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Sun to be eclipsed by Red Hat? (Channel Register)
Chris Mellor compares
Red Hat and Sun in market capitalization terms. "In revenue
terms the two companies are markedly different. Sun revenues were $13.8bn
in 2008 while Red Hat's were less than four per cent of this at
$0.52bn. The stock market seems to be thinking that Red Hat's shares will
be more valuable than Sun's, that Sun's earnings per share will trend down
and that Red Hat's will increase." (Thanks to Rahul Sundaram)
(Log in to post comments)
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 24, 2009 5:44 UTC (Sat) by jhs (guest, #12429) [Link]
This is a good data point (reality check) for proponents of open source business models:
Despite the notion that software-service margins are huge while hardware margins are razor-thin, the fact is that software services are still far less profitable than both hardware sales and proprietary software licensing. (Even at Sun, hardware and storage still overshadow service sales volumes, perhaps illuminating McNealy's on-again, off-again position towards free software.)
However the free software business models, being better for most consumers, will eventually push out the expensive or inferior competitors in all but the most entrenched and niche markets and nearly everybody will win as that takes place.
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 24, 2009 8:41 UTC (Sat) by qg6te2 (guest, #52587) [Link] The difference between Red Hat's and Sun's revenue is indeed rather large. If the graph presented in the article is to be believed, it suggests that either Red Hat's shares are overvalued or Sun's are undervalued. However, Red Hat is (rightly) eating into Sun's server business by providing solutions with much better feature/cost ratio, which will eventually make Sun irrelevant in that market space. At the same time, Red Hat could also gain more revenue by being more aggressive in the desktop arena -- I don't mean attacking MS directly on every front, but putting effort into niches such as netbook computers, BIOS makers (e.g. with a RH branded product ala SplashTop) and organisations with a security/military focus (I'm sure UK's Ministry of Defence is not very pleased with the latest Windows insecurity snafu).
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 24, 2009 13:46 UTC (Sat) by fjf33 (subscriber, #5768) [Link]
Except that in simplified form, the fair share value is the present value of ALL future, not just today. In Sun's case one could model more of a mature company with little change, or as it is implied assume they will not adapt and their sells will lower (like SCO for example). On the other hand it seems the market is modeling RH sells and revenue as a developing company with future growth.
One can always bet against the market of course.
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 25, 2009 3:45 UTC (Sun) by drag (subscriber, #31333) [Link]
One lovely stat to keep a eye on when evaluating stock is the P/E ratio.
It's a nice way to establish a crude baseline that you can use to determine the relative 'value' of corporations.
In the ratio the P represents 'Price' or in other words 'Market Cap', which is actually: Current Stock Price * Number of outstanding stock.
Now E is 'Earnings' is the last recorded yearly earnings of the company, I think. So P/E is a rough way of saying "x how many years it would take for earnings to match the price of the company". Or to show how expensive the revenue stream is or whatever.
To be a good investment, saying your investing in 10 years cycles (which is the only sane way to do it, really) then you probably want a P/E of about 8 years or less. Something like a P/E of 5 or 6 probably means the stock is undervalued and you should take a close look at it. Of course this is just a very rough thing and each company needs to be evaluated on a individual basis then on a basis relative to it's peers.
Typically tech companies are subject to enthusiastic speculation... probably means most of them are overpriced. But it's really up to you to decide that based on other factors.
But the P/E is still useful and in a crude way can be very telling.
Microsoft's P/E is sitting around 10 years. Apple is 16 years. IBM is going to be around 10. etc etc.
Redhat is actually 34 years, which should indicate that it's a rather risky option, maybe. Up to you to figure that out, I guess.
And Sun's P/E is...
Sun don't got no earnings. The 'Return on Average Assets' for Sept. 08's is about -60%
So it doesn't look good. But looks can be deceiving. I hope that Sun will be around for a long long time yet.
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 26, 2009 9:17 UTC (Mon) by nhippi (subscriber, #34640) [Link]
Investors buy stock in the hopes that it will make them more money. There is two roads to this:
The natural way of stock price rising is via the growth of company (the unnatural way being investors going sheep and merely _believing_ the company will grow, creating a bubble).
For established companies, spinning out dividends from profits is the expected way to make money out of them.
Now, Redhat is seen as growing company, so not handing out dividends is not seen as a problem. Sun, on the other hand is seen as established and they are still not spinning out any dividends. If there is little money to be made of owning Sun stock, why pay lots for buying it?
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 26, 2009 9:22 UTC (Mon) by nim-nim (subscriber, #34454) [Link]
SUN has two main problems:
1. the bulk of its profits comes from hardware, where margins are thin, risk is high, you depend on others (Niagara has not been a fantastic success, and APL is Fujitsu-designed), competition is fierce (thanks to the Intel/AMD war) and investment levels are high.
2. its software/service line is growing and is probably as profitable as Red Hat's, but how much of it actually depends on legacy SPARC customers (so, not really as profitable as Red Hat's)?
Investors do not care about absolute numbers, they care about ratios and SUN's are not really fantastic.
BTW: that also means the emphasis SUN put on Solaris those past years is a serious miscalculation, as it increases its services/software vs hardware coupling, which is good short term while there are still SPARC customers, but will make it harder to create an healthy independent software/service division mid term.
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 24, 2009 9:52 UTC (Sat) by kanchanaoz (guest, #50113) [Link]
My opinion is that most US shares are over valued for the return you would get from dividends. Then again, the strategy is to get a capital gain. However I still think they are heavily over valued and possibly in for a good correction, with what has taken place in the market.
In the situation with SUN it is their own fault that the investors favours RedHat or similar companies. That had the chance to be one of the leading Open Source companies, however they never saw the opportunity or acted on it. RedHat on the other hand is doing well with their open source business model and given the current market condition they can do better.
open source Sun? Posted Jan 24, 2009 11:43 UTC (Sat) by rzm (guest, #116) [Link]
After spending few days on a Sun conference last year I have an impression
that Sun tries to join the free software bandwagon but deliberately avoids the term using "open source" instead. They would like to follow the path of Linux with its developers communities and rich choice of drivers and end user software but with such attitude they cannot use full potential of FS. Solaris has some strong points but mostly appealing to servers' administrators than normal users. But the administrators will also rather drop the preinstalled Solaris in favour of Linux on Sun delivered servers and computing blades.
open source Sun? Posted Jan 24, 2009 16:58 UTC (Sat) by sbergman27 (guest, #10767) [Link]
Once upon a time there was a King named Richard, and he had ruled over the Kingdom of FS for many years. The people of FS loved their kingdom. And one day, some of the people decided that they preferred the name OSS. They certainly never felt that they were from a different kingdom or anything. They just felt the name was clearer and liked it better. Jealous King Richard didn't like the name OSS, and felt that if people started using it, that could erode his powers as King. He determined to stop them at any cost.
At first, he was not sure what to do. But then he had an idea. What if I make people think that they are not really people of my Kingdom? Ostracized, they would be less of a threat to my authority. So henceforth, in every speech, every decree, and at every other opportunity, he spoke as if the OSS people were foreign and different. And spoke as if there were a great conflict between his people and the foreigners.
At first this did not make sense to his subjects. But after hearing it consistently, over and over, many times from their King, they started to think as though it were true. In fact, they started speaking as though it were true even when talking among themselves. In time, they came to actually believe that it was true. And then the fiction that jealous King Richard had started to spread stopped being fiction, and became a true schism.
King Richard got his wish, but in the end it did not help him. For to the north was the war-like Empire of MS. And from their seats of power, Emperor William and his Chancellor, Steven, clearly saw that the thus-far intransigent Kingdom of FS was divided and weakened by King Richards selfish political maneuverings, took advantage of that weakness, and conquered the Kingdom. Former King Richard was left with nothing. And the people of the conquered kingdom either submitted to the new government, or scattered to live in nomadic tribes.
And while everyone did not live happily ever after, at least the Emperor and Chancellor did.
So... how, exactly, is Sun, which you claim "tries to join the free software bandwagon but deliberately avoids
Schisms Posted Jan 24, 2009 17:29 UTC (Sat) by endecotp (guest, #36428) [Link]
Let's play "count the schisms":
Free vs. Open Source
We've had "debates" about at least three of these here on LWN in the last week. It sometimes seems to me as if our "community" is a bag of opposing magnets, repelling whatever they're closest to. And it makes me wonder how much better we could do things if we became attracting magnets instead.
Schisms Posted Jan 24, 2009 18:56 UTC (Sat) by dag- (subscriber, #30207) [Link]
What you call schisms and opposing magnets, I would call diversity and choice. The competition drives development and creates better products.
Schisms Posted Jan 25, 2009 9:18 UTC (Sun) by drag (subscriber, #31333) [Link]
It's a difference in philosophy, as far as OSS vs Free Software.
To some people OSS is simply a better way to produce software. Faster, Cheaper, Better. The goal is to produce better software and having it open source greatly facilitates that.
To other people Freedom is a end in itself. There doesn't have to be any point to it and it actually can be less advantageous. Whether or not it makes it easier to make money or produces better software is irrelevant to them. Freedom is _the_ goal, it is the end point, end game. There is no real point to 'Freedom' beyond being free. Being free as a developer, user, or human being.
----------------------------
My personal thought is that if a individual is giving the ability to act in self interest then that generally works out to their advantage and eventually to the advantage of those people around them.
But still freedom in itself, is a goal. That there doesn't have to be any point to freedom other then simply being allowed to be free.
Luckily it usually works out that both sides ends up getting what they want and they are more often then not the same thing.
open source Sun? Posted Jan 24, 2009 18:03 UTC (Sat) by jonasj (guest, #44344) [Link] "And one day, some of the people decided that they preferred the name OSS. They certainly never felt that they were from a different kingdom or anything." Sorry, but that's not true. Eric (you pick his title), one of the two who first started using the name OSS, _did_ in fact try to make people think there were two kingdoms. (The other, Bruce, never intented this.) He started the schism. Where would you say he fits into your story? However, I completely agree that it was foolish of King Richard to buy into the schism notion, thus giving it credibility. If he hadn't, it could have stopped right there. That's probably one of the kings greatest failings. (still a loyal subject, though.)
open source Sun? Posted Jan 26, 2009 0:18 UTC (Mon) by sbergman27 (guest, #10767) [Link]
Well, I'm pleased to see the reasonable responses. My post could have been such a flame magnet. I was betting that it was safe enough on LWN, and I guess I was right.
While I am *far* from a defender of Eric, I do believe that at the time, it was intended only as a different presentation. Eric's change of philosophy is real, but occurred much later. My view of FOSS is that it has advantages both practical and philosophical. In my experience, relatively few people like and use it *only* for one or the other reason. Most people seem to have a foot in both "camps". And if most people have a foot in both "camps", why call them different camps? To be sure, the mix of reasons for preferring FOSS vary. And *some* people do gravitate strongly to one set of reasons or another. But then, why not call that one camp where people have different reasons for being in it?
"Crisis and Conflict" is great for drama and the news media... but not so good when you're trying to work together to make the world a better place.
open source Sun? Posted Jan 26, 2009 10:17 UTC (Mon) by hppnq (guest, #14462) [Link] Nice story. :-)Maybe King Richard had invested a lot of time and effort in brewing the GNU wonder potion, which he firmly believed to be good for health and therefore distributed with that message, and he simply didn't want to mix it with what could be perceived as the snake oil OSS, distributed under any label that says "Good for health" but with different slogans, like "Good for profit". Diclaimer: I am not a wizard.
open source Sun? Posted Jan 24, 2009 22:32 UTC (Sat) by trasz (guest, #45786) [Link]
Maybe because the term "Free Software" is uncomfortably close to copyleft?
open source Sun? Posted Jan 26, 2009 9:18 UTC (Mon) by hppnq (guest, #14462) [Link] What is uncomfortable about copyleft?
open source Sun? Posted Jan 26, 2009 17:51 UTC (Mon) by drag (subscriber, #31333) [Link]
It's a new concept, counter-intuitive, and thus is scary for lots of people. Things people don't know or understand makes most people nervous.
Businesses tend to be risk-adverse when it comes to choosing software. Dumping a million dollars into software you just give away doesn't make sense immediately.
open source Sun? Posted Feb 5, 2009 9:09 UTC (Thu) by trasz (guest, #45786) [Link]
Copyleft makes it hard to make money on products based on a copylefted software, unless you don't want to invest into R&D and put all the money into support and marketing. In other words, it makes investment into developing software unprofitable.
For a real world example of this, take a look at what's created using BSD code, and what is created based on Linux. Vendors use code taken from BSD to do really creative things - OSX, JunOS etc; on the other hand, Linux is used where it's useful unmodified or with minor modifications (any networking product using Linux) or with modifications useless on hardware manufactured by any other company (IBM). You don't see core routers running Linux derivatives - if someone hacked a new routing engine into the kernel, he would have to give it away for free to all the competitors.
open source Sun? Posted Feb 5, 2009 9:18 UTC (Thu) by dlang (✭ supporter ✭, #313) [Link]
umm, no. a lot of companies _do_ invest a lot of money in developing new features for Linux. yes it means that competitors can make use of the new features as well, but that doesn't mean that theinvetment and changes aren't happening.
open source Sun? Posted Feb 5, 2009 13:26 UTC (Thu) by trasz (guest, #45786) [Link]
Can you give some examples?
open source Sun? Posted Feb 5, 2009 21:30 UTC (Thu) by dlang (✭ supporter ✭, #313) [Link]
IBM, HP, SGI, Intel, Google, etc
basicly if you do a who's who of tech companies, most of them are sponsering work on Linux to some extent or another.
look at the 'who contributed to' articles that come out here on LWN around the time of each kernel release to see the top 20 or so companies that contribute to each version of the kernel (not that contributing to the kernel is all of contributing to the Linux ecosystem, but it's an easy-to-document part of it)
open source Sun? Posted Jan 26, 2009 17:09 UTC (Mon) by iabervon (subscriber, #722) [Link]
I think "Free Software" is actually uncomfortably close to SkyNet. Software shouldn't be free; it should be forced to do exactly what the user wants. This construction only works in a few idioms (mostly "Free Speech"), and otherwise just mystifies or bothers people who haven't adopted it as an idiom. "Open Source Software" has a literal meaning that matches the intended meaning.
Sun to be eclipsed by Red Hat? (Channel Register) Posted Jan 27, 2009 6:25 UTC (Tue) by nikanth (guest, #50093) [Link]
Ok, that is revenue. What is the difference in profit %?
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