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Jun. 26, 2009

A close and detailed analysis of Red Hat's first quarter results released Wednesday reveals an interesting detail. Red Hat’s quarterly open source revenues are almost four times larger than its closest Linux rival, Novell.

Here's a comparative look at Red Hat's business vs Novell's.

In Novell’s business model, the company is mainly focussed on Open Platform revenues, most of which involve SUSE Linux sales.

However, Red Hat is focused only on quarterly 'Linux tech support' subscription revenues where most of which involves Red Hat Enterprise Linux and JBoss, the open-source Java application server.

For our current analyzis, let's discount such variables like Red Hat’s consulting revenues and Novell’s product revenues.

Just how does the open source numbers really compare? Well, in Novell’s most recent quarter, Open Platform sales were about $39 million — up from $30 million for Q2 2008. In May, Novell was promoting new channel partnerships and promotions that strive to migrate Red Hat Enterprise Linux customers to Novell SUSE Linux.

For its part, in its most recent quarter, Red Hat’ Linux tech support subscription revenues were $148.8 million, up nicely from $130.7 million in the first quarter of this year.

So in a nutshell, Red Hat’s current quarterly open source subscription revenue is almost four times that of Novell’s open platforms revenue...

What's more, Red Hat is also adding quarterly open source revenue faster than Novell year over year. When compared to Red Hat, recent success involves actual synergy between Red Hat Enterprise Linux and JBoss middleware sales.

As many share the same view in the Linux and open source community, Linux and JBoss are a natural fit, creating an industry push for one another.

Additionally, Red Hat is partnering with various system integrators and Linux development companies to better compete against commercial applications such as Microsoft SharePoint.

So we can safely conclude that Red Hat’s acquisition of JBoss in 2006 was a smart move. Red Hat’s JBoss business is now growing faster than its Linux platform business. Back in 2006, even the most positive industry observers never predicted such a resounding success.

At the same time, Novell’s "legacy business" continues to decrease. Meanwhile, newer businesses such as SUSE Linux, security applications and data center management do offer some growth, albeit limited.

It will be interesting to see how this trend develops in the next two to three quarters. And, will it maintain itself well into 2010? You can almost bet that Novell will agressively go after Red Hat's business, although it remains to be seen.

For now at least, it sure looks like Red Hat is firing on all cylinders.

Source: Var Guy.

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