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A Tale of Two Cities: Red Hat and JBoss

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Red Hat reported great numbers today. The stock was down in after hours trading, and I suspect it will be down tomorrow. The stock movement will likely be based on comments about the JBoss division by Red Hat’s CEO. Forbes reports:


“Sales came in slightly higher than expected, with Red Hat reporting revenues of $127.3 compared to revenues of $99.7 million during the year-ago period. Analysts had expected sales of $125.7 million.

Over the past year, Red Hat’s shares have fallen more than 25% as the company has toiled to transform from a Linux vendor into a peddler of a broader array of software.

One big reason: Sales of the so-called application server software Red Hat acquired with its purchase of JBoss last year have disappointed. “The rate of JBoss bookings and revenue growth has not met my expectations,” said Szulik in a conference call with investors. “We know we can do much better.” “

Red Hat Linux is definitely firing on all cylinders. JBoss, in the words of Red Hat’s CEO “could do much better”.

Further comments via CNet:

“However, not all believe the JBoss deal is going swimmingly. Credit Suisse analyst Jason Maynard downgraded Red Hat from “outperform” to “neutral” Monday. “We believe our thesis of improved field execution and meaningful JBoss acceleration won’t materialize and deliver the anticipated upside to our forecast,” he said. “Our checks indicate that the organization continues to be in a state of flux as the company struggles through its transition to a multi-product company.”"

Here’s something I found funny via Reuters:

” Chowdhry of Global Equities Research said the prospects for JBoss were dim because its software was designed to work with the Java programming language. He said Java was losing market share as businesses embrace Ruby, a programming language that is easier to use and works with an open-source rival to JBoss known as Ruby on Rails.”

LOL. RoR is going to kill JBoss…Seriously?!?! If RoR is such a threat, why are other Java app server vendors “doing okay“? Is there something more here? (Hint: yes – I’ll get into it tomorrow).

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