In what may come to be seen as a deeply symbolic moment in the history of operating systems, Red Hat is on the verge of surpassing Sun Microsystems' market capitalization for the first time.
Sun, perhaps unfairly, represents a fading Unix market. Red Hat, for its part, represents the rising Linux market.
As I write this, Red Hat's market capitalization sits at $2.62 billion, while Sun is just ahead, at $2.7 billion. The stock prices are way out of whack with revenues: Red Hat pulled in $627 million in 2008. Sun? More than $13 billion.
Such is Wall Street's confidence in Red Hat's Linux focus, however, that the market capitalizations between the two companies are almost at parity.
Both companies, of course, have product portfolios beyond Linux or Unix. Sun, in particular, has been significantly expanding its portfolio to include full systems that comprise software (OS, database, storage, portals, etc.), services, and hardware.
Given enough time for its open-source strategy to play out, Sun's market capitalization will likely recover and outpace Red Hat's. But for now, a symbolic moment is about to occur. The inauguration of the Linux-based economy?
Slashdot asks a provocative question: "Is Open Source Software a Race To Zero?"
Over time we've seen our business model eroding as other open source projects produce free versions of the same extensions and utilities that are our bread and butter. Something that was worth $5K last year is suddenly worth $0 because the free version is just as good as the paid. This same cycle is obviously having an impact on pure-play commercial software vendors. Is open source ultimately a race to zero?
It's a good question, but the answer is the same as if asked about free-market economics: yes. Yes, open source is a race to $0.00, because that is what free-market capitalism is all about.
Indeed, the "free" in "free and open-source software" is really about free markets, more than anything else. This is why Tim O'Reilly has been urging the open-source world to stop fixating on bits, whose price point is dropping to $0.00, and focus instead on data and higher-value services around data.
Open source is a free-market, capitalist phenomenon. It's all about driving yesterday's value to $0.00, and forcing the market to innovate new ways to discover and price value.
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