Red Hat: Walking the Linux tightrope

Making money from open source is a balancing act.

While your underlying product is forged in the white-hot fires of online altruism, the success of your business means striking pleasing postures for the investment community.

As the largest stand-alone Linux distribution, Red Hat has had to perfect this balancing act the hard way.

Commentators were quick to accuse the company of favouring its business arm last November when it opted to split its distribution into a supported enterprise product and a rough-and-ready developer-friendly version called Fedora.

Red Hat claims these kind of changes are a vital part of its strive for profitability -- a sensitive subject after the Linux company, which recently reported the resignation of its chief financial officer, was forced to restate its revenues and earnings for its fiscal years 2002, 2003 and 2004.

Financial dealings aside, the company is also facing increasing pressure from the likes of Novell and Sun, which have shifted their Linux efforts into top gear over the last six months. Not forgetting the fear, uncertainty, and doubt wrought by SCO's legal action and the threat of Microsoft potentially stockpiling a patent arsenal against Linux.

ZDNet UK sat down with Red Hat's European marketing director Paul Salazar to discuss cuddling up to Wall Street while mollifying the Linux faithful -- and whether all the legal FUD directed at Linux can be traced to one source.

How satisfied are you with the status quo that you've established between your open-source roots and profit-focused future?
We are making what we think are sensible decisions. We have had to evolve this business model -- it's not something anyone had done before and we made a lot of screw-ups along the way. It was a messy, ugly process. What we have today is not even the end game -- it is two-thirds of the way there. This model is far from baked.

What we have today works and it allows HP, Dell, IBM, [and] Fujistu Siemens to pre-load technology on their hardware. It gives them something to grapple with. We are in an evolution -- in the early part of the adoption curve.

The market has changed dramatically in the past year, with Novell buying Ximian and SuSE, and Sun firming up its Linux strategy. Are you confident you're being proactive enough after being the front runner for so long?
Have you heard Jonathan Schwartz [Sun's COO] recently? He's controversial to himself. He probably looks in the mirror and says 'I don't agree with you'.

Sun is out there but take everyone else: Novell Suse is an interesting one. They have enterprise Linux business but they've still got the retail market. They kind of still have their finger in that game. Red Hat said: "Look, we are only 650 people globally, trying to do an enterprise business, trying to be reliable and stable to the Oracle's and IBM's of this world -- we can't serve two masters." We said: "There is no way we can do the consumer business -- answering my Mom's phone calls -- and at the same time fixing corporate downtime -- it's inconsistent." We said: "Let's get some focus in what we are doing or we are going to be going in every direction and making no-one happy." That's kind of where we were three years ago. We are not making everyone in the enterprise sector happy yet, but we now are doing the right things and investing in the right sectors.