Feeds

Ellison's venomous tongue devastates Red Hat shares

Thanks a lot, Larry

Gartner critical capabilities for enterprise endpoint backup

Investors seem to be taking Oracle chief Larry Ellison as seriously as he takes himself. They've crippled Red Hat shares today simply because Oracle rolled out discounted support for Red Hat's server operating system.

Shares of Red Hat were down 26 per cent, at the time of this report, to $14.35. That's a hell of a drubbing, when you consider that Oracle's support play is thus far mostly talk.

Ellison yesterday unveiled a three-tiered support model for Red Hat Enterprise Linux. The support service starts out at $99 per year for a "basic" service and runs up to $2,000 for "premier" service. By contrast, Red Hat's support packages range from $349 to $2,499.

Oracle has rightly played on one of the industry's worst kept secrets. Red Hat charges a heck of a lot for support, especially when you consider that many open source savvy types find their own fixes. But Red Hat has not had much competition, so why shouldn't it try and milk its customer base for all their worth?

Rather than bothering with its own version of Linux, Oracle has decided to hit Red Hat where it counts. We predicted as much two weeks ago, and a number of you wrote in and called us mean names.

The reaction to Oracle's obvious play is nothing short of astonishing.

Investors have spent the last few months pushing Red Hat shares higher and higher as the company posted a couple quarters of better than expected earnings. Late last month, Red Hat sat at $26 per share.

Red Hat, however, has always underwhelmed careful observers with its inability to make all that much money off Linux. Hardware makers such as IBM, HP and Dell do just fine, as does VMware - $600m per year in revenue - which does little more than let you run multiple copies of Red Hat on a server.

But Red Hat investors have been easily impressed over the years, and are apparently easily unimpressed as well.

Jason Maynard, an analyst at Credit Suisse, suffered a religious experience at the hands of Ellison. His Red Hat price target collapsed to $14 from $29 per share on the basis that Oracle's support plan "is likely to create pricing pressure and some modest customer attrition."

Why the brash price cut for modest attrition, Jason?

The fact of the matter is that Oracle has a lot of work to do proving that this Red Hat support thing is more than a publicity stunt.

Many of you will remember the effect that Sun's application server machinations had on BEA's share price years ago. Sun warned that it would give away its application server, and investors pounded BEA, fearing that it would have no sales in a couple weeks time. Well, here we are years later, and Sun's place in the application server market is almost invisible and BEA still sells plenty of WebLogic.

Will Oracle be the first name that pops into Linux customers heads for support? We doubt it. Does Red Hat need a kick in the pants? Yes. And watching its market cap dissolve should do the trick. ®

Gartner critical capabilities for enterprise endpoint backup

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Fast And Furious 6 cammer thrown in slammer for nearly three years
Man jailed for dodgy cinema recording of Hollywood movie
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?