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Comment by jldugger | Hacker News Reader

> IBM just made it's biggest acquisition ever on an open source company... It seems strange to use that as evidence that open source is not an effective tool--in certain circumstances--for building your business.

It's more about sustaining the business. Redhat's most recently reported quarterly earnings growth was negative. Did they sell now because IBM approached them with an absurdly high price? Or did Redhat executives need to shop around for a buyer, because they felt they were near a local maxima and things were starting to go downhill?

edit: that said, this is a subject I care about and will be adding your podcast shortly. Hopefully you figure out podcast sustainability as well =)

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I think they sold because they were offered $34 billion. Although Red Hat IPOd quite a long time ago, I think a lot of the movers and shakers were sitting on a lot of stock. That's a big exit.

IBM obviously thinks it's worth it, but I'll be honest and say that no matter how bullish I am on Red Hat's business model, I'm sceptical that they can grow it significantly larger without some help. Clearly the focus is on cloud computing and you're up against Google, Amazon and Microsoft. Without at least a strategic partner with someone like IBM (or, ick, ick, ick, Oracle) it's going to be pretty hard to go toe to toe with those guys. In that context, making a "partnership" (agreeing to be bought out) and making a massively big payday for the principal stock holders is pretty win-win for Red Hat.

Having said that, I seriously wonder if IBM is at all interested in maintaining Red Hat's business model...

I am CEO of Gluu. The podcast is an undertaking to help new open source software companies. There is no business model for the podcast, and it's attribution share alike license.

Wait, are you really looking at the second derivative of the revenue? Q2 revenue (September 2018) was up 14% against September 2017.

Red Hat would probably have reached a local maximum sooner or later, so it's probably a mix of the two, but I don't think it's correct to say that growth was negative.

> Wait, are you really looking at the second derivative of the revenue? Q2 revenue (September 2018) was up 14% against September 2017.

Just going by yahoo finance data:

Quarterly Earnings Growth (yoy) -10.50%

Oh I see that now. That was explained by the company as basically a single very large contract that was lost to a competitor, plus a very very strong second quarter the previous year (when you earnings growth was over 40%). However earnings per share were actually above the analysts expectations.

Yea, I imagined it could be a one-off but didn't bother to dig into the situation further. The point is simply that we don't fully know the motivation to sell. Or for that matter, the motivation to buy. For all we know, that competitor is continuing to squeeze RHT's margins. Or maybe Oracle (purveyors of Oracle Unbreakable Linux) approached the board with an offer to buy and someone walked it over to IBM with a note saying 'care to beat this offer from Oracle?'

None of this is evidence suggesting there will be another standalone open source vendor. The model seems to be converging towards taking open source technologies, buying a bunch of servers and sysadmins, and renting them out to customers on an ad-hoc basis. In which case, I won't call it winner-take-all but there's obvious economies of scale to be had. If we look at the recent Redis and MongoDB relicensing debacles, it seems like a direct acknowledgement that the cloud service model is eating their lunch.

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