BUT without counting stock-based compensation.
http://www.redhat.com/about/presscenter/2004/press_q42004.html
It’s just funny numbers.
Hi
What was your reaction to Novell’s acquisition of SuSE? Is it a good thing for enterprise Linux?
Szulik: It helps validate what we’ve been saying for 11 years. I’ve been spending a fair amount of my life trying to convince people that Red Hat and open source could be an economically viable alternative. So [the acquisition] continues to validate it. Competition is good. We think one of the great things about open source computing is choice. If you’re good and you’re trying to build a great company, there’s nothing better [for validating] that than to have more competition in the market. When one vendor has 96% of anything, you see what the result of that is. We think it’s good; it will challenge us.
Go for the desktop.
I believe that the next five years will see Novell dominate the desktop and the corporate workstation, Red Hat the server, and Debian and its derivatives the rest.
Sure there will still be others but those three are going to constitute the lion’s share of the market.
You’re wrong, if you RTFA properly, you will see that before counting the sock figures and ineterest etc, that they made a 12% profit from revenues. Nothing to do with stock. They are in the black and have survived for 11 years without selling proprietry software, they have proved it, nuf said…
I personally was really glad to see that. Linux needs coporate backers. While open source and free software is a nice concept theres no money in it and the hard fact is that in order to be competitive in the enteprise market you have to have serious support which costs money. This is probably why MS has done so well in certain areas. They have billions to throw at to get certain software developed. I understand .net had 2,000 developers on it. Now theres no way open source can do that.
I also think Novell has the right attitude and I look forward to what they are going to do from now on. Red Hat has thrown in the towel as far as the desktop and i cant say I blame them. Linux is great now for newbie users but it still lacks in many other areas which windows simply dominates and probably will for a while.
How is mandrake in comparison to suse?
RH has been called by some parts o the community as the “M$ of Linux” (note the $ to represent the zealotry).
Even though RH has given back much more to the community then Suse used to, and generally have been a model open source company, they were still getting flamed for being ‘monopolostic’ (how the heck can you be monopolistic in an open source market?)
I do think that is one of the things that he means with that comment.
>>>You’re wrong, if you RTFA properly, you will see that before counting the sock figures and ineterest etc, that they made a 12% profit from revenues.
You are the one that is not reading it carefully.
“Operating profit, before stock-based compensation, increased to $4.6 million, or 12% of total revenue.”
It means that $4.6 million represents about 12% of the total revenue (revenue of $37 million times 12%). It doesn’t say that they made 12% in profits from revenue.
The other way of looking at those numbers is that if they count stock-based compensation (which is an expense item) — RedHat would lose money on an operating basis.
That’s why I called it funny numbers.
Every company does Funny numbers to make their books look good even microsoft. How much does MS lose on each Xbox sold??? MS shifts money all around to make them look good,They take money from profitable sections and pass it over to the not so.
Besides they had to get that billions some way. They must be doing something right. As for using money off their IPO that was what the late 90’s five, six years ago??
>>>Every company does Funny numbers to make their books look good even microsoft.
Of course — but to use these funny numbers to declare that the RedHat business model is sound is another matter.
“I believe that the next five years will see Novell dominate the desktop and the corporate workstation, Red Hat the server, and Debian and its derivatives the rest.”
Novell has managed to demonstrate, in the past few weeks, even LESS of an ability to communicate their intentions than Red Hat, and there is no indication that they have an overall, cohesive, long-term plan (as I’ve mentioned before, I’ve spoken personally with Novell reps recently). SuSE and Ximian are both excellent companies, but they have fundamentally different cultures: Ximian is American, and is GTK+ and C oriented. SuSE is European, and is Qt and C++-oriented. A culture clash could be _devestating_ to Novell’s Linux plans.
You’re also ignoring the fairly obvious pushes that Novell has been putting into the server market, and the possible hit Debian might take if Fedora ever _really_ takes off. And, of course, that Red Hat’s been doing this Linux thing longer than anyone, and that sort of experience is a major advantage no matter what they go into.
The market is wide-open, and anything could happen.
-Erwos
I don’t care how they got it, this is still very surprising.
I agree that Redhat has done very well in giving back to the community and I think they make a great product. I really like Novell stuff but I think I’ll always use Redhat to one degree or another at my company.
The big thing is that Redhat used to have a hard time turning a profit and that appears to be all changing. They seem to have hit a good spot in charging for Linux (I use RHEL 3) while still giving a lot back (fedora is great).
And fragment itself, with companies wasting resources trying to outgun each other, tacitly strengthening the hand of the player in the upper left corner of the board.
>>>The big thing is that Redhat used to have a hard time turning a profit and that appears to be all changing.
They haven’t earn an operating profit yet. In fact, if RedHat fired everyone and just sit on the money and not produce anything — they would make an even bigger “profit” that way.
Novell has managed to demonstrate, in the past few weeks, even LESS of an ability to communicate their intentions than Red Hat
The way I see it is that they have communicated their intentions, it’s just that some people don’t want to accept what those intentions are.
SuSE and Ximian are both excellent companies, but they have fundamentally different cultures: Ximian is American, and is GTK+ and C oriented. SuSE is European, and is Qt and C++-oriented. A culture clash could be _devestating_ to Novell’s Linux plans.
SuSE and Ximian get along fine. There is hardly a “culture clash”. The guys are already working together as we speak.
If you meant the non-factor fanboys, not the companies themselves, then forgive me, because you’re right. There will be a culture clash, but then again — Who cares? Why should Linux businesses even trip about what _children_ think?
“SuSE and Ximian get along fine. There is hardly a “culture clash”. The guys are already working together as we speak. ”
Working in the same organization is not the same as working together. Can you cite any instances of direct collaboration between Ximian and SuSE? That guy who made Ark Linux did alright in Red Hat for a while, and then he left over differences. That could easily happen in Novell.
Curious question: what is your take on their use of Qt? I want to know if it’s the same as mine (that is to say, new Novell apps will be programmed in Qt, Ximian and SuSE will do what they want).
-Erwos
Enough with knocking RedHat with the old “they stopped supporting RedHat 8” spiels just so you can plug in your distro-of-choice. RedHat 8 and the other old version of free RedHat Linux were all FREE. No one pays to support them and RedHat is a commercial company. They’ve developed it and supported them for free for more than a year.
You know why the other distros can afford to support their old version indefinitely? It’s because they’re mostly run by volunteers. The source is available for RedHat 8 and older so volunteers and commercial companies can actually provide support for it for free or for pay. In order for longer support to be put in place for their free distro, they’ve set up Fedora.
So for people who like the great organization RedHat has started with their distro, the magnificent redhat-config-* tools, they way they’ve organized configuration files in /etc/sysconfig, the way they rewritten the init rc scripts to be real elegant, the fast-paced yet prudent addition of the newest technologies to achieve whatever distribution goal and other great stuff that are just too many to mention AND have volunteers supporting that distro indefinitely and for the longterm, then go with Fedora.
As a geek, I’m actually impressed with the way the HACKERS at RedHat have actually organized their distribution.
“Of course — but to use these funny numbers to declare that the RedHat business model is sound is another matter.”
You might be right about the funny numbers, but it seems when you look at Amazon.com and that they do pretty much the same thing, not even showing a profit much of the time, but yet the investors keep piling it on, and you’d have to say they definitely have a sound business model. They don’t even have a product, just a very famous name.
So I guess it depends on how you define “profit” and “funny money”, right? If the money is flowing into your pocket, it’s profit..if not, tough luck…
Curious question: what is your take on their use of Qt? I want to know if it’s the same as mine (that is to say, new Novell apps will be programmed in Qt, Ximian and SuSE will do what they want).
Hmm, my take on their use of Qt? For one, they will not make any new *systematic* use of it for the sole reason that they made a $20 million purchase — not on TrollTech, but rather on a specialist in one of TrollTech’s “competitors”.
Also, they made a $210 million purchase, and it wasn’t for TrollTech either, nor did it include a partnership with TrollTech, or an obligation to support Qt related software. No, rather, they happened to purchase an enterprise ready Linux distribution that contained Qt and KDE related Rpm’s. Which doesn’t mean anything when balanced out with the aforementioned $20 million.
All issues of compatibilty or customer preference aside, Qt is irrelevant for Novell applications. Whether they should have spent that money on TrollTech and SuSE, instead of Ximian and SuSE is another issue, but now they _must_ make do with they have — and that’s exactly what they’re going to do.
This is not to say they are choosing Ximian over SuSE as some would like to reason — that would be like saying Linux is worthless except for KDE. If it makes you feel any better, I’ll say that the SuSE purchase is still far more valuable than the Ximian one, even if it contained no desktop software at all.
Redhat has been a rock since the start. It sounds like they intend to continue to be. I was thrown off when Sulsinick said Linux was not ready for the desktop but I don’t think their support for the opensource way has wavered. Also, it is good that Suse/Novell is in the fray. No one company should have it all.
>>>You might be right about the funny numbers, but it seems when you look at Amazon.com and that they do pretty much the same thing, not even showing a profit much of the time, but yet the investors keep piling it on, and you’d have to say they definitely have a sound business model. They don’t even have a product, just a very famous name.
It’s like rich people buying professional sports teams for 200-300 million dollars each. The bigger idiot theory is a pretty sound business model — there will always be a bigger idiot with a bigger networth than you and this bigger idiot will buy your professional sports teams for an even more amount of money.
“Enough with knocking RedHat with the old “they stopped supporting RedHat 8″ spiels just so you can plug in your distro-of-choice. RedHat 8 and the other old version of free RedHat Linux were all FREE. No one pays to support them and RedHat is a commercial company. They’ve developed it and supported them for free for more than a year.”
“Nonsense. Tons of people paid quite a bit of money for Red Hat 8 to be stuck with a Linux distribution that holds the dubious honor of being the one with the shortest support term ever. ”
“You know why the other distros can afford to support their old version indefinitely? It’s because they’re mostly run by volunteers.”
So what? Red Hat also has plenty of volunteers on board. Suse also employ tons of hackers as does Mandrake. And it’s a great thing to have an open development process where people outside the company can contribute. In fact, if smaller companies can afford to offer a much longer support term with “just volunteers”, this does not speak very well for Red Hat’s ability to support its products.
“The source is available for RedHat 8 and older so volunteers and commercial companies can actually provide support for it for free or for pay. In order for longer support to be put in place for their free distro, they’ve set up Fedora.”
Nonsense again. Fedora has even shorter support policies than even Red Hat 8. I do not know why some people cannot see that tons of small organizations depended on Red Hat and they were let down. As I said earlier, this is Linux and it is good that there are alternatives, but it isn’t right that people were pushed to those alternatives against their will and without sufficient time to prepare a proper migration. If you read the interview, even Red Hat’s CEO admits that they screwed up on that one without saying it in so many words.
And for what is worth, I like Red Hat and continue to use it. I am also a RHCE.
“Copyright (c) 2003 Red Hat, Inc. All rights reserved.
The Fedora Project is not a supported product of Red Hat, Inc.”
Does it mean Fedora isn’t branch of Redhat?
http://fedora.redhat.com/about/ explains the relationship between Fedora and RedHat.
There is no formal support (Phone support, direct e-mail support) like for SUSE or RedHat Enterprise Linux … but “support” just like Debian, Skackware and Gentoo (mailing lists, hire consulants, etc.).
Linux seems very expensive to run assuming that Red Hat with a tiny market share have all these money.
Where they get cash from? Support? Is Red Hat Linux that bad so people have to buy that much support?
Is this the reason why BSD isn’t accepted by providers since not much support is needed because “it just works(tm)”?
Hi
People constantly need support regardless of how good the product is. the just works myth wont solve real world problems. people screw up configuration, forget passwords, delete critical files and what not
regards
Jess