Dennis Byron (Research 2.0)

Consider Shorting Oracle Following Tibco's Guidance

Good logic but keep IBM in mind as well.

Financial services made up 27.5% of IBM's revenue in CY 2006, a higher split than BEA, Oracle and TIBCO (according to the numbers above). Of course, that revenue includes more than just technology (as does BEA's, TIBCO's and especially Oracle's revenue). IBM's success outside the U.S. may protect it from the U.S. subprime thing but apparently TIBCO's international business did not protect it.

Is Red Hat Looking To Buy Zimbra and Alfresco?

Should Red Hat buy RHX application-supplier members such as Zimbra and Alfresco? The answers are "No" and "I don't think they want to."
-- I disagree with Jason Maynard and think such acquisitions would be a bad idea for both Red Hat and the larger open source software (OSS) community.
-- Not only didn't I hear that idea expressed by RHAT at Wednesday's Financial Analsysts conference (maybe Credit Suisse got some inside-baseball feedback outside the open meeting), I heard just the opposite at Red Hat's most recent quarterly-results conference call--see my March 30 SeekingAlpha post on the Red Hat quarterly results

Look at the scope of the opportunity:
-- Application spend makes up more than half of the overall $244B software market (2006, the total is based on publicly available IDC data; the applicaton percentage is based on my research).
-- There is no reason why application spend would evenutally not make up at least an equally high percentage of the $7B OSS market (2006, 3% of the $244B total, also based on publicly available IDC data released by Red Hat at Wednesday's financial analyst conference)
-- Today, packaged OSS applications represent only about 10% of the OSS market (also IDC data released by Red Hat at Wednesday's financial analyst conference)

For packaged OSS applications to become a larger share of the rapidly growing OSS market ($20B by 2010 from $7B in 2006), they need to attain the same quality level as both proprietary packaged apps such as SAP, Lawson, etc. and OSS infrastructure software such as RHEL, JBoss, etc.

Choice is required as well: not only does the OSS market need Zimbra for collaboration but it needs OpenOffice, etc. This is true for the same reason that it is important for users today to have a choice among Office, Notes, etc. That same choice and quality equation holds for all 50-plus types of packaged applications (the move to composite applications is going to increase that taxonomy by a factor of 10 but I put that factoid aside for this discussion).

Red Hat Exchange (RHX) is all about building that needed portfolio of quality products. RHX is potentially as important to the OSS movement (and the overall IT market) as the DEC ISV catalog was in the 1970s, the Oracle CAI program was in the 1980s, and the Microsoft ecosystem was in the 1990s.

Red Hat acquisition of application suppliers from their "catalog" (or using the program as a due-diligence method for M&A) would instantly set up conflict that will retard the entire OSS market's development. (Maybe in 10 years, after the OSS applications market is on solid footing, Red Hat can change strategy the way Oracle bought Datalogix in 1998 and Microsoft bought Great Plains, etc. earlier this decade).

And as I said above, not only didn't I hear that Red Hat wanted to acquire applications suppliers on Wednesday, I heard just the opposite in March.