The numbers indicate that Red Hat feels no pressure, in fact they feel they are benefitting from all of the press coverage on Linux and open source caused by Uncompatible Linux and Microvell. Rumors of Red Hat’s demise seem to have been greatly exaggerated.
Some of the results posted by Red Hat in the face of this two-pronged assault: 12,000 new customers this quarter (30,000 for the year), this year ended with more multi-year contracts that ever before for Red Hat, with renewing customers frequently expanding their Red Hat implementation. So, it doesn’t appear that Red Hat customers are switching in response to either of the recent announcements.
To give you a sense of Red Hat’s customer retention records, here is a tidbit: "98 of the top 100 Red Hat customers have renewed this year, including 24 of 25 (up for renewal) in Q3".
So, that means that Red Hat lost a customer up for renewal this quarter. Oh my gosh! Who could it have been, Credit Suisse or some other "enterprise" customer concerned about Microvell FUD? No, it’s funnier than that…
Tim Klasell – Thomas Weisel Partners
Just a quick question on the 24 of the top 25 deals that closed in the quarter, last time when somebody did not renew, you sort of gave the circumstances around that. Could you provide that now? And then one follow-up.
Matthew Szulik
What circumstances would you like. Tim?
Tim Klasell – Thomas Weisel Partners
Why didn’t the customer renew?
Matthew Szulik
It became a competitor during the quarter.
Some analysts are questioning if that customer should remain a competitor next quarter, at least with its current offering:
Mark Murphy – First Albany
Thank you. You are saying that competitive actions are actually expanding your opportunity. You were not saying that in early November. What did you see happening toward quarter close that has emboldened you here to make a longer-term statement like that?
Charlie Peters
I think probably the difference is in early November, although there is an incredible amount of press — in fact, all of you guys wrote an awful lot, and so there was an awful lot of noise. And we were still working with the customers trying to understand their positions and understand the competitive offerings. I think as the quarter, particularly within the month of November went along, it become much clearer. The open source community contributed very heavily in blogs and other things trying to shed light on competitive offerings, which were helpful to us and helpful to customers to understand what was really been offered. So, it certainly did become clearer as the quarter went along. There is lots of talk about open source software. Lots of talk about Linux and middleware, and invariably when that kind of talk happens, when people talk about Red Hat and there’s an awful lot of advertising went on about open source software so that people think about Red Hat.
Matthew Szulik
Mark, let me just add to that. Management in the last 90 days has traveled around the world and has expected both the current installations that our leading customers have spoken with OEMs and third parties, as well as participated actively with prospect case. I think just to reaffirm Charlie’s comments, although the marketplace is certainly competitive, customers continue to reinforce the value that they get from doing business with Red Hat and open source software.
Mark Murphy – First Albany
Then Matthew, just as a follow-up, our own survey of Red Hat customers showed that Oracle’s Linux is essentially irrelevant to your customers in a lot of ways and we have also spoken to Oracle’s own resellers, and they have actually been unable to figure out where to order the product from. And there is other feedback showing that Oracle’s Linux is extremely buggy, and it keeps crashing, and Oracle has generated quite a bit of backlash and animosity from the broader open source community towards Oracle. So, I guess the question is, is it realistic to think that Oracle is just going to ride this experiment into the ground, or would you expect them to possibly withdraw their offering from the marketplace?
Matthew Szulik
Mark, I like the famous basketball coach at UCLA, John Wooden, used to say, we’re focused on the success of our customers. We are focused on expanding the opportunity for open source software through initiatives like OLPC with RHEL 5, RHN 2.0, the expanding JBoss middleware stack, and I have to be frank with you, I don’t spend a whole lot of time thinking about the operational issues and the Oracle operating system product. We are focused on making our customers tremendously successful with open source software.
Amazing, while abiding by the spirit and letter of the GPL, Red Hat can simultaneously deliver service to their customers, value to their shareholders, and respect to the community and increase their customer base by thousands in the process. Novell sold their soul to net one client to date. Is Novell sure they have the right philosophy?
Just for the record, the model of my Thinkpad is the 600X – an oldie but a goodie! And I got gNewSense running on it – with my LinkSys PCMCIA wireless card and all – with ease. So if you’re a purist and you want to work guilt-free (especially after the Novell-Microsoft pact), then I suggest you try it out.
“We have been talking with several local Linux software companies for possible co-operation, including acquisition,” said Sen Ming Chang, Novell’s vice-president worldwide and managing director for its East Asia operation.
I don’t know if they seek to ‘infect’ the Chinese GNU/Linux market**, but do bear in mind that Novell has a track record of replacing Linux with Linux, not Windows with Linux. To quote one recent article, “Susan Hauser, Microsoft’s general manager of customer advocacy, told eWEEK Dec. 20 that no existing Microsoft software seats were lost under these three agreements.”
The raison d’être is this Web site is to encourage Novell to retract its deal. Failing that, the site aims to discourage people from supporting Novell by buying its products. One of the earliest pages to appear here posed the question: Are boycotts effective at all? Boycotts can indeed be effective and no-one proves this better than the Free Software Foundation.
BadVista is the latest in a series of activist campaigns launched by the Free Software Foundation (FSF) in the last eight months. It follows the highly successful Defective By Design campaign against so-called Digital Rights Management (DRM) technologies, and an unnamed effort to encourage the activist media to make free software part of their agenda.
More details on this latest campaign can be found in a large number of Web sites. Clearly, this protest has made the impact it had hoped for.
Ronald Hovsepian, who is Novell’s CEO, continues to flip-flop. This following is an excerpt from a very recent interview.
CNME: Do you think the patent cooperation part of the agreement with Microsoft is in the best interest of Novell’s customers?
Hovsepian: Absolutely. It’s good for the customers because they don’t have to worry about those things. I’m disappointed that we haven’t communicated our intent as clearly [as we should have] to the [Linux] community. The messaging got bogged down.
Mind you, this comes after Hovsepian argued that he had not viewed the deal as one which revolves around patents, but rather around interoperability. This also comes after Novell called other Linux vendors to make similar deals with Microsoft, as well as admitted being selfish.
Excluding special items, the company said it posted a profit of $29.6 million, or 14 cents per share, after adjusting for stock compensation and tax expense.
Analysts, on average, were forecasting that the company would post a per-share profit excluding items of 12 cents a share on revenue of $104.1 million, according to Reuters Estimates.
During the quarter, the company said revenue rose 45 percent to $105.8 million as it added 12,000 new customers amid Oracle Corp.’s jump into the open-source software market.
It appears that analysts also agree that Red Hat has nothing to fear from Oracle Linux: “Open-source is not going away and Red Hat is the leader, Chowdhry said in a telephone interview. "Oracle is a nonevent when it comes to open source."
"Notwithstanding the changing dynamics of our market, we are cautiously optimistic that competitive efforts by some of the largest technology companies in the world are actually expanding our opportunity," Red Hat Chief Financial Officer Charlie Peters told an analyst conference call.
Yesterday, the poor impact of Oracle on the Linux market was briefly mentioned. You may be pleased to know that Red Hat’s reports seem highly promising, despite the squeeze from Novell, Microsoft, and Oracle.
Red Hat Reports Third Quarter Fiscal Year 2007 Results
Thursday December 21, 4:00 pm ET
– Revenue up 45% year-over-year
– Operating profit up 44% from prior quarter
– Operating cash flow up more than 35% from prior quarter
Do you think that there was a chair tossed across a room while Ron Hovsepian was hollering that he will "f@%king kill Google" at Novell headquarters today?
Well, it appears that Allison is instead heading to Google, where Samba will be "pushed forward, harder.", and he will have no further comments on the Novell situation until after the official end of his employment on the 29th.
Good luck and congratulations to both Google and Jeremy Allison. Anyone in the Waltham, Massachusetts area would do well to watch for flying furniture.
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