Red Hat: There's still room for improvement

It's been one step forward, one step back for Matthew Szulik, chairman and chief executive of Red Hat.

The company, which is the top Linux seller, appears to have emerged unscathed by the campaign waged by the SCO Group, which has sought to convince customers that Linux poses intellectual property risks. While SCO has suffered its share of setbacks, Red Hat is cashing in on tens of thousands of new subscriptions for Red Hat Enterprise Linux.

On the flip side, Red Hat's major foe, Microsoft, has announced plans to stockpile thousands of new patents. If Microsoft makes good on its intention, Szulik knows it might choke off the flow of new technology available to build into Linux. At the same time, investors are suing Red Hat after the company restated three years of financial results. What's more, the stock has recently dropped to the upper teens from its 52-week high just above $29.

Szulik, who delivered the opening keynote on Tuesday for the LinuxWorld Conference and Expo, sat down with reporters and editors from ZDNet UK's sister site CNET News.com for a broad-ranging conversation about the company and the open-source business.

Q: Microsoft has been doing a lot of price cutting. Have you felt the impact?
A: As an issue, that consistently comes up. There hasn't been a change. Perhaps it's just more visible now.

What do you make of the various Linux comparison studies Microsoft has carried out?
When I see these studies come out, I'm wondering...this is American industry at its best? The best they can do is fund studies that question whether Linus Torvalds is the primary architect of the Linux kernel? Or the issues of security that "my widget set is more secure than your widget set" or to fund these guys out in Utah?

The customers we are speaking to don't want to hear that. Customers want to hear about the compelling vision. What's the quality of your product and service? What's the financial relationship and the sustainability of your business?

When you make that pitch, what is your win rate? I mean, there's still a non-Linux majority in the business world.
I think that we have lots of room for improvement. Keep in mind what has driven Linux adoption is, first of all, Unix to Linux migration. It is not over yet. It is the migration of proprietary applications, in-house developed applications, to an Intel, AMD, 32-bit or 64-bit environment. It was only about 12 months ago that [customers got] a quality Linux operating system that could run live sophisticated databases and that had the memory management capabilities. This is relatively a new phenomenon.

What about where there is no legacy computing environment?
What gets increasingly interesting is where there is no legacy environment. So you get into parts of Asia, you get into the developing countries, you get into Russia, you get into China, you get into India, you get into Sri Lanka, you get into these government relationships that are new, that they are just starting to look and say: OK, you know, I don't have a mainframe that I have got to migrate.

That's why you start to see many of these international governments taking the bold positions that they are taking. It's not simply from a consumption standpoint of getting a cheap product for a buck.

How forcefully are you pursuing a strategy of doing an end-around by going after overseas customers?
As forcefully as we possibly can within our economic structure. Back in January, I was in India and I had a chance to have a private one-on-one meeting with the president of India. And it was quite ironic because he knew all about Red Hat and open-source software. He talked about being an advocate of open-source software since the early '90s and about how he was going to use open-source software to move the educational system of India forward. That's the secret of making the pie bigger.

Your pricing in some of these international markets is not cheap. Do you have special pricing for those markets or do those folks use some other version of Linux?
Our competitors would like to claim how expensive Red Hat is, but there are no separate fees for upgrades and there are no separate fees for maintenance. I think that our competitors are doing a good job of misleading.