rhel

Analyst: Red Hat "deeply undervalued," Oracle Linux "has failed"

Red Hat has been taking a beating in the stock market recently, but in a recent research note leading analyst Mark Murphy of Piper Jaffray thinks this represents an exceptional opportunity to buy into a "deeply undervalued" company. More interestingly, Murphy finds significant cause for Red Hat optimism based on Oracle's failed attempt to undermine Red Hat with its Unbreakable Linux product.

If Red Hat's model were fragile, the thinking goes, surely a behemoth like Oracle could make a dent in Red Hat revenues? Oracle got into the Linux game two years ago, hoping to cannibalize Red Hat's business for itself.

As Murphy points out, however, Oracle has completely failed to hurt Red Hat, calling into question the belief that Red Hat's demise is just a fork away. Novell, too, despite starting to build a decent Linux business of its own, as The VAR Guy has noted, has completely failed to touch Red Hat's rising revenue. The reason? Red Hat remains the default choice for enterprises looking to move off expensive Unix to high-performance and low-cost Linux.

Murphy writes:

Oracle has failed in its attempt to enter the Linux market. Our recent survey of Oracle database customers reveals that only 1 out of 32 customers currently uses Oracle Unbreakable Linux. This one customer also commented that "support is terrible, it is difficult to get an answer to my problems, Oracle's agents never understand my company." The survey reflects a very low penetration rate in the 2-year period since Oracle unveiled Unbreakable Linux with much fanfare, including live penguins running around onstage with Larry Ellison. Resellers continue to characterize Unbreakable Linuxas a failure because Oracle ultimately cannot control the future direction of RedHat Enterprise Linux, upon which it is based.

While the Street has expected Unbreakable Linux to severely impact Red Hat, its failure ironically serves as a proof-point of the underlying defensibility of RedHat's business model. In fact, in the two years since Oracle introduced Unbreakable Linux, Red Hat's billings have grown at an average rate of 31%--representing clear market share gains.

When Red Hat's biggest rivals can't hurt it, surely this is cause for optimism, and not a market slide? It turns out that being the "source of code" is a great alternative to owning the source code, at least in Red Hat's case.

Red Hat has shown no signs of slowing, with its subscription model able to weather the current recession: even if it doesn't sell any new subscriptions, it can tread water and/or grow with its existing customer base, something that license-revenue driven companies simply can't afford to do.… Read more

Wikipedia drops Red Hat for Ubuntu

What's that sucking sound? It's the sound of money leaving the open-source ecosystem as Wikimedia, the organization behind the popular Wikipedia, has opted to dump its Red Hat Enterprise Linux (RHEL) deployment for unsupported Ubuntu, as The Register reports. Yes, Wikimedia could get support for Ubuntu, but it has elected not to do so.

With 350 servers, I'm sure Red Hat wasn't ecstatic to lose Wikimedia as a customer. That said, it was just a matter of time:

Right now, Wikimedia is using custom Ubuntu versions that have its own software configuration tools. Carr said Wikimedia … Read more

Red Hat: It's the value, stupid

As I walked through the war zone that is Wall Street yesterday on my way to a Red Hat meeting, I assumed the worst. I scanned the rooftops for Paul Cormier, Red Hat's EVP of Products and Technologies, ready to catch him if leaped. I scanned the cardboard boxes along the pavement, expecting to see Red Hat CTO Brian Stevens claiming a cozy spot on the curb. Finally, I dug through dumpsters in search of Jim Whitehurst, Red Hat's CEO and no stranger to market meltdowns as the former COO of Delta Air Lines.

They were nowhere to be seen.

Instead I found Whitehurst, Cormier, and Stevens waiting for me in Room 616 of the Red Hat Enterprise Linux-fueled New York Stock Exchange, which managed to process a massive sell-off of equities over the past week without skipping a beat. Indeed, on a day that saw the Dow Jones industrial average crater by 508.39 points, RHEL kept the NYSE humming.

Perhaps this wasn't something to celebrate, but it's a testament to the power of Red Hat's software, and a painful reminder to Microsoft that its software is not ready for the heaviest enterprise loads, given its own .Net-inspired crash of the London Stock Exchange last month. Microsoft urges us to "get the facts" about Windows performance. Don't worry, Microsoft: we got them.

But it wasn't to poke fun of Microsoft that I spoke with Red Hat. Instead, it was to see how a faltering economy is hurting or helping its business, find out why there aren't more Red Hats, and to learn why enterprises continue to turn to Red Hat even as budgets tighten and implode. … Read more

Some intriguing data behind Red Hat's 29 percent growth

Red Hat continues to impress. Coming off its already-strong first quarter and higher guidance for its fiscal year, Red Hat announced on Wednesday 29 percent year-over-year growth for its fiscal second quarter and 5 percent growth over its first quarter.

Total revenue for its second quarter hit $164.4 million. Both revenue and profit came in above analyst expectations.

This was the first time in years that Red Hat's second-quarter billings exceeded its first quarter billings. Not bad for a company that gives away free software.

Importantly, Red Hat appears to be doing longer-term deals, as its total deferred revenue balance was $496.9 million, growing 32 percent year-over-year and 1 percent sequentially. This would suggest that Red Hat customers are increasingly comfortable making a long-term bet on Red Hat's future. Indeed, on the analyst call, Red Hat Chief Financial Officer Charlie Peters indicated that the average booking for Red Hat is 24 months and that 36 percent of its subscriptions are for a term greater than one year.

In selling longer-term deals, Red Hat is successfully blocking competitive pressure from Novell, Microsoft, and other companies that might want to cut into its accounts.

On the earnings call, Peters and CEO Jim Whitehurst identified several key trends:… Read more

Chicago Mercantile Exchange joins the Linux Foundation

I've been pining lately for greater enterprise participation in open source, following the lead set by Red Hat CEO Jim Whitehurst, and so was excited to see the recent news that the Chicago Mercantile Exchange (CME) has joined the Linux Foundation. For CME, time is money, with a record 2.2 billion contracts in 2007 worth more than $1.2 quadrillion, all running on Linux (Red Hat Enterprise Linux, in this case).

But what does CME get from joining the Linux Foundation?

By joining the Linux Foundation, CME Group will be able to collaborate with key Linux developer and … Read more

Red Hat sets new performance record at a 20 percent cost savings

Once upon a time CIOs bought into open source solely to achieve dramatic cost savings. Today, Red Hat gave them another reason: superior performance.

Today Red Hat announced that it has broken server performance records with its Red Hat Enterprise Linux 5.2 on an IBM System x 3950 M2 running Intel X7460 Xeon processors. Apparently you can have your cake and eat it, too, at least in the open-source world:

In its latest 1M tpmC benchmark, Red Hat Enterprise Linux 5.2 outperformed all other operating systems on price performance in the 1M+ range. The Red Hat-based benchmark system … Read more

Travelocity takes flight by standardizing on Red Hat

With over 9,000 employees and over $3 billion in annual revenue, Sabre Holdings is a customer worth having. It is, however, also a very demanding company: with websites Travelocity.com, Lastminute.com, and others, even a little downtime costs the company tens of millions of dollars.

It is therefore instructive that Sabre Holdings has decided to standardize on Red Hat Enterprise Linux, dumping the proprietary Unix systems it had been using. In case someone within your organization makes the suggestion that open source can't deliver best-in-class performance, you might want to refer them to this statement by Robert … Read more

Q&A: Red Hat's JBoss business hits overdrive

It has been a little over two years since Red Hat acquired JBoss. Despite a relaxed public spin, rumors at the time, and for long afterwards, persisted that Red Hat didn't understand middleware, had botched the integration of the JBoss employees and culture into Red Hat, and worse.

However, in an interview Wednesday with Craig Muzilla, vice president of the Red Hat middleware business line, it became clear that JBoss--which includes all of Red Hat's middleware product line, including MetaMatrix--has finally come into its own at Red Hat. I had been hearing from different corners of Red Hat, … Read more

Red Hat: Gateway to open source in Latin America

Latin America has tended to be one of the worst performing geographies for most software companies, generally coming in at one to four percent of total company revenues. That may be about to change.

Yesterday I had lunch with Julian Somodi, Red Hat's general manager for South America. Somodi has one of the most exceptional backgrounds of anyone I've met at Red Hat. His first "job" was with Red Hat: Until then, he had always been an entrepreneur, starting and selling a range of businesses.

In fact, he started the first real Red Hat distributorship in South America and practically demanded Red Hat to open shop in the region. (I heard this from his colleagues - Somodi isn't the type to brag of his own achievements.) He was Red Hat's first general manager back in 2006, and has been pushing forward ever since.

News flash for Red Hat: Somodi is still every bit the entrepreneur, and is now putting his drive and ambition to work for Red Hat. It's pretty impressive to behold. But then, for anyone that has worked with Somodi, they already know this.

Asay: Latin America has always been difficult for North American and European software companies. Between piracy and comparatively low budgets for technology, we've struggled to know how to do business in Latin America. You seem to see an opportunity, and have been closing some big customers like the Brazilian Federal Court. Why?… Read more

Red Hat makes the planes fly on time in Munich

I spent my lunch today in Buenos Aires with Red Hat's general manager of South America, which I'll report on tomorrow. Meanwhile, on the other side of the planet, Red Hat announced a cool deal with Munich Airport, thrice-named "Airport of the Year" in Europe.

Why? Because Unix couldn't deliver the performance that Munich Airport needed, so the organization went with Red Hat Enterprise Linux to "provide both the savings and performance benefits desired." Thirty servers and 40 desktops later, Munich Airport is running smoothly and at lower cost than before.

While this … Read more