> The company reported an adjusted net loss of $100,000, or break even
> per share, for the second
> quarter of fiscal 2002, compared to an adjusted net loss of
> $4.0 million, or $0.02 per share, for the second quarter of
> fiscal 2001. On a reported basis, the net loss was $55.3
> million, or $0.33 per share, compared with a net loss of
> $20.0 million, or $0.12 per share in fiscal 2001.
What makes this even more remarkable is that Red Hat was being
pressured by a
number of factors:
1. The .COM market dried up. In many cases, there was very little
from this venue. That Red Hat has successfully switched to
customers is a very good sign.
2. OS Competition was stiff. Mandrake and SuSE both beat Red Hat
to the Linux 2.4 kernel.
Red Hat opted not to go after the desktop market, especially the
but they have been doing well in the server market and corporate
consoles, point of sale, customer service/telemarketing), and
3. Services competition was stiff. With companies like IBM getting
into the market,
and Caldera picking up the SCO services organization, including all
connections into franchises and NASD, the market grew significantly
and Red Hat
could have been lost in the free-for-all. Instead, they grew their
4. Red Hat has limited their market to migrating existing UNIX
customers rather than going
after the NT Server and 2K server market. These are more receptive
the sales calls are less confronting, but it may damage the
relationship with Sun/Cobalt.
5. SuSE was a very aggressive competitor. SuSE has been very
successful in capturing corporate
markets in Europe, and in the Financial Services undistries (Banking,
This has grown the pie, but it has also caused some distribution
hopping from Red Hat to
SuSE. At the same time, Red Hat was able to deliver for it's
existing customers well
enough to retain existing customers and grow some lines, in the face
of a slowing economy.
6. Microsoft had aggressively targeted Red Hat's customers with
Windows 2000. This slowed the
sales of Red Hat somewhat in the server market.
7. The delay of Linux 2.4 and Red Hat's resistance to KDE resulted
in less revenue from the
holiday purchases. The "Back to School" sales of Red Hat and
Mandrake (of which RH
gets a small cut) won't be counted until next quarter.
8. Red Hat was focused on cutting expenses. Often there is a
tendency, during cost cutting
mode, to place less emphasis on revenue. Many of the
are simply ignored in favor of less profitable "sure things". It's
quite likely that
Red Hat will be picking up.
9. Red Hat is a little behind in the driver department. Mandrake
and SuSE detected drivers
that Red Hat either ignored or misconfigured. This is a combination
of Synching the
drivers, and perhaps putting out a new release, probably after XP is
Quote:> During the quarter, the company restructured its
> operations to focus on two primary areas, UNIX to Linux
> migration opportunities in enterprises and delivering
> complete solutions for the embedded system market. This
I would like to see Red Hat go after more of the NT market. There are
many corporations who will be looking for alternatives to Windows on
both workstations and servers. Microsoft's 60% increase to existing
clients may not seem like much, but when you realize that the
part of the budget is often $1 million per 1000 users, and a 60%
can mean lay-offs of 60 people per 1000 employees, more if lower
workers are displaced.
> restructuring resulted in the company incurring a charge
> of $37.2 million, which was comprised of the impairment
> of $33.8 million in the carrying value of goodwill and
> intangibles related to acquisitions made in prior periods
> and $3.4 million in severance related expenses.
> Mark Kent
> Take out the ham to mail me.