Is Red Hat going to use its Red Hat Exchange to find acquisition targets? It's quite possible. And if that's the case Zimbra and potentially Alfresco will part of Red Hat at some point.
That speculation is just one of the tidbits coming out of Red Hat's analyst meeting with Wall Street on Wednesday.
Readers of ZDNet know all about Zimbra--Dan Farber and David Berlind have detailed the company's collaboration products and development. Zimbra recently hit the big leagues by landing a deal with Comcast. Alfresco is an open source content management company.
Jason Maynard, an analyst at Credit Suisse, thinks Zimbra would be a "great fit" for Red Hat. In a research note, Maynard says that there are obvious synergies with both content management company Alfresco and Zimbra.
Meanwhile, Red Hat has a great way to do due diligence. Its Red Hat Exchange (RHX), which sells partner software, offers an avenue to monitor the best performing partners. Just like Salesforce.com, Red Hat will be able to track uptake from its partners and pounce if a deal works.
Maynard's takeaway: Don't be surprised if Red Hat buys Zimbra at some point.
"We think investing in RHX is critical because they should be expanding their product footprint into a broader spectrum of product areas like systems management, collaboration, content management, database management, and SOA infrastructure."
"We think very highly of the Zimbra solution from a personal productivity perspective and hear they are soon going to be adding support for Blackberry and Microsoft Exchange integration. As software moves above a solution for a single PC, we believe it will be a core capability to deliver relevant business information to users across a wide range of devices. If Red Hat isn’t going to win the Linux desktop, they ought to be playing in the productivity enhancing space across the entire computing spectrum."
It's a similar story for Alfresco. What good is JBoss middleware if it can't manage all forms of content? If Red Hat bought Alfresco it would be a way to damage Microsoft's SharePoint plans and nudge its way into more Microsoft shops.
The big monkey wrench in Maynard's theory is follow-through by Red Hat. "Our major concern is that the company will under invest in marketing, sales and support capabilities. Simply building an online store, but not staffing it properly won’t yield the type of revenue that potentially is available," says Maynard.
Maynard says that Red Hat has a history of making announcements and not following through enough. Exhibit A for Maynard is Red Hat's Global Desktop announced on Wednesday. Three years ago the Global Desktop would have been swell. Today, Red Hat has allowed Ubuntu to capture market share.
Among other notable tidbits about Red Hat:
- Red Hat reckons that more than 80 percent of its customers are well into the evaluation period for Red Hat Enterprise Linux 5 (RHEL 5). Anecdotally, RHEL 5 is outpacing the update for the company's fourth version. Red Hat says RHEL 5 has six times the certifications compared to RHEL 4 at this juncture. Jeffries analyst Katherine Egbert said in a research note that RHEL 5's virtualization capabilities are driving a faster-than-usual adoption rate.
- JBoss development continues. Red Hat said deals for JBoss' open source middleware is evenly split between replacing prior versions and building new applications. Red Hat talked up a potential deal with a large Brazilian telecom company where Jboss would replace BEA's Weblogic. Overall, JBoss has seen more success against BEA rather than IBM's Websphere due to Big Blue's pricing.
- International strength is growing. Red Hat has greater than 70 percent Linux market share in Japan and India. In China, Red Hat is close to closing a deal with China Construction Bank, reports Egbert.
And then there was some virtualization pricing clarity on RHEL 5 guests. Pacific Crest analyst Brendan Barnicle notes that there were concerns about Red Hat's virtualization pricing and cannibalization of the company's core business. Red Hat executives clarified virtualization pricing. If you select virtualization when you get RHEL 5 you get free guest versions of RHEL 5. However, if you are a VMware customer you have to buy guest versions of RHEL 5. The concern was that everyone would wind up getting RHEL 5 free with the virtualization package.
Red Hat CFO Charlie Peters confirmed that if a user does not select RHEL 5 for virtualization, then those guest versions are not free, even if the user has RHEL 5. If a user selects VMware, the user needs to purchase guest versions of RHEL, even if they are using RHEL 5 as the server’s operating system. Red Hat does not charge its full subscription price for these guest versions of RHEL, but it still does charge the customers.
And since VMware dominates the virtualization market with about 90 percent market share, Red Hat will be taking in revenue.
Barnicle adds this ditty:
"In fact, by offering virtualization, Red Hat may have found a way to increase prices without risking much. Since customers are not likely to use Red Hat’s virtualization, customers will still be purchasing as many RHEL subscriptions as ever, but now the customers may be purchasing those RHEL subscriptions at higher prices because they include virtualization. Ultimately, the RHEL 5 pricing strategy may prove to be an ingenious way for Red Hat to effectively raise prices."
Pretty smooth indeed--if it works.