Red
Hat is the leader in development, deployment, and management of Linux and open
source solutions for Internet infrastructure--ranging from embedded devices to
secure Web servers.
Red
Hat was founded in 1994 by visionary entrepreneurs Bob Young and Marc Ewing.
Open source is the foundation of our business model. It represents a
fundamental shift in how software is created. The code that makes up the
software is available to anyone. Developers who use the software are free to
improve the software. The result: rapid innovation.
Red
Hat solutions combine Red Hat Linux, developer and embedded technologies,
training, management services, technical support. We deliver this open source
innovation to our customers via an Internet platform called Red Hat Network.
History of Red Hat, Inc.
Red
Hat, Inc. is a market leader in open source software systems for mainframes,
servers, workstations, and embedded devices. Unlike proprietary systems that carefully
guard their source codes, Red Hat and other open source software vendors make
their source code freely available. The company's core product is the Red Hat
Linux operating system, which is the leading Linux system for servers. More
recently the company has expanded its product line to offer open source
solutions in such areas as e-commerce, embedded devices, and database
solutions.
Developing Its Own Version
of Linux
Red
Hat Software, Inc. was established in 1995 by entrepreneurs Robert Young and
Marc Ewing. Young, a native of Hamilton, Ontario, and a graduate of the
University of Toronto, started his first company, Vernon Computer and Sales, in
1984. It was a computer rental and leasing business, which Young sold in 1990
to a Canadian financial services company. In 1993 Young started another
computer company, ACC Corp., which was a UNIX reseller business. When his
customers began requesting Linux technology, Young found Marc Ewing, a Carnegie
Mellon University computer science graduate who had a small Linux development
operation. Ewing is credited with developing the Red Hat Package Manager, which
made it easier for users to install and manage the various packages that made
up Linux. Young and Ewing merged their companies in 1994. In 1995 the newly
formed company was named Red Hat Software, after an old lacrosse hat that
Ewing's grandfather owned. Red Hat established its headquarters in Durham,
North Carolina, located near the state's Research Triangle Park.
Red
Hat's mission was to market and develop its own version of the Linux open
source operating system to end users. Linux was first developed by Linus
Torvalds in 1991. He was a 21-year-old student at the University of Helsinki in
Sweden. In August 1991 he made the basic source code for the initial version of
Linux (0.02) available to anyone over the Internet. Users could download it for
free, change it, and share new versions with other programmers.
Linux
0.02 was a UNIX-based operating system. UNIX was originally developed by
AT&T in the mid-1970s. Its source code was kept private until the mid- to
late 1980s, when the Free Software Foundation developed and distributed a suite
of free cross-UNIX tools, including a compiler and shell. The tools were
distributed under a new free licensing scheme called the GNU Public License.
From
1993 to 1995 the number of Linux users increased dramatically from 100,000 to
1.5 million. Linux's popularity with software programmers was due in part to
the fact that its source code was available to everyone for free. While Red Hat
made its version available for free downloading, it also sold CD-ROM versions.
When the company released Red Hat Linux 5.0 in November 1997 for $49.95, InfoWorld called it "a complete
Internet server in a box." The software package included everything a
system administrator needed to get an Internet or corporate intranet server
running in one day, including the Apache Web server, a mail server, a news
server, a domain name server, a gopher server, and more. It also included
development tools and a freeware database engine.
Red Hot Red Hat IPO
In
addition to gaining financial support from computer industry leaders, Red Hat
entered into strategic agreements with computer firms IBM and Dell in 1999.
IBM, which had been experiencing demand from its UNIX customers for an open
source solution, partnered with Red Hat early in 1999. Under the agreement,
developers from IBM and Red Hat would team to move Linux onto IBM's Netfinity
servers, PC 300 commercial desktops, IntelliStations, and ThinkPads. Later in
the year IBM announced it would preload Red Hat Linux 6.2 on its Netfinity
servers, with Red Hat providing technical support.
When
Red Hat released its Linux 6.0 in April 1999, Dell Computer Corp. was the first
major computer vendor to factory install Red Hat Linux on its servers,
workstations, and desktop PCs. Dell also made an equity investment in Red Hat.
Version 6.0 allowed users to run on servers with as many as four processors,
was easier to install, and had two graphical user interfaces (GUIs) that could
be used simultaneously. Version 6.0 was also featured on Red Hat's e-commerce
server, which included encryption capabilities and e-commerce software from
Hewlett-Packard; it was introduced in July 1999. Computer manufacturer Gateway
became an authorized Red Hat reseller in September 1999, enabling it to
factory-install Red Hat Linux on its computers when requested by customers. In
December 1999 Dell and Red Hat extended their alliance, with Dell committing to
install Red Hat Linux on all of its current and future PowerEdge servers. The
two companies also entered into a worldwide service and support agreement.
Red
Hat filed for its initial public offering (IPO) in June 1999 and hoped to raise
about $96 million. The company had revenue of $10.8 million for its fiscal year
ending February 28, 1999, compared to revenue of $5.1 million in fiscal 1998.
On August 11, 1999, Red Hat shares began trading at $14 a share. By the end of
the day they closed up 227 percent at just over $52 a share. Fueled by growing
support for Linux as an alternative operating system to Windows NT for servers,
Red Hat's stock reached an all-time high of $150 a share in December 1999.
Red
Hat also began to address the international market for Linux solutions in 1999.
Red Hat Europe began operating in July 1999 out of offices in London, England,
and Stuttgart, Germany. The new European organization functioned as a wholly
owned subsidiary of Red Hat. Later in the year Red Hat expanded into Japan, and
in 2000 the company established Red Hat France and Red Hat Italy to deliver
software, support, and training services to European enterprise-level business
customers.
Acquisitions, Expanding Products
and Solutions
Following
its IPO, Red Hat embarked on a series of acquisitions that enabled it to move
into the post-PC embedded products market, such as wireless devices, and
develop a Linux-based enterprise platform. In November 1999 it acquired Linux
pioneer Cygnus Solutions for $674 million in stock. Michael Tiemann, author of
the first open source C++ compiler and president of Cygnus, replaced Red Hat
cofounder Marc Ewing as Red Hat's chief technology officer; Ewing continued to
direct the Red Hat Center for Open Source, a nonprofit organization. Cygnus's
business included producing compilers and debuggers, developing embedded
software for handheld devices and other appliances, and application development
tools.
In
January 2000 Red Hat acquired e-commerce software vendor Hell's Kitchen Systems
Inc. for $91 million in stock. HKS's payment processing software was a key
component for e-commerce operations. The acquisition helped Red Hat position
its Linux offerings as a more viable software solution for businesses that
wanted to migrate their operations online. Around the same time Red Hat entered
into a strategic partnership with electronic security firm RSA Security Inc.
that added encryption capabilities to Red Hat's Linux software.
Red
Hat's next major acquisition involved performance management software vendor
Bluecurve for $35 million in stock. The acquisition enabled Red Hat to offer a
tool for monitoring Linux systems. Bluecurve software allowed developers to
simulate transactions and scale their infrastructures to different levels of
service. Around the same time in April 2000 Red Hat introduced redhat.com
Marketplace, a portal where vendors could find software, hardware, and support
services for open source products.
In
June 2000 Red Hat acquired WireSpeed Communications of Huntsville, Alabama, for
about $33 million in stock. WireSpeed made embedded software that allowed
wireless devices to communicate with the Internet and private networks. Its
customers included semiconductor, Internet device, and industrial control companies.
In August Red Hat strengthened its web server security software offerings with
the acquisition of C2Net Software Inc. for $42.1 million in stock.
Red Hat Achieved First
Profitable Quarter in 2001
With
its stock trading around $5 a share, Red Hat reported a net loss of $5.98
million on revenue of $84 million for its fiscal year ending February 28, 2001.
In February the company acquired Planning Technologies, Inc., an Atlanta-based
consulting firm with more than 200 professional engineers and consultants, for
$47 million in stock.
In
June Red Hat announced its first quarterly profit for the quarter ending May
31, with adjusted net income of $600,000 on sales of $25.6 million. In spite of
its depressed stock price, Red Hat was in solid financial condition with about
$390 million in cash and investments. For the future Red Hat planned to
introduce open source database software and launch an open source consulting
practice. Later in the year Red Hat expanded it’s consulting and services group
with the addition of an open source consulting team that had previously worked
for VA Linux Systems. The company also announced contracts with Cisco Systems
and Nortel Networks, both of which installed workstations with Red Hat Linux in
their engineering departments.
Later
in the year Red Hat proposed an open source code, eCos, for 2.5 and third
generation wireless devices. Plans called for the new source code to be
developed by Red Hat in association with 3G Labs. The new operating system
would be based on Red Hat's open source embedded real-time operating system,
not Linux.
The
company continued to expand its product offerings with the introduction of a
new open source e-commerce software suite. The core of Red Hat E-Commerce was
Interchange 4.8, a new version of an e-commerce platform that Red Hat acquired
from open source software firm Akopia in January 2001. Also included in the
package were the newest Red Hat Linux OS, Apache Web-serving software, an open
source database, and a subscription service for receiving software updates.
Red
Hat's stock received a boost in November 2001 when the company announced it
would collaborate with IBM to deliver open source software solutions, services,
and support for the entire IBM eServer product line. The new extension of Red
Hat's partnership with IBM built on the company's previous support of the
eServer xSeries platform. Under the new agreement, Red Hat would provide
support for the IBM eServer zSeries, iSeries, and pSeries platforms. Red Hat
would provide a base solution consisting of the Red Hat Linux operating system,
product support services, professional services, and an upgrade offering. A
wide range of service upgrades would also be offered. Following the
announcement, Red Hat's stock jumped nearly 27 percent from about $6 a share to
$7.62 a share.
Red
Hat's expanded partnership with IBM underscored the company's leadership
position in open source software for enterprise servers. The company also
provided open source operating systems for workstations and embedded devices.
Red Hat also supported open source developers and offered solutions for the
database, e-commerce, secure Web server, and high availability server markets.
For the future Red Hat was well-positioned to maintain its leadership position
in open source solutions.
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