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Starting this week I'd like to post the FAQ every Sunday. While someone volunteered to help, they were unable to get it up this Sunday, so I'm doing it. From now on, it should be posted by midnight every Sunday, with the most recent updates. I'll do my best to make sure it's up, anyone else can feel free to fill in if I'm slacking, however. Enjoy.

The FAQ is categorized as follows (for those who want to skip to sections that are interesting to them):

**** THE COMPANY ****
Q: Who is Red Hat?

Red Hat describes itself as a leading provider of open source software. They design, develop, and market the Red Hat Linux, Red Hat E-Commerce Web Server, and provide custom development, training, support, certification and other value added services.

You can find out what Red Hat itself has to say at:

And for info on the latest projects at Red Hat, check out:

Red Hat trades under the symbol name of NASDAQ: RHAT.
You can look at the stock's performance ever since Aug. 11/99:

Q: What are Red Hat's products?

Red Hat sells its own distribution of the Linux OS, the Red Hat E-Commerce server, training and support services.
You can find more information at:

**** LINUX and RHAT ****

Q: So what is this Linux thing you mentioned?

Linux is a Unix-like Operating System developed since 1991. Linus Torvalds is the original creator. When he first opened it for development, a friend of his decided to call it Linux, a joke on Linus's name and UNIX. Linux is based on an open source development model. Simply put, open source development provides superior results by opening the source code to anyone who wishes to be involved in driving its development. As a result, you have engineers all over the world collaborating on a part of the software.

A person named Eric Raymond wrote some informative essays about the open source development model. You can find out more about the open source development model here:

Eric Raymond is also part of a group called OSI, The Open Source Initiative, which can be seen at:

You can find out more information on Linux at:

Q: I hear Linux can't do this and can't do that; why would anyone want to use Linux?

Linux most likely *can* do this and *can* do that.
1) Linux can do word processing, and word processing apps for Linux are available.
2) Linux can do Image processing, and image processing apps for Linux are available.
3) Popular Games are availabe in a Linux flavor.
4) MP3 players are available for Linux.
5) Linux can play VCD's.
6) Linux has Integrated development environments for programming in C/C++. Visual Basic is in the works.
7) Linux can do 3-D.
8) Linux has dial up networking.
9) Linux has instant messaging.
10) Linux has a WinZip equivalent.
For a quick 20 point lesson in myths, check out:

Linux most likely can't do this:
Run all your windows programs.

Emulators are available, with varying degrees of success, and many vendors are making Linux ports of their programs. Also, Linux does have excellent Java support (from both Sun and IBM, no less) so can run all your Java apps, too. But, you should check first to see if your windows apps have Linux ports or run under emulators before blinding trying to use them under Linux.

Q. Okay, so Linux can do stuff. But can it do *my* stuff?

Check around. For sheer numbers of apps, check out, but if you don't find it there, that doesn't mean it's not there. Freshmeat is passive - people have to report to it for their program to be listed. For a more orderly listing, and with less beta and new products, try

For an active search (where the people go out and find products, whether the product makers advertise or not), try If you use Netscape, just type "?" followed by the kind of application you are looking for.

Some other app listing sites include:

Q. Why does Red Hat think it's so important?

Red Hat believes Linux is so important because it is an open operating system. This means that its users will not be held hostage to a single vendor who can charge exorbant fees for single patches. Red Hat can add value above and beyond the simple Linux distribution in order to succeed in bringing in the profits.

Also, Linux, like Windows, Macintosh, UNIX, and every other operating system out there, is not perfect. Nor is it easy to maintain large numbers of installations (Easy is a relative term, but if you ask your sysadmin chances are he'll agree. Even if you don't agree, let's pretend for the moment). Red Hat believes that support is something that users will want and will pay for - pay good money, more to the point. Red Hat believes the service and support industry is what will sustain it.

Q: Linux is free. It can be downloaded off the net for no cost. Who cares about Red Hat?

Red Hat has built such a brand name that it is, by a variety of different sources and polls, the most popular distribution in America and the second most popular distribution in the world (Second only to SuSE, a competitor).

Of course, anyone can download Red Hat's distribution off the net, too. However, Red Hat's commercial distribution comes on three CD's - one bootable CD with all you need to install Linux on it, one CD with all the source code, and one CD with a variety of commercial applications on it. The third CD is *not* available for download.

Red Hat also developed and markets the Red Hat E-Commerce server available for purchase on a CD. This is also not available for download.

Downloading off the net offers no support. This may or may not be a concern to individuals, but businesses most likely will be interested in paying for a support contract. Larger installations themselves lend to a large support contract. Imagine, if you will, 1000 machines in an office which need to be installed with near-duplicate configurations and kept that way. If something breaks, the owners want someone to call on.

This is why people care about Red Hat.

Q. What is a Linux distribution?

A Linux distribution is a set of tools, device drivers, application software, and documentation packaged together with the Linux OS and an installation program, and offered by various Linux companies.

Q. How is Red Hat Linux distribution different from other Linux distributions offered by other Linux companies?

As quoted from the Debian Linux FAQ:
"... What distinguishes the various Linux distributions are the software,
protocols, and practices they use for packaging, installing, and tracking
applications packages on users' systems, combined with installation and
maintenance tools, documentation, and other services."

Q. Enough with that geeky tech talk! How about Plain English, please!

Plain English: Each Linux company offers their own set of tools/apps to go with the Linux OS. Many also offer their own method of installing the Linux OS, and/or installing other applications. This is how each Linux company differentiates itself from others.

Q. Does RHAT own Linux? Does Linus Torvalds own Linux?

The short answer: No.

The long answer: No one person owns Linux. Bits and pieces of it are copyrighted by various people and corporations (like Sun and IBM), but there's no sole owner of the whole shebang. The copyrights to the Linux kernel (the core) are owned by over 1000 different people. This means there is little chance that any one person/company could snarf up all the copyrights and own Linux. Linus made an amazing decision from the beginning to make sure that the kernel was copyrighted by so many people to insure that it does NOT get bought out by one company.

Q. Then how does RHAT make money from something that no one owns?

RHAT owns its own trademarks (ie. the "Red Hat" brand name and the Red Hat Logo). It offers users of Linux the convenience of the Linux OS, all the necessary updated drivers, and a whole suite of desktop products and utilities, and technical support all integrated into one product. It makes money by providing this product and other products, and value add services, like training, and certification services.

**** THE STOCK ****
Q. Where can I find financial information about RHAT for the past 2 years? Where can I find a prospectus of the company?

You can find it here:

On December 27th, 1999, RHAT announced a stock split effective January 7th, 2000.

Q. Is RHAT an internet stock?

The short answer: no.

The long answer: yes and no. It depends on your standards used to identify internet stocks. Red Hat sells a real, physical product as well as consulting and support services. Red Hat has real assets. These things cannot be said about most internet stocks, which are web sites supported by advertising revenues (that may not even have their own network, servers, office, etc.). Red Hat can also be considered an "infrastructure stock", like Cisco.

RHAT is not a "pure play" 'Net stock like YHOO, AMZN, or EBAY. However, RHAT does plan to derive some of its revenue from Web advertisements, and online purchases through their E*Store.

Q. I want to put my Grandma's life savings into RHAT stock. Where do I sign her up?

Whoa, before you jump into the RHAT stock, you should be aware of the risks associated with investing in RHAT. There are many risks listed in the prospectus. In my opinion the most serious of them are:

1) open source software may not be able to capture enough market share of the OS market.
2) There may not be enough companies willing to develop 3rd party apps. for Linux.
3) RHAT will be unprofitable at least until the year 2001 due to expansion. After that, they hope to become profitable but don't guarantee anything.
4) RHAT is believed by a large number of analysts to be overvalued. Most sane investors are expecting some sort of price drop to a reasonable level, but the market seems to be holding steady around 70, possibly anticipating the future value of the company.

Q: I want to short RHAT. Why can't I?

Perhaps your broker can't find shares for margin trading. There are no restrictions upon shorting RHAT stock anymore, it is only limited by supply and demand.

Q. Are there any other Linux companies trading in the stock market currently?

Yes. VA Linux Systems, trading under LNUX, has had a very successful IPO, and as of the time of this writing is trading in the 150's range. LNUX is primarily a hardware company. They offer a service similar to Dell. Unlike Dell, however, they optimize both the hardware AND the software to work together. LNUX is not a direct competitor to RHAT. They offer Red Hat 6.x as the default OS, but will install a different distribution if you so wish it. Previously, Debian was their default OS.

Some companies, such as IBM, Intel, and SGI, have made investments in Linux. None of these companies are pure Linux, but it should be noted that many of them seem devoted to it. SGI in particular is relying heavily on Linux.

**** THE NAME ****
Q. What's the big deal about the Red Hat name? What is the value of RHAT?

RHAT Chairman Robert Young argues that companies make profits from building awareness, trust and reliability through brand names. You can find that argument here:
and here:

Please also visit their website and browse through some of their pages to get a flavour of what the Red Hat name and the Red Hat experience is like:

RHAT's value is in its name brand. It plans to succeed by marketing its brand of products, education, training, certification and support services, and leading the development of standards for Linux OS.

Q. What is RHAT's commercial potential?

So far, RHAT has 3 things going for it:

1) Brand Name.
Quote from RHAT's chairman: "the only thing Red Hat owns are our trademarks". Red Hat registered its company name as a Trademark. RHAT is the first Linux company to go public. With 22 different underwriters for this stock, you can bet that it will have lots and lots of exposure to different consumer/corporate groups.

2) RHAT has the biggest market share in Linux.
According to International Data, Red Hat Linux accounted for approximately 56% of new license shipments of Linux-based server OS's in 1998. This is from the prospectus. RHAT generated $10 million in gross revenues in 1998. Web presence: RHAT is planning to become the leading Linux portal.

3) strategic alliances with DELL, Compaq, IBM, Intel, Silicon Graphics, Oracle and Hewlett Packard. The RHAT prospectus states that INTC owns over 3 Million shares of RHAT. SGI plans to make Red Hat Linux available in its line of desktop/low-end products. DELL and CPQ have both entered into marketing/distribution relationships with RHAT.

You can find news of all this at:,4,33518,00.html?,4,34697,00.html?
As well as information on Dell-Linux systems at:
And Compaq-Linux systems (as well as some software) at:

IBM announced a joint marketing agreement to bundle IBM's enterprise applications with the Red Hat Linux as well as provide ViaVoice for all flavors of Linux:

Oracle has ported its enterprise applications (Oracle 8, 8i, and some web application servers) to the Linux OS.

Q. How will RHAT make money?

There are 4 ways in which RHAT will derive its revenue:
1) sales of its products to retail consumers.
2) Sales of its professional services (tech support, training, certification, etc.) to large corporate customers. Big corporate customers pay SUNW and MSFT thousands of dollars for a single support service contract. This is the piece of the enterprise systems pie that RHAT wants a part of.
3) Web Advertisement. Companies will pay RHAT to advertise on their website. This will come from marketing the Red Hat brand name.
4) Licensing agreements with distributors like CPQ and DELL, as stated in the RHAT prospectus.

Q. RHAT cannot become a profitable company and grow its earnings per share simply by selling CD's. How will it succeed in the long term?

RHAT will succeed if Linux succeeds in gaining large market share of the OS market. As more and more companies realize that Linux is for real, Linux works, Linux is superior, Linux is ***CHEAPER***, Linux won't crash every other day, they will start turning to Linux companies for service and support in installing Linux into their client workstations, Linux servers, the whole 9 yards. Then they will want to hire someone who is certified to administer, configure, and maintain the network of Linux boxes (sort of like a Microsoft Certified Systems Engineer, but for Linux). In my opinion, RHAT is the company that is in the best position to take advantage of this not if, but when it happens.

Q. Has Red Hat acquired any other companies?

Yes. Red Hat bought Cygnus Solutions in November 1999, and in January of 2000 bought Hell's Kitchen Systems.

Cygnus is strong in the embedded market, as well as making their own development and win32-unix tools. They were acquired for $674 million in stock.

Hell's Kitchen sells e-commerce credit-card verification systems. They were picked up for $80 million in stock.

Q. Who are RHAT's potential customers?

Basically anyone or any corporation who doesn't use Red Hat Linux. Unix and Linux shops offer great opportunities for migration or integration. Microsoft and Apple shops will have problems with legacy applications, but may offer ways to get the foot in the door. And of course, corporations are the aim and individual consumers are secondary.

Q. Who are RHAT's competitors?

RHAT's competitors include anyone who does serious Operating System or other related developmental work. Companies like Microsoft, SuSE, LinuxCare, etc. This can be expanded in other directions to include companies like IBM who push their Java Environment for Linux, depending on how broadly you define RHAT's market.

To be more specific, the answer is that it depends on your view of the market. At the topmost level, the server market, RHAT competes with SUNW, and MSFT for being the preferred OS, and network OS. On Aug. 10/99, RHAT announced that they will be co-operating with LinuxCare and VA Linux to offer seminars to educate company executives about the benefits of the Linux OS, and to dispel some myths about Linux. That announcement can be found here:
The success of all Linux companies (RHAT included) are dependent on the success of the open source development model. This forces RHAT to compete against Windows, Macintosh, and traditional Unix, but to compete *with* other Linux distributions in a more friendly manner.

At a lower level, in terms of Linux distributions, RHAT does compete with Debian, Caldera, SuSE, SlackWare, etc.
RHAT has already mentioned in its prospectus that it plans to grow more revenue by selling the Red Hat Linux, training, technical support, and other services to large corporate customers. This is actually the same market that VA Linux, LinuxCare, and even IBM are also going after.

Q. Who are RHAT's targets?

Anyone or any corporation who doesn't use Red Hat Linux. There are varying degrees. All-Microsoft shops are the big target. Breaking this door down in a highly-publicized manner would be a big break for all Linux companies, but especially the company that actually does it. Offices with mixed environments containing Unix or other distributions of Linux offer great integration or migration opportunities, but won't offer the lucrative business of an all Red Hat shop.

Q. Who are other Linux companies? Where can I find more information about them?

Caldera OpenLinux <>
- This is Caldera Systems' own distribution of Linux.

Debian GNU/Linux <>
- This is a NON-profit distribution of Linux maintained by some 300 members of the Debian community.

Linux Mandrake <> :
- This is a combination of the currently most popular GUI called KDE + Red Hat Linux 6.0

LinuxPPC <>
- This is the Linux distribution for the PowerPC CPU hardware. It is designed to run on all Apple PowerMacs, and most and Motorola products that use the PowerPC CPU.

MkLinux <>
- This is a Linux distribution for the Apple MacIntosh and PowerMac. It seems like MkLinux is sponsored by Apple.

Slackware Linux <>
- This is a Linux distribution produced by SlackWare. It is designed to look more like Unix than Windows.

Stampede Linux <>
- This is a Linux distribution optimized for speed on the Pentium (and higher) CPU's.

S.u.S.E. Linux <>
- This is a Linux distribution that is the most popular in Europe (and gaining popularity in N. America).

TurboLinux <>
- formerly Pacific Hi-Tech

UltraPenguin <>
- This is Red Hat Linux for the Sun SPARC workstations.

Yellow Dog Linux <>
- This is a Linux distribution produced by Terra Soft solutions for the Apple Macs.& PowerMacs.

LinuxCare <>
- Quoted from their website: " provides an array of technical information and support services to enhance and simplify your use of Linux and other Open Source software."

Q. You guys are crappy writers. Is there another FAQ out there?

Try this one:

Let us know if you find other good ones. And sheesh, we never said we were good writers either!

Q. Who are the authors of this lovely FAQ?
Who wrote this @#%!ing thing?! They need beat!

The authors are primarily:

Rob Nelson


Albert H.S. Lo

as well as other members of the RHAT board on The Motley Fool's forums.

Q. So, which one of you losers do I send the list of typos to?

Either of us will do. If you're just dropping off typos, leave us the proper email address to sign up on all the mailing, a way to get in touch with you ;)
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