5 ms·

> Why on earth is the article comparing RedHat to Amazon? I don't understand that and not because: > One is a Linux distribution vendor, the other is a global

by pacofvf 13y ago

> Why on earth is the article comparing RedHat to Amazon? I don't understand that and not because: > One is a Linux distribution vendor, the other is a global internet shopping mall. I don't understand that because Red Hat already does what Amazon does: http://www.redhat.com/solutions/open-hybrid-cloud/ http://www.redhat.com/solutions/open-hybrid-cloud/ I don't know if Peter Levine knows that.

adwf 13y ago
Yes, but the article is comparing the total Amazon revenue in the $70bn+ range to the RedHat ~$1.3bn. A completely misleading comparison, considering that Amazon don't actually break out their AWS figures in their financial reports. Those charts are highly misleading and borderline duplicitous.
- nl 13y ago
  He shows estimated AWS revenue on [1], where he appears to be using the $3.8 billion revenue estimate. I regard that estimate as defensible, and a reasonable indicator of the size of the market. [1] http://tctechcrunch2011.files.wordpress.com/2014/02/peterlevine2.png?w=675&h=460 http://tctechcrunch2011.files.wordpress.com/2014/02/peterlev... [2] http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013-says-analyst-7000009461/ http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013...
  - cwyers 13y ago
    Yes, because "providing service and support for software running on someone else's hardware" is the same as "maintaining large datacenters, including hardware, power and cooling costs," and therefore let's just compare revenues without looking at costs.
    - nl 13y ago
      If I was an investor, and I saw Redhat growing revenue at the rate AWS seems to be then I'd be buying as much Redhat stock as I could - even if their profits were depressed because of the investment they were making. I'll quote the investment guidance from the link I posted above[1]: Using our estimate of $3.8bn for 2013 AWS revenues, and applying a ~5x multiple based on the comps noted above, we arrive at a valuation of ~$19bn for the business on an EV/Sales basis (equating to ~$41/share of AMZN stock). Importantly, we believe this to be a conservative valuation multiple, as AWS revenues are growing much faster than any of the comps incorporated above. At an 8x valuation multiple, we estimate the AWS business could be worth $30bn as a stand-alone company, or ~$66/share. Note that they value AWS as a $30bn company right now, almost triple Redhat's $11bn market cap. From [2], we see that Amazon has has invested $4.6 billion in its business over the past year, including $1.4 billion to purchase the building that houses its Seattle headquarters.. Taking out that $1.4 billion, we get $3.2 billion, which almost matches estimates for AWS revenue. So we see AWS is growing like mad, pretty much owns the whole cloud hosting category[3] and MIGHT NOT EVEN BE LOSING AMAZON MONEY, even while they are investing so much that no one else can compete with them on scale of their offerings already. Take my money now. [1] http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013-says-analyst-7000009461/ http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013... [2] http://www.informationweek.com/cloud/infrastructure-as-a-service/amazon-web-services-revenue-new-details/d/d-id/1112068 http://www.informationweek.com/cloud/infrastructure-as-a-ser...? [3] http://readwrite.com/2013/08/21/gartner-aws-now-5-times-the-size-of-other-cloud-vendors-combined http://readwrite.com/2013/08/21/gartner-aws-now-5-times-the-...
  - adwf 13y ago
    You have to remember how AWS started - Amazon selling their excess datacentre capacity in their offpeak downtime. It really isn't possible to distinguish how much of AWS is a money maker for Amazon, because you can't separate the costs of running it from the costs of the Amazon business as a whole. For all we know, they could be selling the excess capacity at a massive loss, which is still justifiable for them because at least it recoups some of their everyday running costs.
nl 13y ago
Red Hat already does what Amazon does No, they don't. You can't pay RedHat money and run software on their infrastructure. Instead, Redhat is building a set of open source platforms, which they will sell support to you for. Their IAAS platform is based on OpenStack, and their PAAS is OpenShift[1]. The problem isn't the software, it's that they are relying on support revenue for these too. As Levine points out, that isn't as profitable source of revenue as running your own cloud service, or selling a SaaS app. I don't know if Peter Levine knows that Levine was the the CEO of XenSource (who wrote the Xen hypervisor). Pretty sure he knows the cloud space fairly well. [1] https://www.openshift.com/ https://www.openshift.com/
- sciurus 13y ago
  "You can't pay RedHat money and run software on their infrastructure." You definitely can. https://www.openshift.com/products/pricing https://www.openshift.com/products/pricing

by pacofvf 13y ago

adwf 13y ago

Yes, but the article is comparing the total Amazon revenue in the $70bn+ range to the RedHat ~$1.3bn. A completely misleading comparison, considering that Amazon don't actually break out their AWS figures in their financial reports. Those charts are highly misleading and borderline duplicitous.

nl 13y ago
He shows estimated AWS revenue on [1], where he appears to be using the $3.8 billion revenue estimate. I regard that estimate as defensible, and a reasonable indicator of the size of the market. [1] http://tctechcrunch2011.files.wordpress.com/2014/02/peterlevine2.png?w=675&h=460 http://tctechcrunch2011.files.wordpress.com/2014/02/peterlev... [2] http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013-says-analyst-7000009461/ http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013...
- cwyers 13y ago
  Yes, because "providing service and support for software running on someone else's hardware" is the same as "maintaining large datacenters, including hardware, power and cooling costs," and therefore let's just compare revenues without looking at costs.
  - nl 13y ago
    If I was an investor, and I saw Redhat growing revenue at the rate AWS seems to be then I'd be buying as much Redhat stock as I could - even if their profits were depressed because of the investment they were making. I'll quote the investment guidance from the link I posted above[1]: Using our estimate of $3.8bn for 2013 AWS revenues, and applying a ~5x multiple based on the comps noted above, we arrive at a valuation of ~$19bn for the business on an EV/Sales basis (equating to ~$41/share of AMZN stock). Importantly, we believe this to be a conservative valuation multiple, as AWS revenues are growing much faster than any of the comps incorporated above. At an 8x valuation multiple, we estimate the AWS business could be worth $30bn as a stand-alone company, or ~$66/share. Note that they value AWS as a $30bn company right now, almost triple Redhat's $11bn market cap. From [2], we see that Amazon has has invested $4.6 billion in its business over the past year, including $1.4 billion to purchase the building that houses its Seattle headquarters.. Taking out that $1.4 billion, we get $3.2 billion, which almost matches estimates for AWS revenue. So we see AWS is growing like mad, pretty much owns the whole cloud hosting category[3] and MIGHT NOT EVEN BE LOSING AMAZON MONEY, even while they are investing so much that no one else can compete with them on scale of their offerings already. Take my money now. [1] http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013-says-analyst-7000009461/ http://www.zdnet.com/amazons-aws-3-8-billion-revenue-in-2013... [2] http://www.informationweek.com/cloud/infrastructure-as-a-service/amazon-web-services-revenue-new-details/d/d-id/1112068 http://www.informationweek.com/cloud/infrastructure-as-a-ser...? [3] http://readwrite.com/2013/08/21/gartner-aws-now-5-times-the-size-of-other-cloud-vendors-combined http://readwrite.com/2013/08/21/gartner-aws-now-5-times-the-...
- adwf 13y ago
  You have to remember how AWS started - Amazon selling their excess datacentre capacity in their offpeak downtime. It really isn't possible to distinguish how much of AWS is a money maker for Amazon, because you can't separate the costs of running it from the costs of the Amazon business as a whole. For all we know, they could be selling the excess capacity at a massive loss, which is still justifiable for them because at least it recoups some of their everyday running costs.

nl 13y ago

Red Hat already does what Amazon does No, they don't. You can't pay RedHat money and run software on their infrastructure. Instead, Redhat is building a set of open source platforms, which they will sell support to you for. Their IAAS platform is based on OpenStack, and their PAAS is OpenShift[1]. The problem isn't the software, it's that they are relying on support revenue for these too. As Levine points out, that isn't as profitable source of revenue as running your own cloud service, or selling a SaaS app. I don't know if Peter Levine knows that Levine was the the CEO of XenSource (who wrote the Xen hypervisor). Pretty sure he knows the cloud space fairly well. [1] https://www.openshift.com/ https://www.openshift.com/

sciurus 13y ago
"You can't pay RedHat money and run software on their infrastructure." You definitely can. https://www.openshift.com/products/pricing https://www.openshift.com/products/pricing