Monday, March 31, 2008

Red Hat What Of It?

Red Hat (RHT) announced decent earnings after market close on March 27. S&P upgraded them citing increased liquidity. Hey cash in the bank is good these days! Red Hat tipped their hand somewhat when in the opening paragraph of their press release Jim Whitehurst, President and Chief Executive Officer led off with a quasi religious statement about open source:

“During the fourth quarter, I spent a significant amount of time meeting with customers, partners, employees and thought leaders from the open source community. The momentum of open source solutions is strong and growing, and we believe there is a significant opportunity to expand our presence with existing customers and the many companies and industries that have only just begun to adopt open source solutions in a meaningful way,“

At this point Red Hat has been around long enough to have gained traction. I am not an IT guy but this open source concept should be a lot larger by now than just a half billion dollars in sales and only $77 million in bottom line.

Red Hat has an obligation to create wealth for its shareholders. Meetings with thought leaders does not lay out a roadmap for the future. It may even mean that Red Hat is lost in the woods and certainly not leading.

IT is a cold hard business that frequently eats its own babies. Red Hat seems to be on a restricted diet without reservations to any place interesting.