Memo to Red Hat (RHT): OpenStack, Not Open Stack

Memo to Red Hat (RHT): OpenStack, Not Open Stack

How much is Red Hat (RHT) investing into OpenStack Research and Development (R&D)? The cloud technology appears to be consuming lots of dollars, but finding the information isn't easy. Here's why.

How is Red Hat's (RHT) emerging OpenStack business shaping up? The VAR Guy checked the Linux company's latest SEC filing and found nothing -- not a single mention of OpenStack, the open source cloud platform. At first glance that's a huge concern. But take a closer look and you'll learn why The VAR Guy didn't go into panic mode. Nor should you. Here's why.

First a little background: Red Hat now offers its own OpenStack distribution, which customers and partners can use to build public and private clouds. It sounds promising -- and strategic. Back in June 2013, Red Hat mentioned OpenStack 32 times during an earnings call with Wall Street analysts. But the company also conceded that Red Hat OpenStack would not generate substantial revenues anytime soon.

Fast forward to October 2013 and how are things going? The VAR Guy checked Red Hat's Oct. 8 SEC filing and briefly went into panic mode because the lengthy document didn't mention OpenStack once. Not a single time.

But oh... wait a minute. Red Hat mispelled OpenStack as two words (Open Stack). Panic ended. Crisis averted. Within the document, Red Hat addressed its R&D spending this way:

"Research and development expense increased by 23.6% or $14.9 million to $78.3 million for the three months ended August 31, 2013 from $63.4 million for the three months ended August 31, 2012. The increase in research and development costs primarily resulted from the expansion of our engineering group as a result of both direct hires and business combinations as we continue investing in cloud management and our other emerging technologies such as Red Hat Open Stack infrastructure-as-a-service (“IaaS”) and OpenShift platform-as-a-service (“PaaS”) among others."

Open Stack (er, OpenStack) and OpenShift could be a killer combo for Red Hat. The VAR Guy will keep watching those emerging technologies for signs of progress -- even if the words don't look quite right...

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