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 From : Sergey Lentsov                       2:4615/71.10   21 Jun 2001  17:11:36
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 Subject : URL: http://lwn.net/2001/0621
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    Here is the [42]permanent site for this page.
    
    See also: [43]last week's LWN.
    
 Leading items and editorials
 
    Red Hat makes a profit - sort of. With some fanfare, Red Hat has
    [44]announced its results for the first quarter of its 2002 fiscal
    year. The core point, of course, is that the company claims to have
    made a $600,000 profit in this quarter, which ended on May 31.
    
    The company made $11.3 million in revenue from subscriptions, and
    $14 million from the various consulting and development services.
    There is no separate item for "Linux distribution sales," leading one
    to believe that they have been folded into "subscriptions." Red Hat
    also earned almost $4.5 million in interest from its sizeable cash
    holdings. On the down side, the "cost of revenue" was $11.1 million,
    sales and marketing ran $10.7 million, research and development
    $4.3 million, and administrative expenses were $3.4 million.
    
    In other words, Red Hat actually, using these numbers, operated at a
    $3.9 million loss. It was the interest income that put it nominally
    into the black.
    
    This is a significant achievement on Red Hat's part. The company had
    not promised profitability for another year yet, but that state has
    been reached now. They have gotten there despite a harsh economic
    downturn that has savaged many other Linux companies. And Red Hat has
    not drifted from its commitment to free software; the company still
    employs a great many free software developers, and gives back a great
    deal to the community. Red Hat shows that it can be done.
    
    Or so we hope. A closer look at the numbers shows a slightly more
    complicated story than what we have seen so far. The $600K profit
    comes out of the "adjusted" results. The adjustments that have been
    made include the omission of three sets of expenses:
      * "Amortization of goodwill and intangibles": $20.8 million.
      * Stock-based compensation: $3.7 million.
      * Merger and acquisition costs: $3.7 million.
        
    Once you figure those in, suddenly Red Hat shows a loss of
    $27.6 million, or 16 cents per share. The justification for leaving
    them out is that they are, it is said, one-time charges that do not
    show the steady state of the company. And one could argue that the
    goodwill costs, reflecting money that went out the door some time ago,
    should be left out. But the fact remains that the "total assets"
    claimed by the company dropped from $505 million at the end of
    February to $471 million at the end of May. Red Hat may have achieved
    "operating profit," but it doesn't look 100% sustainable quite yet. At
    some point the assets need to start increasing.
    
    What about future quarters? During the company's conference call, Red
    Hat management explicitly refused to provide any sort of guidance
    regarding future results. They will not even guess, at this point, at
    whether they can remain profitable or not. These are uncertain times
    for most companies, but most are sufficiently on top of their
    situation to offer estimates of how things will go. Red Hat,
    evidently, has no clue. The company did say, however, that no
    significant changes in staffing were expected over the next quarter.
    
    So it remains to be seen whether this is the beginning of Red Hat's
    money-making operations, or whether it is, instead, the company's high
    point. Red Hat appears to be doing things right in a lot of ways, to
    the free software community's benefit. With luck, they'll pull it off.
    
    Red Hat to become a database company? One other detail that Red Hat
    let slip in its conference call was that the company would soon
    announce a relational database product and associated services. No
    further information is available from the company at this time; it is
    making people wait until the marketing people say it's time.
    
    The hope, clearly, is that relational database systems will help drive
    the next phase of corporate acceptance of free software, and that Red
    Hat will be able to provide those systems and the services that go
    with them. It remains to be seen how well that will work; database
    customers are used to getting their databases and operating systems
    from different vendors. Red Hat will have to offer something new and
    compelling to attract customers in this field.
    
    Red Hat will stick with its open source approach for its database
    offering. Assuming that Red Hat is smart enough not to try to
    implement a relational database management system from scratch, it
    will have to adopt one of the existing, free database systems:
    [45]MySQL, [46]PostgreSQL, [47]InterBase, or [48]SAP DB. Red Hat as
    been careful, thus far, to not tip its hand regarding its selection.
    
    There are some rumors about, however, that PostgreSQL will be the
    platform chosen by Red Hat. Certainly it would be a worthy choice; the
    PostgreSQL team has worked long and hard to produce a top-quality
    relational database system. Such a move, however, could prove to be a
    challenge for the companies that are already providing commercial
    support for PostgreSQL.
    
    The most prominent of those, perhaps, is [49]Great Bridge, the company
    founded by early Red Hat investor Frank Batten Jr., and the employer
    of much of the PostgreSQL core team. We talked briefly with Great
    Bridge CEO Bob Gilbert, who was very upbeat about Red Hat's possible
    entry into the PostgreSQL market. "What took them so long?" Mr.
    Gilbert welcomes Red Hat, and looks forward to Red Hat's contribution
    to PostgreSQL development.
    
    If you believe Mr. Gilbert, the PostgreSQL market is a good one to get
    into. The company is finding customers in each of several target
    areas; PostgreSQL is being received well. Larry Ellison and Oracle, he
    says, should start getting worried "yesterday."
    
    Mr. Gilbert's confidence may well be justified, but Red Hat's entry
    into the database market still has the potential to shake things up.
    We'll revisit this topic once the company has made its plans public.
    
    GnuCash and library dependencies, again. Last week's item about the
    GnuCash 1.6 release and its many library dependencies drew more than
    the usual amount of mail, including [50]this response from the GnuCash
    project itself. We seem to have hit a bit of a nerve there. So this
    week we'll follow up with two more articles; this one looks at the
    library dependency issue again, and the following one is a quick
    review of the 1.6 release itself.
    
    Some members of the GnuCash development community felt that the
    project had been unfairly singled out for criticism when they would
    rather have seen attention paid to the stable release that they had
    worked so hard to produce. So let us say it here: GnuCash, at the
    moment, demonstrates the kinds of problems that can come up with
    massive shared library dependencies, but GnuCash is not, itself, the
    problem. GnuCash is a high-quality application which fills a pressing
    need in the free software community, and it has gotten there partly
    because its developers have taken the greatest possible advantage of
    work done by others. We never meant to criticize the project itself.
    
    There are pitfalls, however, with a reliance on large numbers of
    shared libraries. Especially when a number of those libraries are not
    widely available on common distributions. If nothing else, it makes it
    very hard for people to use your software.
    
    In the proprietary world, users will expect to be able to install a
    new "stable" release of a web browser, mail program, file manager, or
    personal finance program on their current system. Most do not expect
    to have to massively upgrade parts or all of their system first. (What
    happens when the application messes with their system anyway is a
    different, sad story that Linux users, happily, need not experience).
    
    The people who have reported success with GnuCash 1.6 are, for the
    most part, running distributions like Debian unstable ("sid") or
    Mandrake's Cooker. The exception appears to be the just-released SuSE
    7.2 distribution. Nonetheless, many users of a personal finance
    application will not be pleased to have to upgrade their operating
    systems just to install or upgrade it. If you tell them that, not only
    do they need to upgrade the operating system, but they must use an
    unstable version of a distribution, they will simply walk away.
    
    There may be no easy solution to this problem. One of the
    characteristics of free software is rapid development, and few of us
    would have it any other way. But fast development implies a lot of
    upgrades if you want to keep up, and, often, the need to run beta
    versions of software. These requirements may be hard to reconcile with
    the needs of desktop users, who just want things to work without their
    needing to mess with them. This will be a continuing challenge for
    those developing desktop applications.
    
    About GnuCash 1.6. The GnuCash package has long had the features that
    one really needs to handle personal finance - see [51]LWN's review
    from back in 1999. It has, however, remained far behind the
    proprietary packages with regard to the features offered. People who
    really want to run free software for [52][gnucash main window]
    everything have been able to use GnuCash for some time; just about
    everybody else has been inclined to wait.
    
    With the 1.6 release, the feature gap is closing. The application as a
    whole has a much more finished look, and the online help is greatly
    improved. Quite a few important new features have been added. GnuCash
    still has not caught up with the proprietary packages in a number of
    ways, but it has gotten a lot closer. Once the distributions catch up
    and make GnuCash 1.6 easy to install and run, its user base should
    grow.
    
    The first thing likely to be noticed by GnuCash users who upgrade to
    1.6 is the new, XML database file format. The program converts older
    files to the new format, but must ask a number of questions in the
    process - especially if the file contains a lot of stock accounts. The
    XML format is certainly nice for a number of things, but there is a
    downside as well: the size of the database file grows by almost a
    factor of ten. Over 1KB is required for each transaction (i.e. a
    check) ([53]example). GnuCash 1.6 is noticeably slower to load or save
    data in the new format. That's the sort of price we pay for a
    transparent file format.
    
    Of course, for those with huge GnuCash files, taking advantage of the
    new PostgreSQL back-end may well prove the best way to go.
    
    A crucial improvement in GnuCash 1.6 is in the report generator.
    Reports in version 1.4 were somewhat crude and could not be directly
    printed - one [54][GnuCash report window] had to export the report in
    HTML and feed it to a web browser first. Version 1.6 reports are more
    tightly integrated into the system, look better, and include the
    obligatory bar and pie charts.
    
    GnuCash has always had a strongly international approach and supported
    multiple currencies. The new version has strengthened that approach,
    and includes detailed support for the Euro.
    
    Other features include: more business-oriented support (things like
    depreciation reports), tax preparation support, improved QIF
    importing, internal updating of stock prices (no more need for an
    external application), a loan calculator, and even a built-in web
    browser.
    
    GnuCash 1.6 also includes support for the "GnuCash network." The
    network does not currently provide much in the way of services; the
    registration window doesn't even work, and will not until version
    1.6.1. One can presume, however, that providing useful services
    through that channel is part of somebody's business plan, and that
    things should start showing up there soon.
    
    What's still missing? Many users would most like to see support for
    scheduled transactions; this feature is apparently under intensive
    development and should be there for the next major release. It's still
    not possible to directly import information from banks or credit card
    companies. No budgeting tools are provided. GnuCash still doesn't
    really understand loans, and will not handle the amortization for you.
    And several other things, doubtless.
    
    The GnuCash developers have set themselves the goal of blowing the
    proprietary finance packages (both personal and business) out of the
    water with a free alternative. It is an ambitious goal, and, as of
    1.6, it has not yet been achieved. Things are clearly heading in the
    right direction, however; GnuCash is more than usable now. If you are
    still balancing your checkbook with a proprietary package, it may be
    time to consider making a change. (See also: [55]the GnuCash web
    site).
    
    Inside this week's Linux Weekly News:
      * [56]Security: The Danger of Posting Images, a look into the world
        of 13 year old hackers, new vulnerabilities in fetchmail, rxvt and
        more.
      * [57]Kernel: Linux Device Drivers 2nd Edition; API changes in
        stable kernels; FOLK.
      * [58]Distributions: Agenda-VR, Sentry Firewall CD, the Mandrake
        Cooker Weekly News.
      * [59]On the Desktop: Netscape 6.1, XFree86 reviewed, Ogg Vorbis and
        yet more on pilot-link.
      * [60]Development: GCC 3.0 announced, Ogg Vorbis decode RC1,
        Stallman on scientific publishing, mod_lisp 2.0, GHC 5.00.2.
      * [61]Commerce: Compaq initiatives, Goldbox, GCC 3.0.
      * [62]History: Software patents, Handhelds.org and "open sores".
      * [63]Letters: GnuCash and shared library hell; non-executable
        stacks.
        
    ...plus the usual array of reports, updates, and announcements.
    
    This Week's LWN was brought to you by:
      * [64]Jonathan Corbet, Executive Editor
      * [65]Elizabeth O. Coolbaugh, Managing Editor
      * [66]Michael J. Hammel, Senior Editor
        
    June 21, 2001
    
                               [67]Click Here 
    
                               [68]Click Here 
    
    
                                                        [69]Next: Security
    
    [70]Eklektix, Inc. Linux powered! Copyright Л 2001 [71]Eklektix, Inc.,
    all rights reserved
    Linux (R) is a registered trademark of Linus Torvalds
 
 References
 
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    3. http://lwn.net/2001/0621/security.php3
    4. http://lwn.net/2001/0621/kernel.php3
    5. http://lwn.net/2001/0621/dists.php3
    6. http://lwn.net/2001/0621/desktop.php3
    7. http://lwn.net/2001/0621/devel.php3
    8. http://lwn.net/2001/0621/commerce.php3
    9. http://lwn.net/2001/0621/press.php3
   10. http://lwn.net/2001/0621/announce.php3
   11. http://lwn.net/2001/0621/history.php3
   12. http://lwn.net/2001/0621/letters.php3
   13. http://lwn.net/2001/0621/bigpage.php3
   14. http://lwn.net/daily/
   15. http://linuxcalendar.com/
   16. http://lwn.net/stocks/
   17. http://lwn.net/Reviews/
   18. http://lwn.net/Gallery/
   19. http://lwn.net/archives/
   20. http://lwn.net/op/headlines.phtml
   21. http://lwn.net/op/Contact.html
   22. http://linux.tucows.com/
   23. http://news.tucows.com/ext2/
   24. http://unixthemes.tucows.com/
   25. http://lwn.net/2001/features/MandrakeSoft.php3
   26. http://lwn.net/2001/features/KernelSummit/
   27. http://lwn.net/2001/features/Singapore
   28. http://lwn.net/2001/features/djbdns.php3
   29. http://lwn.net/2001/features/linuxworldny/
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   32. http://lwn.net/2001/features/Momjian/
   33. http://lwn.net/2000/features/Timeline/
   34. http://lwn.net/2000/features/ESR/
   35. http://lwn.net/2000/features/Comdex/index.php3
   36. http://lwn.net/2000/features/Comdex/RansomLove.php3
   37. http://lwn.net/2000/features/Guido.php3
   38. http://lwn.net/2000/features/PaulEveritt.php3
   39. http://lwn.net/2000/features/ESC/
   40. http://lwn.net/2000/features/ESC/ELC.php3
   41. http://lwn.net/2000/features/OLS/
   42. http://lwn.net/2001/0621/
   43. http://lwn.net/2001/0614/
   44.
 http://www.businesswire.com/cgi-bin/f_headline.cgi?bw.061901/211702622&ticker=RH
 AT
   45. http://www.mysql.com/
   46. http://www.postgresql.org/
   47. http://www.borland.com/interbase/
   48. http://www.sap.com/solutions/technology/sapdb/
   49. http://www.greatbridge.com/
   50. http://lwn.net/2001/0621/a/gnucash-response.php3
   51. http://lwn.net/1999/features/GnuCash/
   52. http://lwn.net/2001/0621/mainwindow.php3
   53. http://lwn.net/2001/0621/a/transaction.php3
   54. http://lwn.net/2001/0621/gcash.php3
   55. http://www.gnucash.org/
   56. http://lwn.net/2001/0621/security.php3
   57. http://lwn.net/2001/0621/kernel.php3
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   59. http://lwn.net/2001/0621/desktop.php3
   60. http://lwn.net/2001/0621/devel.php3
   61. http://lwn.net/2001/0621/commerce.php3
   62. http://lwn.net/2001/0621/history.php3
   63. http://lwn.net/2001/0621/letters.php3
   64. mailto:lwn@lwn.net
   65. mailto:lwn@lwn.net
   66. mailto:lwn@lwn.net
   67. http://ads.tucows.com/click.ng/buttonpos=lwnbutton125top
   68. http://ads.tucows.com/click.ng/buttonpos=125-001-016
   69. http://lwn.net/2001/0621/security.php3
   70. http://www.eklektix.com/
   71. http://www.eklektix.com/
 
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 URL: http://lwn.net/2001/0621   Sergey Lentsov   21 Jun 2001 17:11:36 
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