Dennis Byron

Red Hat's Latest Acquisition Brings Multiples Back to Earth

User 255819 -

I say there is no such thing as an open source company because open source is a culture and a set of license terms and conditions, neither of which can be used to define a "company," especially one you would want to invest in (which is the point of SA after all).

Every so-called open source company I have looked at (as opposed to a group such as the Apache Software Foundation or the Mozilla Foundation) looks just like every other software business I have ever looked at; it just recognizes its revenue slightly differently (as explained by Sacha in the other comment above). I say slightly differently because even most of the so-called non-open-source software companies (e.g., SAP, Oracle, etc.) recognize most of their "software revenue" as subscriptions in the same way Red Hat does.

Sacha -

I understand your logic but I'm still a Jerry McGuire guy. When I said "we are not able to compare revenue-per-year totally fairly in all these acquisitions because the acquired companies were all private," I could have also added the disclaimer--that I use in my reports--that a total subscription-based revenue model understates market share. But I didn't think it mattered for this analysis because all the companies acquired kept their books this way, no?

So--if I used your method--the multiples are still going down dramatically, just from different highs.

(As for source, I'll send you an email.)