Red Hat: There's still room for improvement

One of those larger companies was talking at its analysts meeting last week in Seattle about how it wants to increase the number of its patents. How much of a threat you see from Microsoft's patents and how much of their effort do you think is geared toward open source?
Patents are a relatively new phenomena in comparison to other activities that have been patented... How patents have been acknowledged and how patents are awarded is what we are really questioning, not patents by themselves. It's not limited to software. I think you will see the same happening elsewhere. You have teachers being driven to generate copyright. How do you continue to inspire creativity when there is the threat of litigation and copyright infringement in medical research? It just goes on and on and on. Is it a threat? When we know what is patentable and we know the legitimacy from which a patent is awarded, then we can deal with that. As I have said, there is a lack of a clear and consistent award process for software products specifically. That is disturbing to us, based on the nature of our software products and how we build software products in a global open-source community.

Red Hat is now building a defensive patent portfolio. How big is it at this point?
It's tiny in comparison. I wouldn't say that it's an overt building of a patent portfolio. I think that we are just trying to do the right thing to make sure that open-source creativity and invention is not reserved by a competitor that may use it in a wrong way.

Is that the biggest threat to the open-source philosophy?
Consumption for fee is also a very big threat. People paying for products and services is a threat. The competitive nature of an industry that's in an enormous state of transition is a threat.

What do you mean by consumption?
People buying products and services from Red Hat or any other open-source company.

For much of its history, Red Hat has been defined as opposition to Microsoft, and you are getting to the point now where you are investing in other companies. I'm curious. You saw the statement by Jonathan Schwartz regarding Novell? As you look over the horizon, will Red Hat need to make a big acquisition or perhaps partner or even be merged into a larger entity in order to flourish in this next realm of the IT industry?
I just learned about the Jonathan Schwartz comment, so this is relatively new to me. This is an interesting time because the [acquisitions] topic has come up frequently. Red Hat has made over 14 acquisitions. And not all of them have been very successful, I am not proud to tell you. So from my own personal perspective, I'm highly suspect of the success of…acquisitions in the software business.

Our greatest challenge is internal and consistent execution as opposed to doing something like making an acquisition that may not be lucrative, that may take with it large organisational integration challenges that would distract us from getting Release 4 out of the door...We never rule it out.

But you are not a big fan of the idea.
Not personally. No.

One of the discussions related to this Novell business was that IBM created a little monster called Red Hat in terms of supporting you over these last couple of years and helping Red Hat to gets its dominant share. Now that IBM has invested in Novell, there is speculation that Sun is just jerking IBM's chain to buy Novell to compete with Red Hat and so on. What do you make of that scenario?
I'm from the (former UCLA basketball coach) John Wooden school. He was just focused on getting his team ready to play to the best of their abilities. All this (creates) great speculation, and I'm somewhat surprised that it would take place in such a public way because of (full disclosure) requirements. But I think people should be responsible for their own decisions, first and foremost. Secondly, these companies have their own long-term strategy about what their role in open source is or is not. They will have to be accountable for their own decisions.

Do you think that there is sufficient competition in the Linux market?
There is tons of competition.

But when you look at ISV (independent software vendor) certifications to Mandrake or Debian, it doesn't seem to be very high compared to ISV certifications for Red Hat Enterprise Linux. And when you look at the price Red Hat is charging, or the number of customers in terms of market share, it's certainly hard to argue that Red Hat is not dominant. Is that a healthy situation and one that will continue?
Who is CNET's competition?

We have several competitors.
So we are in the same boat, right?

Well, wait a second. We don't have 55 percent market share.
Let's back up. Five years ago the company was fortunate enough to go public. We got capitalised. There were many competitors. Remember LinuxCare? Remember VA Linux? The precursor to SCO was Caldera, the 800-pound gorilla in 1997. They had Ray Noorda's money, they had ISVs. There is a lot that's changed through successful execution.

So my perspective of market share and dominance is that it's partly due to capitalisation because it's been very, very expensive to build a global company.

I don't think our company and our management and our board sit back and say, "When we get 50 percent market share or whatever it is, aren't we smart?" I think we are frightened to death of these guys in Redmond. We are frightened to death of the guys that are up in Provo, Utah. I think this is an incredibly competitive marketplace.