Dennis Byron

http://www.itinvestmentresearch.com

50 Comments

    • Can Google Reach Its Pie in the Sky? [view article]
      Good overview of the issues. I have a couple of nits but I'm not sure if they affect your conclusion:

      1. Google's legacy/core business is an advertiser/publisher application delivered as a service, not "search/directory... The facts that the service uses sophisticated patented search technology and is monetized by selling ads are secondary (although the former has helped it succeed in delivering a "packaged" advertiser/publisher application where others failed).

      2. Although Google builds "key technology in house," it supposedly (I have never personally researched its claim) does it with commodity and/or open source components, basically providing the "off the shelf" advantage you're concerned about.

      I don't think this changes Google's chances competing head-on with Microsoft's SaaS strategy (which it will insist on calling Software Plus Service until Ballmer retires) however. Microsoft is most likely adopting the same commodity and/or open source technologies in its data farms (and even if it is using its own proprietary stuff, it doesn't pay list price). And Microsoft should be able to maintain application functionality superiority for 10 years simply based on momentum (barring some execution mistake which I think it unlikely Ozzie would make).

      Neither company should try to deliver the network infrastructure itself. Going back to the utility metaphor, they shouldn't try to be GE circa 1940, delivering both dynamos and light bulbs (but not sure it does either anymore).       Oct 07 07:30 AM
    • Microsoft, Sun Do Well in Open Source Census [view article]
      The above commenters may not completely understand how the census works. The group conducting the census welcomes information from Mac, BSD, Solaris, and other platforms.

      As for Java, I believe it is a prerequisite of even beginning the census so by definition it is on every "machine" scannned.

      More information see https://osscensus.org/discover... .

      Or just rant away!!

      -- Dennis       Oct 02 04:04 PM
    • Open Source Bloggers Don't Let the Facts Confuse Them When Attacking Microsoft [view article]
      Dear Wild-eyed Zealot:

      I would prefer to email you directly about this rather than bore other SA readers but I need to assure you that my definition is not "odd" or "bizarre," I am not confusing free and open source, and I fully understand all the implications of what I am writing about. You are missing something but I can't figure out what it is. Again, I assume it is your admitted zealotry.

      In my research, I use the Open Source Initiative definition of open source. Please note that the word distribution and/or redistribuion appears in seven of its 10 characteristics, including the first (see www.opensource.org/doc...). In two of the three characteristics where the words are not mentioned (the discrimination characteristics, numbers 5 and 6), the subject is clearly about distribution. The concept of distribution appears ahead of the obvious characteristic of open source being source code related, which is only mentioned in two of the 10 characteristics.

      That is why we say "The term Open source software refers to some specific terms and conditions in the software’s license primarily related to redistribution." Again I point out the word primarily. I did not say exclusively.

      I still don't get your point about "free" but try me again and I urge you to email me direct.

      Dennis       Sep 24 03:17 PM
    • Open Source Bloggers Don't Let the Facts Confuse Them When Attacking Microsoft [view article]
      Dear Wild-eyed FOSS Zealot.

      At least you are honest about your biases. But I believe your zealotry makes you read things that are not in my article and ignore things that are.

      If you do not understand why the sentence “Open source software refers to some specific terms and conditions in the software’s license primarily related to redistribution" is accurate then it is you who bases your opinion on ignorance. Note that I say "primarily related to redistribution." Most of the investment-research readers of this web site are sophisticated enough to know the obvious link between the word "source" and the phrase "source code" and we don't bog down each other by repeating things.

      The rest of your comment is unclear since the original article clearly says there is confusion in the Stanford/Harvard abstract between the words free and open source. So are you re-iterating that or disagreeing with it?

      Thanks

      Dennis Byron       Sep 24 12:26 PM
    • Red Hat's Latest Acquisition Brings Multiples Back to Earth [view article]
      Cameron

      Thanks for the comment. As Sacha describes above, the idea is to try to figure out what the acquired company did or will do the year after it was acquired. As the blog post notes, lining up the years will never be perfect.

      We will never know on JBoss but Red Hat SEC filings indicate its revenue actually declined after it was acquired. As for Qumrannet, the 5X is simply based on the Red Hat press release of September 4, 2008 announcing the deal.

      Bigger point: the trend line has gone from unbelievably high to a more normal multiple traditionally assoicated with any young hot software company.

      -- Dennis       Sep 05 05:23 PM
    • Red Hat's Latest Acquisition Brings Multiples Back to Earth [view article]
      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.)       Sep 05 09:37 AM
    • Google's Chrome Sounds Like 1970s Pressure Cooker [view article]
      RickRusselTX and Captainccs -

      Thanks for your comments and I'll take your word for it vis a vis the technical descriptions (skipping over the "disconnected&quo... and "weakly connected" problem your descriptions don't address; for example, Gmail recently).

      But this is an investment site, not slashdot. The idea is what will people buy/how will consumers use Chrome. Hence my comments about applications that would need to be ported to the net. Or how else will Google make money (that nice clean Chrome UI will look pretty messy with ads all over it) to make Google a better investment. Tim Armstrong, Google President, Advertising & Commerce, North America (recently picked up responsibility for Latin America as well), spoke Sept 2 at the Citi Technology Conference, and said basically
      the idea behind Chrome is to get users to use more Google services but there is no particular business model tied to the browser (or anyone’s browser).
      -- Dennis Byron       Sep 03 02:32 PM
    • Google's Chrome Sounds Like 1970s Pressure Cooker [view article]
      Bob F --
      Honestly I tried to read the Google Chrome comic book but because even my cataract-covered, torn-retina eyes can handle more than 17 words at a time, I gave up. I at least expected a few laughs (hence the term, "comic book").
      -- Dennis       Sep 03 12:36 PM
    • False Data Clobbers the Markets [view article]
      Great perspective. However the alternative to not releasing preliminary data is trading by insiders (not necessarily management but just those that know sooner than others). Transparency trumps perfect timing.

      In my little niche, the software market, we see a variation all the time. It's not a matter of false data but no data. The pundits say:
      -- Microsoft is in an end-game state (except that it is growing as fast or faster than all the other leading software suppliers except Google and is active in all the likely future technology trends, not just Search, leading in some of them)
      -- SaaS is taking over the software world (except there is no data to back up that claim even though SasS--nee ASP--has been out there for 10 years, or more depending on how you count)
      -- Cloud computing is the next big thing (except it has been around for 50 years)       Aug 29 10:50 AM
    • We Need a Digital Bill of Rights [view article]
      Eric

      Re: your digital bill of rights idea, the current one does the job just fine, thanks.

      When you say "We need..." and then talk about the U.S. election, I assume you are talking about the US and not some "oneworld" idea you have blogged about previously. I'm sorry to see such European Union communalism (seekingalpha.com/artic...) infecting SV. So much for starting a company in your garage and waking up one morning with a 12-meter ocean racer in the Bay.

      Specifically you say,

      "When the economics of scarcity no longer apply, consumers start to behave differently. They copy and reuse content in unforeseen ways. The pendulum has swung so far that normal consumer behavior has now been criminalized."

      That's typical EU blogobull. Taking some one else's digitized intellectual property is no different than sneaking into the movie theater through the fire escape or shoplifting in the video store. I agree it's no big deal. But it's wrong.

      As for what Amazon and Apple can do with/to content you purchased and put on their service-delivery device is their prerogative. You affirmatively chose to abide by the Ts&Cs of their service. You didn't buy a product from them; drop their service if you object. You can't screw up regular utilities either with some appliance you purchase.

      As for net neutrality, I never heard that anyone was proposing to take away the free flow of information. I thought they just want to offer services that make the flow faster if I want to pay for it. I may be wrong on my understanding of the issue but the current laws would protect me given anything I can think of Verizon or Comcast doing. In fact, the bigger risk is the one that you're proposing: letting the government get too involved.

      In your last paragraph, it sounds like you want a "do not email" list. Why do we need to change the bill of rights to do that?

      Finally nothing is better protected by the current Bill of Rights than privacy. Got an issue; make a federal case out of it. You don't need a new law to do that. By the way, I assume you are not proposing to go through that awkward constitutional protocol of getting your rights enshrined through an amendment.       Aug 26 09:48 AM
    • Supply Chain Management Enterprise Software: And Then There Was None [view article]
      Bob (User 249699)--

      Thanks for the comment

      You may be right abou MANH. Terri O'Hanlon, its SVP of Marketing, made a similar comment above so I did not dig deeper. Again, my point is "be careful investing in sectors such as APS that primarily do not standalone as a market" (as illusrated by the way all of these companies were gobbled up) I think EAM may be the next such sector.

      I did not do a post on August 12 and do not know MGI Research. This was my only post on JDAS so the article you reference must be elsewhere on SA?

      Thanks again

      Dennis Byron       Aug 25 07:14 PM
    • Supply Chain Management Enterprise Software: And Then There Was None [view article]
      Correction: A reader that apparently wants to remain anonymous has contacted me offline to note that Demand Management was acquired by Logility (which in turn is mostly owned by American). So there are basically none left by my analysis or just a few left as described in some of the comments above (for which we say thanks as always) that analyze it slightly differently.

      To the question, "So what?," my point might have been lost in all of us waltzing down supply chain's memory lane. My point was that there are some functional software areas that will not support separate companies in which to invest. Spell checking was one year ago. APS was one as described in this post. And I feel EAM might be the next one in that category.

      -- Dennis       Aug 19 01:26 PM
    • CIOs See Increased IT Spending Overall [view article]
      You can't take such statistics in a vacuum but if you could, this has some interesting data points in it:

      -- IT spending growth to dive 50% this year (leading quant houses said IT spending grew 6-7% in 2007 so 2.3% could mean trouble)

      -- 60% of CIOs to install Windows between 2008-2010 (huge win for Microsoft; if 40% are not going to install that leaves 60% of a very large number)

      -- Virtualization market is totally saturated (that's a huge loss for Microsoft which has just put a lot of investment into upgrading Windows Server to support virtualization and not to good for EMC/VmWare either); this survey says there is no one left that needs it)
      Aug 05 06:31 AM
    • There's a Lot of Money to Be Made in the Free Economy [view article]
      Chris,

      Be careful with your $30 billion Linux open source ecosystem number, used in calculating the size of your third category. It includes mostly traditionally sold (and priced) information technology, not software explicity "sold" with open source terms and conditions. Also, as a nit, the MySQL and sugarCRM numbers are included in the $30 billion not additive.

      See seekingalpha.com/artic... for more details. In terms of open source--not just Linux--the number you are looking for is $2.5 billion.

      Also, philosophically, the most strident open source folks object to it being called "free" in this sense. As they put it, they don't mean "free as in beer," they mean "free as in air, the fish in the sea..." etc. Their philosophy has merit to investors: my research finds that this ecosystem (software sold with OSS terms and conditions) acts no differently than the rest of the market. It's just a "give away the razors to sell the razor blades" business model. It is not really a separate market. To that exent, open source software belongs in your first category.

      -- Dennis       Jul 31 07:23 AM
    • Clearance Sale on Windows Servers in Q1? [view article]
      Marcel, thanks for the comment.

      In rereading my post 6 weeks later, I think I left something out between my mind and the keyboard. While it is certainly true that some Unix shops are switching to Windows, my research says the Unix guys are going to Linux. In fact, I look at Unix/Linux as one entity from a market dynamics point of view. I believe most Windows growth is coming from legacy systems.

      Folks who used NetWare or VAX VMS for years are more comfortable with the more traditional ISV. Plus many of the VMS guys my age (see photo) believe Unix is "snake oil" for some reason or other :)

      Dennis       Jul 24 09:08 AM
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