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No. of Recommendations: 54
At the outset, let me state that I use RHAT Linux on my server, but I use Win98 on the desktop. Why? Necessity. Currently, most of the applications which are necessary to my profession are only available for Windows. But, as is often the case with open source development, this is changing on an almost daily basis. The only thing missing is a reliable case/calendar/contact package, and there are plenty of available options currently being developed. I anticipate running Linux on the desktop by the year end.

If you're investing in RHAT, you're definitely L-O-N-G. Check out their current financials if you doubt this. But future estimates can change quickly, so IMO, now is not a good time to be focusing solely on the financials. As Robert Young has consistently stated, RHAT is looking to develop a brand name. I think his analogy with Heinz Ketchup is a great example. No one owns the rights to ketchup and any of us could make our own. But we don't. We buy it at the grocery store. And if you ask any person which companies sell ketchup, Heinz is almost ALWAYS mentioned. Building a brand name takes time. Years. Thus, L-O-N-G. Which ain't so bad. As Warren Buffet has said, he makes his money by purchasing stocks and putting them under his mattress for 5 years.

Now, why RHAT? Again, their current financials don't tell the story. (0.05) for Feb2000, (0.15) FY Feb2000 and (0.13) FY Feb20001. Who wants a piece of this?

I do.

RHAT is a smart company. At the outset, they concentrated on bringing in the big players, and many of these big players actually sought out RHAT. Intel (INTC) bought in early. Intel, for crying out loud. Why? Because INTC, being the giant that they are, knowing that their future depends upon their ability to see the trends before others do, knew that Linux was making great inroads. Greylock and Benchmark, arguably two of the greatest venture capital firms in America, saw it too. Dell and Netscape were not far behind. With IBM, AOL, Compaq, Corel, Fujitsu, NEC, Novell, Oracle, and Real Networks, just to name a few, throwing their weight behind Linux, combined with the fact that Linux runs on Intel, Alpha and Macs, RHAT stands to gain greatly. They are poised to become synonymous with Linux. And that's where the payoff begins.

It is axiomatic that hardware evolves faster than software. INTC's reasoning for throwing in behind RHAT probably best exemplifies the common thinking. As stated in Under The Radar, "Executives at the highest levels at [Intel] had long recognized that proprietary operating system manufacturers were not moving their operating systems foward as quickly as Intel was advancing microprocessor technology. That is, Intel was being held hostage by those that controlled the operating system. If it had a new technology available at the processor level that would allow computer users to do new things, it had to wait until the operating system supplier decided it was willing to build support for these features into the systems." (Under The Radar, p. 6). Stated more simply, proprietary software does not foster hardware growth. INTC realized that, by having access to the operating system source code, they could innovate and evolve far more quickly. And by participating in the open source community, they were effectively ensuring a dependable user base.

While cost is rarely the sole consideration, it is nonetheless a consideration. The estimated cost of MS Win2k (as projected by Microsoft around December 1999) compared with RHAT is astounding. See http://www.virtual-attorney.com/linux/cost.html for a quick comparison. I've worked for Fortune 500 companies, and let me tell you, these types of comparisons speak volumes.

So, why would a company choose to invest so much when they could have RHAT for so little? The main reason often touted is lack of support. From a historical perspective, it is important to remember that much of the FUD (Fear, Uncertainty and Doubt) spread regarding Linux is it's lack of support. It's not something you hear very often anymore, but less than a year ago, it was a quite common complaint. This, IMO, is one of the main reasons RHAT touts its service model so highly. I am convinced that RHAT's successful IPO brought an end to much of the FUD being spread concerning Linux. RHAT does intend to bring in revenue by offering service and support, but I'm not entirely convinced that, over the long haul, RHAT intends support to be its cornerstone of revenue. When LinuxCare goes public, it would not surprise me to see RHAT begin to downplay support as a main source of revenue, and rather seek to more closely align itself with LinuxCare.

Another reason given by companies is the cost of end user training. However, I believe as applications continue to be developed for the desktop, these concerns will fade. End users point and click, and with the continued evolution of X-Windows and associated windows managers (KDE, Gnome, etc.) and applications, training will eventually become a non-issue. Many of the free applications currently available have a very comfortable and familiar look and feel, which foster productivity and make the transition quite more appealing.

Hardware vendors such as Dell and Intel's "white box" dealers are going to continue to find Linux more and more appealing. When a vendor can sell a computer for $2,000, paying MSFT's licensing fee for Windows isn't really a painful proposition. However, hardware prices continue to fall. It's much more difficult to pay that license fee when the selling price of the system is $600 - $800. Linux (think RHAT) is a much more profitable alternative.

RHAT continues to develop and participate in the open source community. Applications are currently underway, which is a Good Thing, because the lack of applications is currently Linux's greatest shortcoming. However, it is important to remember that Linux is less than 10 years old. Development has progressed logically. First, the core system was developed, then with the rise of the Internet, communications and 'net-related functionality was added. X-Windows came along, and with it came the beginnings of the desktop environment. Today, more and more applications are being developed for the desktop. Linux is only now entering the Application Era. The stability and reliability is in place, and the focus is moving from server functionality to the desktop. (This is not to say that development has ceased on the server side, only that the focus is migrating. That's one of the great things about open source - development rarely ceases.) Plug-n-play, enhanced 3D video, PCMCIA support, etc. It's all there and being improved daily.

Now, what good is R&D when you end up giving the end result away? From an open source standpoint, it's a badge of honor. But this doesn't translate to financial gain. Or does it? RHAT sells its version of Linux, along with several add-on applications. While it is true that anyone can download Linux for free, it has been my experience that most people prefer to purchase it. I'm completely capable of downloading and installing/upgrading Linux, and I have done it before. However, I have found it to be much more convenient to purchase RHAT version X on CDROM and perform the upgrade. And with each version I purchase, RHAT adds more and more applications. And I know people who will not upgrade until RHAT releases the commercial version. While they could simply borrow my CDROM and perform the upgrade (without violating any license), they don't. For reasons which only they can conceive, they want to purchase their own copy.

A great number of Linux users are still very young. 18 - 25 is the age range I often see, but I know of many extremely capable Linux users and developers who are younger than 16. They use it because, on their limited income, they can afford it. For either a free download or $50.00, they gain access to some of the most powerful development tools available. I haven't conducted a poll, but I'm currently unaware of any junior high or high school students who, as a hobby, develop under Visual Basic or any of MSFT's tools. They simply can't afford it. It is true that MSFT offers Visual Basic, C++, etc. development tools for under $100.00, but these versions have been stripped of much of the functionality which interests young developers or require additional purchases (such as MS Access). The tools available for Linux are fully functional and ready to rock.

Time marches forward. Some day these young people will run the world. Server-side, Linux usage is already commonplace and increasing, and the desktop is undergoing rapid and steady development. Twenty years from now, when these young Linux users are running the world, how commonplace will Linux be? RHAT is positioning itself now to be the brand name then.

Frankly, RHAT's greatest competition may come from MSFT, but rather than a Windows vs. Linux scenario, it could conceivably be Linux vs. Linux (http://www.cnn.com/2000/TECH/computing/03/06/ms.linux.idg/index.html). As Linux continues to grow (and it will), MSFT will continue to feel the pressure. For every desktop shipped with Linux and for every person who replaces MS Windows, MSFT takes 2+ hits. First, it's the loss of the operating system sale. Second, it's the loss of application sales (however many this might be). In some cases, this translates as revenue to RHAT and in other cases it doesn't (right now). RHAT's challenge is to position itself such that it is THE Linux choice, and they have made great inroads toward this.

How does all of this translate to earnings? Think ketchup. You can borrow my ketchup and I can borrow yours with no concern regarding a license violation. But sooner or later, you're probably going to purchase your own ketchup (think initial installation). And when that bottle is empty, you'll purchase another (think upgrade). The only question is what brand of ketchup you will purchase (think RHAT).
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Excellent analogy! I wish I could click the Reccomend button 5 more times... This needs to be posted as a Fribble.

BTW, I have found a good calendar program is GnomeCal...

http://download.tucows.com/perl/linuxRegion.html?Target=/files/gnome/system/gnome-utils-1.0.13.tar.gz
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No. of Recommendations: 1
ShockMeFool:

That post has many fine things to be said about it, it would take another long post to properly comment. What can I say? Too bad we're limited to only 1 RECOMMEND. Many thanks for the vewry well-thought out, very well-written comments. ;o) --Acemon
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<snip>Frankly, RHAT's greatest competition may come from MSFT, but rather than a Windows vs. Linux scenario, it could conceivably be Linux vs. Linux (http://www.cnn.com/2000/TECH/computing/03/06/ms.linux.idg/index.html). As Linux continues to grow (and it will), MSFT will continue to feel the pressure. For every desktop shipped with Linux and for every person who replaces MS Windows, MSFT takes 2+ hits. First, it's the loss of the operating system sale. Second, it's the loss of application sales (however many this might be). In some cases, this translates as revenue to RHAT and in other cases it doesn't (right now). RHAT's challenge is to position itself such that it is THE Linux choice, and they have made great inroads toward this.</snip>

A couple of months back MS went through a major reorg. It was reported as a precursor to a possible break up of the company by the government. In the past couple of days a MS "settlement" is back in the news. I can see the spin now--MS settles, agrees to split the OS, internet, applications divisions. Two weeks later, it announces it's MS Office Linux distro. Another "innovation".</spit>

/mike
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<QUOTE AUTHOR=vrmichael>
Two weeks later, it announces it's MS Office Linux distro. Another "innovation".
</QUOTE>

<REPLY>
Hey! Another reason for people to buy RHAT... $$$
</REPLY>
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You say that this Redhat is a long term holding, but how long term are you considering? Taking into account that Microsoft NT 2000 wil steal away valuable accounts from Redhat, and that name recognition is such a large part of the industry. Microsoft will win over many clients just based on the fact that they are safe and proven. Also many businesses are already equiped with the Microsoft Family of desktop essentials and Networks, is it wise to think that Redhat could concievably "steal" these accounts? I beleive you are correct Redhat is a well run Co. but for them to make any serious run at Microsoft they had better start seriously advertising and getting that name on the Market, which means that overall earnings will suffer. For how long? Just ask IBM what happened to their OS2 system, once the industry favorite to compete with Microsoft. I beleive you are correct this is a long term buy but I look to the 5-10 year maturity on this stock, which means that the window of opportunity will be open for quite a while. There's no rush, in the meantime stick your money in a Co. with immediate growth like Micron systems while you wait for Redhat to catch up to the big boys.
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Think Corel, Think Corel.
Just like Redhat is behind the development of Linux OSs, Corel is doing the same thing.
Now Corel(CORL) is currently not as inticing as Redhat, Corel is managing to do it better than Redhat.
Hear me now, believe me later, check into CORL.
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You say that this Redhat is a long term holding, but how long term are you considering? Taking into account that Microsoft NT 2000 wil steal away valuable accounts from Redhat, and that name recognition is such a large part of the industry. Microsoft will win over many clients just based on the fact that they are safe and proven. Also many businesses are already equiped with the Microsoft Family of desktop essentials and Networks, is it wise to think that Redhat could concievably "steal" these accounts? I beleive you are correct Redhat is a well run Co. but for them to make any serious run at Microsoft they had better start seriously advertising and getting that name on the Market, which means that overall earnings will suffer. For how long? Just ask IBM what happened to their OS2 system, once the industry favorite to compete with Microsoft. I beleive you are correct this is a long term buy but I look to the 5-10 year maturity on this stock, which means that the window of opportunity will be open for quite a while. There's no rush, in the meantime stick your money in a Co. with immediate growth like Micron systems while you wait for Redhat to catch up to the big boys.

By which division of Microsoft Corporation are you employed? I hope not by public relations department, because you are not very good at it.
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thank you for sharing your fantastic pipe dream with us.

Taking into account that Microsoft NT 2000 wil(sic) steal away valuable accounts from Redhat

apparently you don't read a lot of trade journals or hear the cries from IT departments about what a nightmare(reliability and perfomrance) Win2000 promises to be.

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You say that this Redhat is a long term holding, but how long term are you considering? Taking into account that Microsoft NT 2000 wil steal away valuable accounts from Redhat, and that name recognition is such a large part of the industry. Microsoft will win over many clients just based on the fact that they are safe and proven. Also many businesses are already equiped with the Microsoft Family of desktop essentials and Networks, is it wise to think that Redhat could concievably "steal" these accounts? I beleive you are correct Redhat is a well run Co. but for them to make any serious run at Microsoft they had better start seriously advertising and getting that name on the Market, which means that overall earnings will suffer. For how long? Just ask IBM what happened to their OS2 system, once the industry favorite to compete with Microsoft. I beleive you are correct this is a long term buy but I look to the 5-10 year maturity on this stock, which means that the window of opportunity will be open for quite a while. There's no rush, in the meantime stick your money in a Co. with immediate growth like Micron systems while you wait for Redhat to catch up to the big boys.

By which division of Microsoft Corporation are you employed? I hope not by public relations department, because you are not very good at it.


Say what you will, but just let me know if anything I said is incorrect, then I'll listen and we'll talk about your PR skills, otherwise continue writing these well thought out replies, they're good for a laugh at the end of the day.
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Also many businesses are already equiped with the Microsoft Family of desktop essentials and Networks

I can't imagine why he thought you worked for MS - certainly everyone I know talks like that. In fact, we were just talking about the Microsoft Family of Desktop Essentials over lunch! :-)
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Great Post!! Too bad I bought RHAT at the top. I'm down 50%+ right now, but seeing as I am a LTB&H kinda guy, I still sleep at night. Thanks for the words of encouragement. Oh yea, bought ORCL at 39 and watched it languish at 25 all last summer. Let's see, I think it closed above 80 today. Yep, I'm LTB&H alright.

OmRonnie
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I can't help but reply to this. While I will put some time into researching the strategic plan of the company, I can't help but notice one problem. If there is such a cost savings, and there obviously is, how can Red Hat make money. In addition to that, once I am a customer, I pay for no upgrades, so how are the going to be making money off of me on a repeat business. This is where I feel they will have to change to stay competitive. Micrsoft can operate on economies of scale vs. Linux because they can operate at a longer time than can Linux making less money. It is hard to battle a giant, and it is next to impossible to compete on price alone. Since you quoted Warren Buffett, you should think along his lines. He doesn't just buy and hold eveything just for buy and hold sake. As a matter of fact, he owns some Microsoft, just not within Berkshire. You have to look at long term, how will Red Hat compete with Microsoft. Any headwind that Red Hat makes can be negated by an identical move by Microsoft. As soon as Red Hat is taken out to deep water to drown, what is to stop Microsoft from going back to the same old profitable company it always was? Nothing. This is why, in my opinion, all of the companies are backing Red Hat. But how keen are they going to be on providing support to battle with a giant like Microsoft on a long-term basis. Unfortunately, as an example in the airline industry, the same thing happened to Western Pacific. United simply lowered their rates on their routes, took away customers, took WestPac out to deep water to drown, and then proceeded to raise their rates right back to the same level. Unless Linux is leaps and bounds more consumer friendly than Windows, and I haven't used it myself, they will lose the game because they are competing on simply price, which won't work. I love Windows and see it as a tough task to switch a nation in love with Microsoft to Red Hat. But Stranger things have happened, and if Microsoft doesn't play there cards right, I guess it could be conceivable. For me, I have to do more homework. Out.
Derek
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Well, you can think "ketchup" if you like, but I think you're thinking "catsup". Red Hat is just another "also ran" in the Linux world. The leader in numbers, I think, is Corel, who have sold more copies of Linux in one year (20 million alone in one humongous deal with PC motherboard makers) than all of the rest of the vendors put together. The leader in Linux applications is probably Sun (Star Office) or Corel (WordPerfect, Corel Draw). The leader in Linux connectivity is Corel/Inprise (CORBA). Red Hat is overpriced and boring. The owner of the "ketchup" brand is turning out to be Corel. Red Hat's "catsup" is OK, but its taste is off, and it's not quite like the real thing. Corel's share price can only go up, and RHAT, well ... what can I say ... it's already gone up?
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No. of Recommendations: 5
<snip Fool="derekanquilm">
Unless Linux is leaps and bounds more consumer friendly than Windows, and I haven't used it myself, they will lose the game because they are competing on simply price, which won't work. I love Windows and see it as a tough task to switch a nation in love with Microsoft to Red Hat. But Stranger things have happened, and if Microsoft doesn't play there cards right, I guess it could be conceivable
</snip>

Reading posts like this, I find myself questioning my investment in RHAT, which is really just a manifestation of my belief in the future direction of computing. But for some reason, I refuse to buy into this MS has won, quit tilting at windmills dogma.

There are slogans out there ("Think Different", "think out side the box", "paradigm shift" come to mind) that many people mouth (myself included) without focusing on what they really mean. The stock market is a reflection of this. People are jumping into companies based on buzz not fundamentals. Most traders/investors are not rocket scientists, yet the companies they are buying into are based on rocket science. <urban legend>Most VCR displays are flashing 12:00</urban legend> Do you seriously think these people (myself included) can give a competent description of the inner workings of (pick one) optical networks, OS kernels, xDSL, wireless broadband, etc. NOT!

You indicated that you love windows. I would ask you: "Have you tried other OSs?" I've worked on mainframes (IBM, Burroughs, Hitachi), superminis (Prime), minis (DEC), workstations (Sun) and PCs (mac and wintel). I say this not to brag, nor to claim that I'm some sort of OS guru. I'm not. Only to provide a frame of reference when I say that I could not use "love" and "windows" in the same sentence (and I'm writing this from an NT box).

Why does Windows dominate? Marketing. And FUD. I've dealt with corporate IT departments for years. There used to be a saying: "No one ever got fired for buying blue" The reference was to IBM. Big iron was king. Along came the PC revolution and IBM's stock tanked. It took the better part of a decade for it to regain it's share price. MS currently holds the NOEGF slot within most corporate IT hierarchies. Why? Because it's the best? No, because its the safest career bet.

You don't have to look very hard to find studies that indicate MS OSs are not the most cost efficient (when support costs are factored in) nor the most secure when it comes to the net. That said, MS did learn something from IBM--service/support is a fundamental priority. I'm not talking consumer here, but corporate. Most corporate IT staff are not "rocket scientists", many are barely competent (I'm sure I'll get flamed for that statement--once again, I recognize that my experiences are just that--Mine). So how do these people get by? MS support. If your corporation is large enough you can count on near instantaneous response from MS.

So why am I not selling my RHAT and buying MS. Five years on the internet. Once again, let me emphasize, I am not a "net guru". You don't have to be to see what's happening. The old line business model is crumbling, the fat is being squeezed out of industry after industry. IMHO you have three choices: ignore it (and find yourself unemployed/out of business in 5 years); fight it or run with it. I have to say that running with it is personally much more rewarding. It's also very dangerous, as there is a lot of money/power behind the "old guard". Apple found this out when it tried to stand up to MS. MS found this out when it took on the government.

Will Linux win? I don't know. There are alot of YOUNG people being introduced to it in much the same way that there were, in previous lifetimes, young people introduced to mainframe OSs, and PCs (mac OR windows). As a MAP (middle aged professional/programmer) I am constantly blown away by what "kids" are doing today. Programming languages are being taught in elementary schools--think about that! These "kids" are not stupid. Get on the Net (not the sanitized/commercialized/glorified BBS that AOL/MSNetwork/Yahoo provides, but the real internet). Look around (click outside the Yahoo/Altavista/Netscape portal). Think!

Oh well, I've wasted enough of your time. You might, if you're inclined to follow up on this, look at Slashdot. They've got an interesting thread on the Amazon/patent dispute. You might compare what Bezos is doing with O'Reilly vs. what MS is doing. It's called dialog with the community!

"Crush your enemy. See them driven before you. And, hear the lamentation of their women" Bill Gates? No, Conan the Barbarian. But Gates was a good guess.

/mike
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As a high-energy physicist, I use tens to hundreds of alphas and pc's running linux, and Red Hat is definitely the standard. (One proposed experiment wants
to use 2500 PC's running linux in a pipelined architecture to do pattern recognition on particle collisions!) I use it on my laptop. Great product.

I would like to believe that Red Hat could be profitable (nothing like investing in something you believe is the BEST product out there) but I don't really see how this will come about. I bought a CD rom with LINUX for $2, why buy it for $75? Admittedly, I have many experts nearby to ask for help when I need support.
I think open source is a wonderful thing and will continue to spread (and RedHat is THE brand in my field), but at this point I don't see where the profits will come from.


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Re:
There used to be a saying: "No one ever got fired for buying blue" The reference was to IBM. Big iron was king. Along came the PC revolution and IBM's stock tanked. It took the better part of a decade for it to regain it's share price. MS currently holds the NOEGF slot within most corporate IT hierarchies. Why? Because it's the best? No, because its the safest career bet.

I used to hear this as a CPA. CPA's knew nothing about computers but were frequently in the position of trust and were asked, so they answered IBM because of the above. Years later I often wondered if some of these CPA's lost their "jobs" afterall but in a slow, insidious fashion. Maybe another phrase should be that no one ever kept their job over the long haul talking about things they know nothing about.



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