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Red Hat CEO touts 'very early stage' market

Matthew Szulik on acquisitions, expansion and singing with a choir.

Network World - If anyone can be called an evangelist of the commercial value of open source software, it's Matthew Szulik, CEO of Red Hat . He has guided the company to profitability as other Linux start-ups have gone down in flames around him, all the while managing the difficult task of succeeding in both the open source software community and the enterprise data center. He spoke last month with IDG News Service correspondent Robert McMillan at the Red Hat Summit in New Orleans.

Sun had been hinting for a while that it was working on a major acquisition, and at one point even suggested that it might consider purchasing Novell. Did you breathe a sigh of relief this week when you found out they were purchasing StorageTek?

No. I've come to the conclusion that when people make big forecasts about big acquisitions, they usually become underwhelming.

What about the issue of consolidation? This is happening so much in the software industry right now. Is that going to happen with the Linux industry as well?

I don't think so.

You don't think Red Hat or Novell is going to get picked up by a larger company ?

Well, I couldn't speculate on that, but I don't think the industry of open source is at a point of maturity. I don't think the economic models are exhausted, as they are in the proprietary software business. So I have a hard time reconciling the economies of scale that that would create.

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I had a chance to speak at Harvard a month ago, and I met 20 CIOs who manage IT budgets of $500 million or larger. So these were very, very serious IT executives. And many of them had small deployments; nothing strategic. My take-away from that was, 'Holy mackerel! This is still a market at a very early stage.'

So if you believe that, what would we consolidate besides pretty robust technical talent? Now, when you look at our last two acquisitions, we consider those to be highly strategic. One was in the area of file systems, which of course is incredibly important. And the Netscape [directory server] asset was an asset that we had been tracking for four years. We had been paying attention to that asset because of the lack of domain experience in building directories [and] the strategic importance of being able to deliver advanced levels of security, certificate management. This is highly strategic for our company.

And then you look at what's happening as you get databases and application servers. Is that really a compelling business for Red Hat to think through? That's not clear to me right now, and I don't hear our customers asking for it.

So where do you see Red Hat getting traction beyond being an operating system provider?

In 2004 there were $19 billion, globally, in Unix systems sold. So when people say, 'Are you going to grow past an [operating system] company?' I say, 'Don't get bored with this Unix-to-Linux migration. It's still in its infancy.'

We want to continue to be pragmatic and not be overzealous and give in to the siren call of Wall Street: 'Go buy company X,' or 'Go buy company Y.' And then we have an enormous integration problem: Witness our competitors. You miss out on the speed with which the industry is moving while you're trying to integrate a disparate culture, a disparate set of people who may not have the same motivations as you.

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