Red Hat Software Inc. (Nasdq-RHAT) Message Board

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Technology Stocks : Red Hat Software Inc. (Nasdq-RHAT)

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To: Knight who wrote (1484)	9/15/2000 12:41:01 PM
From: GVTucker	Read Replies (2) of 1794

How can RHAT succeed? Think of ADBE. The basic version is free to all. RHAT gives away their software, but will be able to sell accompanying services and higher level software to support the basic O/S. The key here is how to maintain some sort of competitive advantage. RHAT, as a sort of first mover in bringing Linux to the corporate mainstream, has name recognition and scale that the other providers do not have. This is self reinforcing, as RHAT can then attract talent to support large enterprise, a key in keeping the revenue growth going. Can a services-based company like RHAT get their gross margins in the 50-60% range? Yesterday's earnings report showed substantial gross margin improvement, 380 bp, backing what has been management's contention. The stock is getting beaten up today primarily because software sales came in lower than expected. This doesn't worry me all that much, as long as the services side continues to do well.

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