Open source software continues its torrid pace. In fact, according to a report from the 451 Group, the sector saw its biggest quarter for venture funding -- hitting $203.75 million, which is up from $100.4 million in the same period a year ago.
Why the interest? Well, I had a chance to interview Matthew Aslett, who is an analyst of enterprise software at the 451 Group:
Your take on the focus on open source?
VCs are interested in open source vendors because the open source development and distribution models reduce start-up costs and lower the barriers to entry. Some VCs have also cited increased code quality as a reason for investing in open source as the model enables a broader range of product testing and rapid innovation. There are a number of VCs that are sold on the open source model, and some have even stated that they would only consider investing in a software vendor if it was using and producing open source. Open source vendor revenues are lower than more established traditional rivals today, but most vendors are still in their infancy. Recent mergers and acquisitions involving open source vendors such as Zimbra, JBoss and MySQL have proved that the returns are there and are likely to encourage more VCs to look favorably on open source.
Over the past few weeks, I've talked to a variety of players in the open source world, including people at EnterpriseDB. No doubt, it's a powerful force -- and that's attracting a good amount of venture capital. What's more, companies like Red Hat (NYSE: RHT) have shown that there's money to be made.
But is it possible for a mainstream software company to offer open source? Well, there's no clear-cut answer yet. After all, it's tough to sell a customer expensive software but at the same time offer a free version.
Yet, as history has shown, the software industry can be nimble.
Take Day Software. Based in Switzerland, the company has built a franchise in the content management space. Revenues are growing nicely and the company drops a lot of cash flow.
There's much concern in the information technology (IT) world. Might companies cut back on spending in light of the slowing economy?
Well, as for Red Hat (NYSE: RHT), the environment seems to be OK. For example, in Q4, the company posted a 27% increase in revenues to $141.5 million. What's more, bookings are bulging (above $200 million).
While RedHat has a strong business with its Linux offerings, the company is also seeing lots of traction with its middleware platform, known as JBoss. Interestingly enough, with Oracle's (NASDAQ: ORCL) buyout of BEA Systems (NASDAQ: BEAS), there's been a surge in downloads of JBoss. Basically, customers want an alternative.
Going forward, Red Hat forecasts revenues of $665 million to $680 for the upcoming year. Earnings are expected to range from $0.78 to $0.82 per share.
And Red Hat recently purchased Amentra, which is a systems services company. Basically, the deal will allow Red Hat to continue to turbocharge its sales of JBoss.
Microsoft Corp. (NASDAQ: MSFT) built its fortune on proprietary software than runs on PCs and servers and grew its business with the support (some say collusion) of the hardware makers that manufacture all those corporate laptops and home computers. Sure, there are alternatives to Microsoft software in many environments (many are completely free), but the Redmond giant knows how to get products sold and out the door. Recently, shipping product has been a lax business at Microsoft, but not when you look at its history. Of course, its software is so complex now it's amazing the company can ship anything on time.
Yet, ole' Softie has seen the light and has proclaimed that free and open-source software violates 235 of its patents. It's hard to see how patent infringement can be claimed on software that generally does not operate in any way like Microsoft's software products, but I'll move on. If you've seen newer versions of Linux software, the user experience is quite a bit like Windows. The question is: who was there first?
According to an interview with Fortune, a top attorney at the company stated that the Linux operating system violates 42 Microsoft patents. In addition to that, the UI (user interface) and other visible design elements infringe on another 65 Microsoft patents. This kind of claim is sure to set the advocates of free and distributable software on fire, which they should be. Is this a way for Microsoft to fight dirty as it's threatened in the server and PC operating system space where it reaps most of its revenue, or does it really believe infringement is going on here?
CEO Matthew Szulik of Red Hat Inc. (NYSE: RHT), the world's largest open-source software company, states that the open-source movement is a generation long opportunity to lead the digital revolution. Recent quarterly results from Red Hat seem to agree with his assertion.
1Q total revenue was up 41% to $111.1 million from 1Q 2006. Total revenue was up 44% to $400.6 million. Subscription revenue, which accounts for almost 75% of Red Hat's revenue, was up 48% to $341.2 million. Net income for 1Q 2007 was $20.5 million, up 23% from the same period one year ago. Not only is Red Hat receiving more revenue from its existing customers for services, consulting and maintenance support, Red Hat is also adding huge numbers of new customers, 10,000 new customers per quarter for the last 5 quarters, with no end to the growth in sight.
Open-source software allows customers more control over their software costs because Linux-related open source software can be initially acquired at a lower cost and can then be adapted to fit specific existing applications without violating copyrights. Open-source software, due to its many variations, is harder for hackers to target, so it is more secure.
Everyone loves to beat up Microsoft Corp. (NASDAQ: MSFT). The world's largest software company has detractors that commonly use phrases like "stealing computer code," "buggy software" and "outdated features" while those who support Microsoft use phrases like "made the PC a household appliance" and "makes PCs easy to use."
I hold shares in this company and have feelings both way. But, are Microsoft and other tech companies paying huge prices for trying to operate in a free marketplace that is continually stifled by government forces in many countries around the world? Some think this is the case, and especially with Microsoft. That premise is the jist of this article by an antitrust attorney.
It seems that many large companies, at a certain point in time, are attacked from an antitrust perspective just for being good at what they do. Now, I'm not saying there aren't antitrust actions going on in these companies. Microsoft's actions and consequences are well documented. But I do agree that recent regulatory trends makes it appear that a governmental lack of faith in the processes the sustained economic growth could be out of control a bit. These regulatory forces seem to target innovation in the Information Technology (IT) sector where Microsoft operates. Do these governmental forces no longer believe in the free marketplace?
Many larger IT (software, hardware) companies face antitrust battles even as they build partnerships to bring their products closer to other companies' products and systems. This, in turn, advances computing forward and makes sure everyone has a chance to sell more exciting and innovative products. But when the European Commission orders Microsoft to open up its intellectual property to the competition, we are no longer in a free market at all -- we're in a socialist market. Well, maybe the word "European" should have clued me in.
Microsoft Corp. (Nasdaq:MSFT) has angered the Wikipedians by offering to pay someone to correct what it says was wrong information on the site.
The company took this route - which the Wikipedia says is very, very wrong - because it says that it wasn't able to get the wrong information corrected by Wikipedia volunteers. To add insult to injury to the world's largest software company, the offending information was about open source software.
Setting aside whether Microsoft's complaint was legitimate or not, I find Wikipedia's response really odd. The Associated Press quotes founder Jimmy Wales as saying that "the proper course" for Microsoft would have been to commission a white paper, post it on an outside Web site and link it to a Wikipedia discussion forum.
"It seems like a much better, transparent, straightforward way," he told the AP.
Really? It seems like this would just cause more arguments from people wondering why Microsoft is trying to influence the Wikiepedia. Moreoever, why should someone have to go through all of that trouble to correct information that's wrong. It seems unfair.
Remember what happened to John Siegenthaler? Someone added to his Wikpedia biography that the one-time assistant attorney general was implicated in the assassinations of both John and Robert Kennedy. That bogus information was removed but it underscores the notion about not believing everything you read.
In other Microsoft news, the company signed basketball star LeBron James to promote Windows Vista.
Open source software continues its torrid pace. In fact, according to a report from the 451 Group, the sector saw its biggest quarter for venture funding -- hitting $203.75 million, which is up from $100.4 million in the same period a year ago.
Over the past few weeks, I've talked to a variety of players in the 
There's much concern in the information technology (IT) world. Might companies cut back on spending in light of the slowing economy?
and 
. He also operates 
Closing Bell: Stocks slump as AMD, AT&T, GM and Merck decline
Global Q&A: A rocky road, but profits ahead
Could oil go as low as $40?
