Posts for Ticker ‘Linux’

Red Hat Continues Deferred Revenue Growth (RHT)

Red_hat_logo_2Red Hat, Inc. (NYSE: RHT), the largest seller of Linux operating systems and office suites, today reported that quarterly revenue soared 29% revenue to $164.4 million. It posted non-GAAP earnings of $0.20 per share.  First Call had estimates at $0.18 for earnings and $163.6 million for revenue.

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Posted on: September 24, 2008 – 3:17 pm in Earnings, Software, , , ,

Microsoft & Interoperability (MSFT)

Microsoft (NASDAQ: MSFT) is implementing four new interoperability principles and corresponding actions across its high-volume business products:

  • ensuring open connections;
  • promoting data portability;
  • enhancing support for industry standards;
  • fostering more open engagement with customers and the industry, including open source communities.

This isn’t a full open-source initiative.  We wouldn’t expect that the company will ever make all of its efforts open source, although "ever" is quite a long time.  It is also aimed at being being more EU-compliant.  We’d encourage you to go straight to the guts of the company release because the list of initiatives and comments is rather long.

Microsoft shares have pulled back about 1% since this news first broke as traders are not looking at this as any major change to its revenue or earnings structure.  Shares are still up 0.7% at $28.42 in mid-morning trading.

Jon C. Ogg
February 21, 2008

Posted on: February 21, 2008 – 11:21 am in Software, , , ,

VMware’s Magic Is Becoming Wizardry (VMW, EMC)

VMware Inc. (NYSE:VMW) shares managed to cross the century mark of $100.00 on Tuesday.  This has been an unbelievable stock with a premium IPO pricing at $29.00 (under our projected IPO price target) and the stock never seeing a sub-$50.00 print.  Shares even managed to trade over 5.8 million shares on Tuesday’s 6.8% gain to its highest post-IPO close of $101.61, making this the busiest trading day in the stock since September 12.

There is no doubt that this one is a beneficiary of ongoing window dressing and the tech-markup with the other key tech stocks outlined as we enter the end of the year for many fund managers in October.  But even with what we labeled as the "VMWARE CONUNDRUM" because of a low float exaggerating it’s price moves, money managers’ and traders’ demand for stock in the virtualization king seems tireless.

There is no doubt that the company is the leader in virtualization and there is no doubt that the company wants to exceed its targets and will do whatever it can to beat targets.  It has already made itself an acquirer and will likely do so at each new virtualization conference it attends.  But at a closing price of $101.61 what does this stock look like in valuation?

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Posted on: October 10, 2007 – 3:45 am in Software, , , , , , ,

Red Hat Looking More Green & Blue (RHT, VMW)

Red Hat Inc. (NYSE:RHT) is starting to look more and more like a traditional software company each quarter.  The valuations are no longer like virtualization values, and virtualization is probably going to help Linux system sales directly for Red Hat.  Here are the key results:

  • Total revenue for the quarter was $127.3 million, an increase of 28% from the year ago quarter and 7% from the prior quarter. Subscription revenue was $109.2 million, up 29% year-over-year and 6% sequentially. Total revenue expectations from First Call were $117 million.
  • Net income for the quarter was $18.2 million, or $0.09 per diluted share, compared with $16.2 million, or $0.08 per diluted share, for the prior quarter and $11.0 million, or $0.05 per diluted share, in the year ago quarter.
  • Non-GAAP adjusted net income for the quarter was $36.9 million, or $0.17 per diluted share, after adjusting for stock compensation and tax expense as detailed in the tables below. This compares to non-GAAP adjusted net income of $33.7 million, or $0.16 per diluted share, in the prior quarter and $24.5 million, or $0.12 per diluted share, in the year ago period. Non-GAAP expectations from First Call were $0.17 EPS.
  • Guidance was issued for the quarter was $131 to $133 million in revenues, and non-GAAP EPS of $0.18; estimates are $0.18 EPS and $132.5 million revenues.

Red Hat released the beta version of the Red Hat Developer Studio, an integrated Eclipse-based set of open source development tools and runtime environment.  VMware’s (NYSE:VMW) rapid launch and faster investor absorption tied with cheaper RAM and multi-core processors are both lining up to be just what the doctor ordered for Red Hat and other Linux players in general (read about that on the Red Hat site on virtualization).

In addition, Red Hat today announced that its Board of Directors had authorized the continuation of the Company’s stock and debenture repurchase program. Under the program, the Company is authorized to repurchase in aggregate up to $250 million of the Company’s common stock and in aggregate up to $75 million of the Company’s 0.5% Convertible Senior Debentures due 2024.

If Red Hat just meets fiscal FEB-2008 EPS targets at $0.70 then even after the 4% jump in after-hours prices its forward P/E ratio on a non-GAAP basis is becoming more than easy to mentally absorb at 27.5.  The company does have more competition, but this new opening up of the desktops from virtualization in 2008 to 2009 and beyond may really open up the market for this company. 

The wildcard for this one tomorrow is going to be the Wall Street research calls with upgrades or downgrades.  These numbers on the surface have no WOW-factor to them, but the flip side is that these numbers are also starting to look more normalized.

Jon C. Ogg
September 25, 2007

Jon Ogg produces the 24/7 Wall St., LLC Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Posted on: September 25, 2007 – 5:41 pm in Earnings, Software, , , , , ,

What To Expect From VMware & EMC Analyst Coverage (EMC, VMW)

This weekend may mark the official end of Summer, but VMware (NYSE:VMW) and EMC Corp. (NYSE:EMC) shareholders are going to have to watch the calendar.  The brokerage firm and underwriting quiet period for this super-hot IPO should be ending.  This may actually be one of the most impacting events on shares of VMware and on EMC since the IPO, even if it is merely the order of post-IPO transition on the calendar.  That being said, the analysts at the underwriting firms will all be able to issue formal research reports and those may start coming very soon.

To throw another wrench in the machine, Friday is September stock options expiration date.  We recently noted how traders have been using stock options as a stealthy way of having exposure to VMware.  We have referred to a "VMware conundrum" and this may be contributing to the option trading as "less risky" trade if you can imagine that.

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Posted on: September 21, 2007 – 4:05 am in Analyst Calls, Software, , , , , ,

VMware Already Looking Out To Its Next Conferences (VMW, EMC)

VMware (NYSE:VMW) is on of the stocks that no one seems to get enough of.  Part of the reason is more than easy to figure out, because virtualization is the next "Next Thing" and next buzzword for investors. 

But there does exist this stock conundrum because of the EMC Corp. (NYSE:EMC) relationship and ownership.  The float is tiny, so it takes a far lower amount of money in and out of this stock to manipulate the price of a $25 Billion market cap.  To top it off, we noted earlier how investors are starting to use out of the money stock options as a manner of gathering exposure to the company.  While it is risky and while many of the strike prices may expire worthless, it is too hard to blame anyone for using a stock option to play the stock.  We just noted how this new $90 target from an analyst may be hard to justify, but this stock does have a mind of its own.

The VMWORLD CONFERENCE 2007 in San Francisco was a big catalyst for the company.  VMware even announced an acquisition of a private virtualization company after less than a month of being public.  That is good, because the company has a whole lot of market cap to grow into.  It cannot justify that market cap entirely on its own, so more partnerships and acquisitions would make sense.

But interestingly enough, there are some more virtualization conferences coming up.  There was a release out yesterday showing the InfoWorld Virtualization Executive Forum at the end of this month.
What’s good about this is now virtualization is on the map, and this one is in New York closer to the analysts and fund managers that may be looking for other ways to invest in the sector.  VMware also today announced the first annual VMworld Europe conference in Cannes, France from 26th-28th February 2008. 

There are many developments in this space and virtualization is going to be helped by cheaper and cheaper RAM and multi-core processing power.  Now the company itself has to demonstrate that its stock is worth the $25 Billion on paper.

Jon C. Ogg
September 13, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: September 13, 2007 – 5:55 pm in Software, , , , , ,

Citrix Systems Maybe Unable To Challenge VMware (CTXS, EMC, VMW, SYMC, MSFT, ORCL)

This would have been a great story to cover any normal day, but if you have been following the trading sessions in the stock market you know times aren’t normal.  Citrix Systems (NASDAQ:CTXS) made an acquisition in the virtualization space by acquiring XenSource for for approximately $500 million in a combination of cash and stock, which includes the assumption of approximately $107 million in unvested stock options.  Citrix expects the virtualization of desktops and servers to reach $5 Billion over 4 years, and other. 

EMC Corp. (NYSE:EMC) made its buyout of VMware (NYSE:VMW), which was the huge IPO Tuesday, for some $635 million in a deal that was completed in early 2004.  The value of VMware and the market penetration is far better, and right now it seems that the market is treating the XenSource buy as a ‘me-too’ acquisition trying to catch a fad (although virtualization won’t be a fad).  With Microsoft (NASDAQ:MSFT) coming out with its own virtualization soon and with another competitor named Virtual Iron and others out there it seems like the space may get treated as crowded before it gets to even go mainstream.  We gave in our special situation investor newsletter subscriber service (sample now unembargoed) our playbook for capturing the downside in EMC right for after the IPO and that now seems to have mostly played itself out.

XenSource was VC-backed with a total of $41.5 million raised.  Virtual Iron was VC-backed, but also had Goldman Sachs (NYSE:GS) and Intel (NASDAQ:INTC) as investors.  VMware announced that Intel (NASDAQ:INTC) and later Cisco Systems (NASDAQ:CSCO) had each taken stakes before the IPO, but those were much larger investments with Intel putting in more than $200 million.  VirtualIron’s investment in 2005 was led by Intel with a whole group placing $8.5 million and an option for $2 million more with a strategic go-to-market partner. 

The industry pricing is roughly equal to the capital raised with VM’s Virtual Infrastructure running over $5,000 (and on up and up more) and XenSource running under half that for starters and then with VirtualIron running less than half again.  Being a lower cost provider works if you can out sell and out-partner a competitor, but only if you have more realistic goals and expectations.  Beating EMC at this is going to be more than tough even at its competitive pricing.

Symantec (NASDAQ:SYMC) also owns Altiris, which is also a virtualization package.  Intel has also dabbled in another virtualization player called SWsoft in 2005 and Intel also invested in VirtualLogix in the same space this June.  Oracle (NASDAQ:ORCL) seems like it is not in the fray here, so it might not be a shock to see them either make investments in these companies or buy one to see what it can do so it doesn’t cost billions in a few years.

You would think with the VMware IPO success that Citrix Systems would be viewed better, but maybe they are paying too much for too little and too late.  Even at the end of the day when the market went from -300 to positive before a slight down close, Citrix shares still closed on the downside by about 1.5% at $31.79.  It closed down roughly 1.5% on Wednesday as well, and that was the day the deal was announced.  Its 52-week trading range is $26.10 to $39.77, and looking at the trading shows a chart that seemingly wants to act a weaker than the market regardless of direction. 

Jon Ogg is a partner in 24/7 Wall St.; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: August 17, 2007 – 2:24 am in IPOs, Mergers and Buy Outs, Software, , , , , , , , , , , , , , , ,

Google + Sun >OR= Microsoft; And 2 + 2 = 2.624356 (SUNW, GOOG, MSFT, VMW)

The second tier, albeit with ambition, StarOffice(TM) office suite software package from Sun Microsystems (NASDAQ:SUNW) has finally made a name partner for the download universe.  Enter Google (NASDAQ:GOOG).  The StarOffice suite is now available through the Google Pack software download service.  This may actually be the one of the more true unification of Sun’s office software suite that is compatible with Microsoft’s (NASDAQ:MSFT) Office documents, but this is merely a small battle win in war that has been mostly lost.  Part of the reasoning for this statement is easy: If it’s free, then what is the incentive?

Maybe this new web search functionality within the suite is a help, but it is hard to imagine that very much of the tech geared technorati out there is going to instantly dump MS Office 2007 (or 2003) for the sudden cost savings.  Even if this is compatible under the OpenOffice and in support of the Open Document Format, how many businesses and how many well to do tech-oriented persons are going to TRULY dump Microsoft?  Exactly.  I have had hopes for Linux for literally 8 years and can even remember my first "Linux For Windows" software package that was nothing more than a demo after it was all said and done.

Linux in theory is great.  StarOffice(TM) in theory is great.  Open Office and the Open Document Format is great, in theory.  But when governments and major businesses use the Microsoft linchpin OFFICE the rest of this is just theory as far as total dollars spent is concerned.  Open source software is a great concept, but the fact that most of the initiative was too open has created a model set to fail.  It takes more than brains alone because the money flow and incentive has to be there.  Until a major "Linux-Only" initiative comes marching down Wall Street with Wall Street’s blessing then we are just having a theoretical discussion. 

The truth is that we’ll probably try this out personally.  But we aren’t scrubbing our Microsoft programs yet.  Until all of these new initiatives are able to get a major world government to unilaterally dump Microsoft for one of these open source formats then this is still cottage industry that will stay a cottage industry.  The cottage may turn into a manor, but that manor hasn’t proven it can become a citadel.  These are controversial statements and some readers may think "these are fighting words," but so far history has been more than on Microsoft’s side. 

We have cheered for a dual system universe since the 1990’s, but here we are still wishing.  Same old same old.  We may be running much of the same version of a future story in 10 years.  Maybe by then the prevalence of alternative software may have taken more share.  VMware’s (NYSE:VMW) virtualization packages may help this process, but in case you hadn’t noticed none of the ‘add on’ and virtualization packages out there really get rid of Microsoft and its expensive bulky products.  Most of us will still probably be buying some form of Office or Windows for another generation, if not more.

Sometimes the easiest solution isn’t the best solution, even if it makes sense in the long haul.  Logic dictates that a citadel can have many cottages, but not many cottages will become citadels.

Jon C. Ogg
August 16, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: August 16, 2007 – 12:24 am in Internet, Software, , , , , , , ,