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Technology Stocks : Red Hat Software Inc. (Nasdq-RHAT)
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To: Nelson Chang who wrote (777)8/24/1999 11:55:00 AM
From: JP Sullivan  Read Replies (4) of 1794
 
For years now organizations have been told it's not kosher to copy software. So it's not impossible to imagine all the Dilberts following the same train of thought: one machine one copy, or it's illegal. Then somebody wakes up and says, Hey! it's okay to copy Red Hat Linux and redistribute it. And that's what they'll end up doing.

Nevertheless, my problem is that I'm having trouble understanding how Red Hat will be a significant money machine in the foreseeable future. Some people have mumbled about it being the next Microsoft. Well, how is that possible if Red Hat doesn't own what it sells? Who's it going to sue when its bundle of Linux is propagated all over an organization? Downloading Linux over the Internet may be too slow for most people, but what about downloading from a LAN. I imagine it's an acceptable wait. Part of Microsoft's open secret to money making is that people are compelled to shell out significant cash for what amounts to a piece of paper (e.g. licence for permission to add more clients to an NT Server)--I'll bet it costs Microsoft less to print a licence that it does the US government to print a dollar bill. Now, what has Red Hat got that matches or betters that model? (BTW, I'm only using Microsoft for comparison; it doesn't mean I'm a cheerleader for Bill & Co.)

Sell service, you say. Well, okay. I'll purchase one service contract because I've purchased ONE pack of Red Hat Linux. In the meantime I have 500 machines that run on that one pack of Red Hat I bought for $75. How much does it cost to keep a technician in the field? How much does it cost to mail you a piece of paper that says you can add X clients? Cost is a major issue determining a company's profitability at the end of the day. Whose cost is going to be higher? Red Hat's or Microsoft's? Bear in mind that one is selling a service (= people = high costs) and the other is selling a product --in some cases it's a piece of paper-- that is mass produced by the millions.

I'm sure I'm missing a huge point here. The legions of Red Hat enthusiasts can't be wrong. Please enlighten me. What's going to make Red Hat so incredibly profitable? I'd like to learn and perhaps profit from it.

Maybe at the end of the day Red Hat's profitability doesn't really matter. After all, we know that the prices of some stocks bears little relation to their companys' ability to make money, so long as the spin pleases WS.
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