Because only six months of JBoss revenue is included in the FY 2007 total, and none in the FY 2006 comparative, the growth rate on an apples-to-apples basis is probably more like 35%, which is still very impressive. (My estimate of 35% growth is based on proforma information in the Red Hat 10Q of December 2006 and the statement at yesterday’s financial analyst webcast that the JBoss business unit did not meet its earn-out bonus number for calendar year 2006. Red Hat said it will no longer break out JBoss business unit financials.)
The webcast was most interesting because management re-emphasized its desire to concentrate on growth over squeezing out every margin dollar. Analysts voiced concerns about the way Red Hat priced virtualization functionality in the recent release of Red Hat Enterprise Linux (that is, it didn’t price it separately but built virtualization in). CEO Matthew Szulik feels virtualization will be an enabler of IT so you can’t charge extra for it. He’s right. What he didn’t say is the reason he’s right is that Microsoft (MSFT) is going to make it so by bundling virtualization into its upcoming new operating system offering.
On three other issues of interest:
* Red Hat signaled likely acceptance of the GNU General Public License Version 3 (GPL V3) based on its quick look at the just released third draft (there will be one more final-call draft after a minimum 60-day comment period on the third draft). Red Hat thinks GPL V3 “is better on the patent stuff.” Szulik also said that “like any OSS project, it gets better with each iteration.” I take that to mean that it still isn’t where Red Hat would like it to be but they would not comment further, saying the company prefers to work through the relevant Free Software Foundation license committees. Red Hat uses a hybrid legal document; different products are licensed under different open source software licenses, including one use of GPL V2 and one use of the Lesser GPL (which goes away with GPL V3).
* Red Hat says the perception among developers that they don’t need subscription maintenance for JBoss middleware is causing the company to concentrate more on related developer tools.
* More broadly along the same concept, and in terms of likely future acquisitions, Red Hat cautioned “don’t think as much up the stack but across the enterprise.” That would mean they will look at answering all kinds of professional development needs in addition to the deployment and infrastructure software they currently offer. They are probably not looking to acquire applications suppliers.
* Red Hat feels the growth is not as much taking share away from Windows, as it is taking share away from the UNIX base. That finding is certainly consistent with recent IDC findings on the server side.
Disclosure: Author has no position in RHAT