When Red Hat announced first quarter results on June 24, The VAR Guy spotted a rather interesting detail: Red Hat's quarterly open source revenues are nearly four times larger than

The VAR Guy

June 25, 2009

3 Min Read
Red Hat: Four Times Novell's Open Source Revenue?

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red-hat-partner-program

When Red Hat announced first quarter results on June 24, The VAR Guy spotted a rather interesting detail: Red Hat’s quarterly open source revenues are nearly four times larger than its closest Linux rival, Novell. Next, can you guess who’s growing faster in the open source market? Here’s the math, and the potential implications.

First, a little background. The VAR Guy is NOT referring to overall company revenues.

  • In Novell’s case, our resident blogger is only focusing on Open Platform revenues — most of which involve SUSE Linux sales.

  • For Red Hat, The VAR Guy focused only on quarterly subscription revenues — most of which involves Red Hat Enterprise Linux and JBoss.

  • The VAR Guy is ignoring variables like Red Hat’s consulting revenues and Novell’s legacy product revenues.

  • This is NOT a Linux vs. Linux comparison, since Red Hat’s open source portfolio also includes JBoss.

Keeping Score

So, how do the open source numbers compare? In Novell’s most recent quarter (Q2 2009), Open Platform sales were about $39 million — up from $30 million for Q2 2008. Nice, solid growth. And in recent weeks, Novell has been promoting new channel partnerships and promotions that strive to migrate Red Hat Enterprise Linux customers to Novell SUSE Linux.

But now let’s throw Red Hat into the mix. In its most recent quarter (Q1 2010), Red Hat’ subscription revenues were $148.8 million — up from $130.7 million in Q1 2009.

In other words:

  • Red Hat’s current quarterly open source subscription revenue ($148.8 million) is roughly 3.8 times that of Novell’s open platforms revenue ($39 million).

  • Plus, Red Hat is adding quarterly open source revenue (up about $18 million, year over year) faster than Novell (up about $9 million, year over year).

It’s All About Synergy

In Red Hat’s case, recent success involves synergy between Red Hat Enterprise Linux and JBoss middleware sales, The VAR Guy believes.

Like peanut butter and jelly, Linux and JBoss are a natural tandem — creating market pull for one another. And now, Red Hat is partnering up with ISVs (such as Alfresco ) to gang up against entrenched closed-source applications like Microsoft SharePoint.

Meanwhile, Novell’s legacy business continues to shrink but newer businesses like SUSE Linux, identity management, security and data center administration offer promising growth. But here’s the problem: Those individual Novell products don’t always create pull for one another, The VAR Guy believes.

Hmmm. Plenty of skeptics initially dismissed Red Hat’s decision to acquire JBoss in 2006. Fast forward to the present, and the Red Hat’s JBoss business is growing faster than Red Hat’s Linux platform business. The numbers seem to show that Red Hat has a killer software combo.

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