Red Hat and Linux Bloggers: The Big Disconnect
When Red Hat announced financial results March 24, Linux and open source bloggers fell all over themselves praising the company’s performance, revenue and profit growth. Now here’s the twist: Instead of climbing, Red Hat’s stock fell. Why’s that? Here’s the story.
Alas, sometimes open source fanatics can’t help themselves. Spot some good open source news, and the Linux fans position it as great news. Identify a minor setback at Microsoft, and the open source fanatics Tweet it as the death of Windows and Microsoft Office.
So, what’s the real situation at Red Hat? No doubt, the company deserves credit for its continued growth, and its ability to diversify beyond Red Hat Enterprise Linux — promoting JBoss middleware and virtualization as the next big revenue opportunities for Red Hat partners. And by most accounts, Red Hat is set to become the world’s first $1 billion open source company.
Impressive. But let’s keep the celebration in perspective. While Linux fans were busy cheering and hyping Red Hat’s latest quarterly results, Wall Street expressed concern. For March 25, shares are down about 5 percent.
As the Associated Press reported:
Shares of Red Hat Inc. dropped Thursday as its 2011 profit outlook fell short of analyst projections, despite a strong fourth quarter and a new plan to repurchase $300 million of its stock. [But Red Hat expects] adjusted profit of 71 cents to 74 cents per share in its fiscal 2011 year ending in February 2011. That fell short of expectations of analysts polled by Thomson Reuters, who forecast earnings of 76 cents per share, on average.
Microsoft’s Big Shadow
No doubt, Red Hat is in solid financial shape. And The VAR Guy even owns a few shares in Red Hat. But let’s not lose sight of the facts:
- Red Hat is growing nicely, and is poised to become the first $1 billion open source company.
- Microsoft’s annual revenues for 2009 were $59 billion.
Translation: Microsoft is still 60X to 100X the size of the world’s most successful open source company, depending on which financial quarter you’re tracking. That’s rather amazing.