Is Red Hat in financial trouble?

Not sure I agree that a FOSS business is expected to have low margins. The stock market does not currently expect Red Hat to have low margins. Investors appear to believe they will have high margins. Maybe there's an alternative explanation for the stock price, but in my opinion it's based on hopes for either an acquisition or higher margins.

I do agree that high margins will involve some competitive advantage, but I don't think it has to go so far as a monopoly. My view is that "monopolistic competition" as an economics textbook would say is a good balance between interests of the company and the consumer. These are the Cokes and Wrigleys, where they can't charge infinite amounts for sugar water and gum, but they do have some pricing power. Bob Young's vision for Red Hat in 1998 was a story about Heinz.

I think most people would say that management is supposed to focus on long-term value. Stocks are normally valued assuming perpetual duration.

But it's context-dependent; if a manager thinks the best outcome for shareholders is to liquidate the company and give them their money back, they're also supposed to do that. Some stocks obviously will not have perpetual duration.

In practice managers can do pretty much whatever they want, since there's no way to prove in court that such-and-such complex judgment was wrong. But managers who don't have investor confidence may not last very long.

If you were Red Hat management, you can't come out and say "oh, we'll have bad margins." The stock price would crater. In an interview a while ago, Red Hat's CEO said something like he'd compromised with analysts and agreed to increase margins 1% per year.