ZDNet: Red Hat: An Appraisal and Outlook

“Ever since the market bubble burst, Red Hat has been struggling
to regain its initial glow of excitement. Although it claims
prestigious accounts (Amazon, Morgan Stanley, Merrill Lynch, Cisco
and others), enterprise IT loyalty to a specific Linux distribution
and distributor is less locked in than with proprietary systems.
Linux is displacing Unix on reduced instruction set computer (RISC)
in selected applications, but the revenue opportunities are still
coming from the ‘low-hanging fruit.’

“The future of Linux as a pervasive enterprise market
opportunity is still four to five years away. The greatest
challenge to Red Hat comes from generating revenue growth.
Currently, Red Hat does the labor-intensive work of making Linux
robust and scalable for enterprise applications, while the platform
and middleware vendors corner the largest share of revenue (for
example, IBM is already at $1 billion in Linux business).

“So although we praise Red Hat for ‘commercializing’ Linux, the
open-source model and its ‘allowance’ for commercial opportunities
leave Red Hat the slimmer rewards of managing the edge of the
kernel. It will, therefore, take Red Hat five years with aggressive
growth (25 percent to 30 percent) to reach a revenue target of $400
million (0.8 probability)…”

Complete Story