Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Red Hat Software Inc. (Nasdq-RHAT) -- Ignore unavailable to you. Want to Upgrade?

To: Mike Petriv who wrote (643)	8/17/1999 9:42:00 AM
From: Nelson Chang	Respond to of 1794

Understanding the Red Hat Phenomenon This is an interesting article from thestreet.com. Here's most of the read: >>>Red Hat and its lead underwriter, Goldman Sachs, did a lot of things right here, three of which led directly to this remarkable performance: Red Hat has done a great job over the past year of massaging the press, getting itself identified repeatedly as THE source of wisdom on Linux, THE commercial source of Linux, THE vendor of more-or-less-standardized Linux. All of which it is, sort of, but not by nearly so large a margin as the press has reported. Red Hat has become the only important brand name in the Linux business, Caldera and the other also-rans notwithstanding. That translates directly into shareholder value. Red Hat was the first mover to market in an incredibly hot corner of technology. Those who pooh-pooh the importance of first-mover status in many ways in tech stocks should take note of this one. Sure, if Red Hat hadn't done a lot of other things right, this one wouldn't have headed for the moon. But being the first recognizable Linux developer to come to market was the big accelerator. Give me a fully realized, world's greatest-product box, or a fast path to market, and I'll take the latter every time. Red Hat followed this year's practice of controlling demand by offering a modest number of shares: Just 6 million, which at the offering price produced about $84 million in cash for Red Hat's treasury. Smart people never sneer at $84 mil, but that sum wasn't nearly so important for Red Hat, of course, as was the credibility it created for the company -- and the amazing instant wealth it created for its founders and other insiders. Red Hat, of course, also delivered a superior product, and backed it up with a business plan which makes sense. Part of the key to survival and profitability in the perilous Linux market -- remember, you can get Linux for free via download from several sites, rather than paying $50-$80 for Red Hat's tweaked version -- is selling support, and that's where Red Hat will, I'm convinced, earn its future. Support starts at $225 per incident, and goes up to a one-year $55,000 24/7 unlimited-calls contract. Indeed, I think Red Hat will see the day, and maybe before very long, when building and shipping its versions of Linux becomes almost a nuisance ... but a necessary one, to sign up support customers.<<<