Red Hat’s open source model thriving in downturn
By Dave Jeyes
While some might argue that it’s too early to call, Red Hat’s open source model seems to be paying dividends despite the soft economic climate. Could penny-pinching managers looking for cheap solutions be a boon to the open source industry?
Red Hats revenue grew 22 percent to $165.3 million in the third quarter over the same period last year. This resulted in net income of 24 cents per share, which beat Analysts’ expectations of 18 cents a share.
In fact, Red Hat’s position was solid enough that it took the opportunity to repurchase 6 percent of its outstanding shares, strengthening its position by approximately $11 million. The company is planning to continue buying up stock to shore up the company’s resistance to the recession.
Red Hat CEO Jim Whitehurst find that in a, budget-constrained environment, IT professionals are adopting open source and more specifically Red Hat to save money and enhance their competitiveness.” By building their operating system on code contributed by the open source community, Red Hat’s Enterprise Linux is a more cost effective server than proprietary alternatives.
There’s still some question as to whether this will hold true for other open source vendors. Red Hat is the leading provider of Enterprise Linux servers and, as we all know, downturns favor the leaders.
It may be hard to identify how open source technology is faring in other market segments. MySQL’s merger with Sun ties it to one of the largest proprietary Unix companies, though much of Sun’s revenue is derived from Linux support contracts.
The Mozilla Foundation, developers of the Firefox browser, are also a leading open source company. However, Mozilla could see quite a different picture, as its revenue is made up largely from the floundering Internet Advertising from the browser’s search bar.
Other server companies once scoffed at the prospect of making their software freely available. However that core strategy is now driving Red Hat’s long term resilience and prosperity.
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