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Red Hat’s traditional Linux partners are absolutely the wrong group to be selling its middleware offerings, a fact that took Red Hat some time to digest. Now, however, Red Hat seems to be getting the picture and has launched its Catalyst Program to sell turnkey open-source solutions through a growing ecosystem of value-added resellers (VARs).

That’s a rise of 12 percent compared with the same period last year. Despite the company’s against-the-grain performance in a weak market, however, it may need to invest more in its middleware business to ensure future growth.

As part of its quarterly earnings call, Red Hat executives revealed a range of reasons to think its business is on track:

At the recent Red Hat Summit, company CEO Jim Whitehurst quipped that “flat is the new up,” but he clearly wasn’t referring to Red Hat. On Wednesday Red Hat announced another strong quarter, with revenue of $183.6 million for the company’s second fiscal quarter of 2010.

But it’s also normal that as it slows, companies like Red Hat will look for increased growth beyond their core businesses. Oracle is perhaps the most obvious example of this.

Customers seem content to pay Red Hat for free software that they could get more cheaply elsewhere. While recent IDC data hint at hard times to come for commercial Linux vendors, it hasn’t hit Red Hat. Not yet. The company is still a darling with CIOs.

For Red Hat’s sake, it should stick with this one. Through Catalyst and other means, Red Hat needs to place more emphasis on the world outside of Linux. The company believes that virtualization and cloud computing are big opportunities, and they are, but these are mostly ways to build upon RHEL, rather than ways to extend its reach into fast-growing, diverse markets.

Red Hat is an execution machine and will undoubtedly be able to continue to grow its Linux business, and possibly to accelerate that growth again through enhanced investments in virtualization and cloud computing. But the real growth for the company is a bit higher up the stack in its middleware business.

But first, the good news. Of Red Hat’s total revenue, roughly 85 percent, or $156.3 million, came from subscription revenue. That’s an increase of 15 percent compared with the year-ago period. Putting this into context, IDC projects Linux subscription revenue to top $1 billion by 2012. Red Hat should claim virtually all of this at its current pace of growth.

Despite the mostly sunny skies, Red Hat’s slowing revenue growth remains a concern. The trend kicked off in 2005 and has continued apace since then despite a brief respite in 2007, as The 451 Group reports.

But it does need to significantly change the way it views its channel partners.

Of course, as Red Hat gets bigger, and as the economy remains stagnant, it’s normal that Red Hat’s revenue growth will slow.

Peters said that the company is investing significantly more in JBoss than RHEL, proportionate to the revenue each brings. That’s good, but also obvious, given that Red Hat’s JBoss business is comparatively small to its RHEL business. It may be time to invest even more in JBoss.

And it may not for some time, with Red Hat reporting deferred revenue of $581 million, up 17 percent compared with the same period last year. The company is increasingly profitable, too. It reported net income of $28.9 million, or 15 cents a share, compared with $21.1 million, or 10 cents a share, for the year-ago quarter.

All top-25 customer accounts renewed, and at 120 percent of the prior year’s value. Most customers are expanding their adoption of Red Hat, and more and more are upgrading to Advanced Platform.
Only three of its top-300 customers up for renewal didn’t renew in the quarter, and two of those have returned to Red Hat after the quarter closed.
Two deals were over $5 million, while 10 deals hit $1 million. Red Hat EMEA (Europe, Middle East, Africa) closed its biggest deal ever in the quarter.
Of the top 30 deals, 23 included Red Hat Enterprise Linux (RHEL) Advanced Platform, and five included a JBoss component. This suggests that Red Hat’s big customers are upgrading to Advanced Platform, according to Red Hat CFO Charlie Peters.
JBoss continues to grow much faster than the core RHEL business.
Deal length extended to 22 months from 19 months last quarter, reflecting One former Red Hat customer, a large financial services company (almost certainly Credit Suisse), dropped Novell’s SUSE Linux and returned to Red Hat with a big order in the quarter. Credit Suisse is one of the companies Novell pulled away from Red Hat by using Microsoft-subsidized coupons, but Peters indicated that the customer had returned because of Red Hat’s superior value. It appears that Red Hat is a better value than free.
Red Hat is taking share from its competitors rather than seeing an increase in net new server purchases.

Catalyst, however, is still in its infancy. It remains to be seen whether this program will stick, as Red Hat has moved away from ecosystem efforts like its Red Hat Exchange in the past.

Red Hat doesn’t need to get into video game consoles (e.g., Microsoft’s Xbox) or hardware (e.g., Oracle’s pending acquisition of Sun) or a variety of businesses far afield from its core infrastructure business. After all, Red Hat clearly has a lot of room to grow its JBoss/middleware business, and arguably needn’t acquire its way to that growth.

On a more positive note, we recently attended a PlayStation preview in New York that highlighted the PSP Go and the exclusive titles available for both the PSP and PS3 platforms during the upcoming holiday-shopping season. Overall, it looked pretty good.

The bright spot was Sony’s motion picture division, which saw a 6.5 percent boost that was largely attributable to the relatively strong showing of “Angels & Demons” at the box office. But almost everything else, including TV, video game, and computer sales, was down in a big way.

Nintendo sold 2.23 million Wii consoles in the quarter, compared with 5.17 million the same quarter a year earlier.

PS3 sales are slumping, but not as bad as the Wii's sales, which have been cut in half.

Sony can also be consoled by the fact that sales are also way down for the Wii, as Nintendo reported a 66 percent fall in quarterly operating profit on “slowing demand for its Wii console and a stronger yen.”

According to the report, Sony said it sold about 1.1 million PlayStation 3s and 1.3 million PlayStation Portables in the latest quarter, compared with 1.6 million PS3s and 3.7 million PSPs in the same period a year ago.

However, Nintendo still posted a profit of $445 million and is forecasting that it will sell 26 million Wii consoles before year’s end–along with 30 million DS handheld game players, which, by the way, is seeing increased competition from another handheld device. Nintendo didn’t mention the PSP as the rival in its earning call, but rather Apple’s iPhone.

Sony latest earnings show that it continues to be hammered by the worldwide recession and strong yen, suffering a net loss of $390.5 million in the quarter that ended June 30.

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Sony)

In an article, The New York Times highlighted the 37.4 percent year-over-year slump in gaming and computer sales (Vaio PC). The article noted that PlayStation 3 game consoles were “particularly sluggish” and that software sales had dropped.

Comments? Is the PlayStation franchise in serious trouble or will it pull out of its funk this holiday season? Does Nintendo need to cut the price of Wii?

The wane in PSP sales is particularly brutal, although part of that slowdown may have been due to rumors earlier in the quarter that Sony would release a new PSP later in the year. (And sure, enough, the PSP Go was unveiled in June at E3.) Also, the constant spate of rumors involving the potential arrival of a new PS3 Slim certainly hasn’t helped sales of the current game console.

Updated at 7:00 a.m. PT with added information on MIT battery research. Updated at 11:45 PT on October 26 with correct first name of professor Sadoway.

Lithium ion batteries will power a generation of electric cars slated to come to market in the next two years, replacing the nickel metal hydride batteries used in today’s hybrids.

EnerDel, which makes lithium ion batteries, has agreements to supply Think Global’s city car and Fisker Automotive’s luxury plug-in electric vehicle, both of which are expected to be available in the next year. Nissan, meanwhile, plans to unveil an all-electric sedan next week, which it plans to make available next year.

Massachusetts Institute of Technology professor Donald Sadoway and his student David Bradwell earlier this year built a prototype of “liquid battery” that uses three layers of molten metals–two for the battery’s electrodes and an electrolyte liquid in the middle.

Seeking out a better auto battery, Nissan Motor and EnerDel said Thursday that they will team up in support of research into a better conductive material for batteries.

EnerDel lithium ion car battery.

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EnerDel)

The pact calls for the two companies to co-fund research at the Argonne National Laboratory to develop a new electrolyte made of a slurry liquid. The work is being done specifically for electric and hybrid vehicle batteries.

Lithium batteries, which are also used in consumer electronics, are relatively light and allow for higher energy density. But researchers have been looking at novel approaches to improve performance and cost, including different electrolytes.

The advantage of this method is that the liquids allow for fast charging and discharging. Batteries built this way promise to be cheaper and last longer as well.

Taking Greene at his word, and assuming that the company carefully avoids sending out identifiable information, I still can’t shake the creepy feeling that I get about any product that collects any information from children, especially in the name of child protection.

Greene said that the company does provide a disclosure to parents as well as a way for parents to opt out, but the information in its end-user license agreement is written in the typical legalese and is a bit contradictory. In one section, it says “SearchHelp (recently renamed Echometrix) does not read or disclose private communications except to comply with a valid legal process such as a search warrant, to protect the company’s rights and property,” but in another it says “We have a parent’s permission to share the information if the user is a child under age 13. Parents have the option of allowing SearchHelp to collect and use their child’s information without consenting to SearchHelp sharing of this information with people and companies who may use this information for their own purposes.”

A software product sold to protect children from predators, cyberbullying, and visiting inappropriate Web sites is also collecting information about what the kids are saying, and its publisher is selling that data–in aggregate form–to other companies for marketing purposes.

(Credit:
Echometrix)

Box shot of Sentry Parental Controls from company Web site

Greene says that the service can let companies “in real time, find out what the kids are saying about your product and all your competitors’ products…I can’t tell you who said it, I can only just tell you that a lot of kids said it.”

Spyware?
David Perry of TrendMicro, which includes parental control tools in some of its security products, said he isn’t aware of any other parental control products that capture this type of information. “This is a severe case of what we used to call spyware,” he said. Perry worries that even though the software may not collect the names of the children, “those names could be included in some of the chat messages.”

At my request, the company provided a link to a Web page where parents can opt out of the collection process.

In an interview, Echometrix CEO Jeffrey Greene said that the company doesn’t collect or report the names or any identifying information about the children. “We never, ever, ever can identify who the kid is who is saying it. In fact, we don’t have any information about the individual child,” he said.

The company’s Sentry Parental Control Software, according to Greene, is designed to warn parents if a child is engaged in inappropriate online behavior by analyzing a database of 29,000 words including what he calls “Weblish,” slang terms like POS (parent over shoulder) that kids use as short cuts in instant messaging and chat rooms. To do this, said Greene, it’s necessary for the company to capture this information so “we can monitor these kids and the conversations they are having and the things they are seeing and all the words that are coming to them and all the words they’re sending out, so we can make decisions and identify questionable activities and let mom and dad know about it right now–in real time.”

Listen to my interview with Echometrix CEO Jeffrey Greene

In addition to notifying parents if their kids are doing something questionable, the company also sells summary data based on this information–in the aggregate–to other companies. A press release on its Web site describes a product called Pulse “that reads digital content from multiple sources across the Web, including: instant messages, blogs, social environment communities, forums, and chat rooms.” The company says that it delivers the unsolicited raw conversations in real time. It gives marketers immediate, unique information about what teens are saying in their own words.”

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Similar studies have also seen a boost in Microsoft’s search business. An August report from ComScore discovered that Microsoft’s share of the global search engine market lept 41 percent from July 2008 to July 2009. Bing was introduced in May, taking the place of Microsoft’s Live Search.

Other players in the top 10 included AOL Search in fourth place with 333 million searches and Ask.com Search in fifth with 186 million searches.

Google remained in the top spot with a commanding 64.6 percent share, accounting for 7 billion searches in August, a gain of 2.6 percent over July. Yahoo saw its search results drop 4.2 percent for the month to 1.7 billion, earning it 16 percent of the market.

Earlier this week, Microsoft showed off a “visual search” feature for Bing that returns thumbnail images for at least some search results. Microsoft reportedly will be debuting a Bing 2.0 sometime soon sporting a variety of new features.

Microsoft’s new Bing search service is the fastest-growing U.S. search engine among the top 10, according to a Nielsen report released Monday.

The total amount of searches on Bing rang in at 1.1 billion for the month of August, a leap of 22.1 percent over July, winning Microsoft a 10.7 percent share of the search engine market.

(Credit: Nielsen)

Themes. Facebook has long been the king of vanilla. You don’t like blue on white? Tough luck, go download a browser add-on. FriendFeed on the other hand, recently embraced themes that can skin the entire experience. It was also opened up to third parties to design their own, letting anyone browse the site with a visual style of their preference. Is Facebook likely to embrace this right away? Probably not, but FriendFeed sure did a great job of adding it to its own site, and with other big products from Google like Gmail and Calendar getting themes, it’s a big trend to ignore.

Monday’s news that social giant Facebook is acquiring the less than two-year old FriendFeed included an important postscript: “FriendFeed.com will continue to operate normally for the time being as the teams determine the longer term plans for the product.” But for FriendFeed users, the future seems unclear. Will development on the service be discontinued as the now Facebook-employed FriendFeed creators have been tapped to work on a bigger, and more popular social-networking site? Probably.

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CNET)

IM integration. I’ve knocked this feature in the past for being noisy, but for some it’s useful. FriendFeed’s IM integration can give you the heads up when someone likes one of your posts, or simply posts new content. It’s also got a deep list of commands that let you interact with content on the site, all without actually having to go there. For instance, if you see someone has commented on something you just posted, you get that notification in an IM, and can leave a retort. This is great for continuing to use the service in places where the site itself may be blocked like work or school.

Admittedly file sharing is probably not something Facebook would have too hard a time cooking up on its own, but after seeing all the internal data on how FriendFeeders have been using it, Facebook will have something to work with if it chooses to expand how it handles posting or sending media.

Discussion tracking. FriendFeed lets you keep an eye on anything you’ve commented on. This means that if you dropped in to leave a comment it makes a note of that and gives you a very simple way to get back to that conversation. Facebook does this to a degree, but it’s via e-mail, and there’s no quick return path to get back to those conversations. Not to mention, you can use the aforementioned IM integration to get a quick update on a reply, without filling up your in-box, and without having to go back to the site to add another reply.

What is likely to happen is that many of FriendFeed’s killer features become features on Facebook, with FriendFeed eventually shutting its doors to focus on Facebook development. So what are those FriendFeed features Facebook doesn’t have, or that FriendFeed simply does better?

Any item on FriendFeed can be tracked through IM. The IM system also lets users interact with the content without having to visit the site.

(Credit:
CNET)

Search: One of the most important features FriendFeed has (that Facebook doesn’t) is a really solid search engine. On FriendFeed you can search for content from your friends, or the entire world. The best part is, you can save any search you’ve made and keep an eye on it for updates. Facebook’s search is currently focused more on finding people, along with navigating to various parts of its site like events, pages, and applications. Update: Scratch this one off the list. Hours after this post went live, Facebook began pushing an updated version of its search engine that indexes updates and other content. At least for the past 30 days, which is a good start.

Real real time. FriendFeed’s real time is a constant flow of information that comes in as soon as the service can get it to you. On Facebook, you get a little reminder to refresh the stream when there are updates. FriendFeed’s way of letting users avoid an overload is to simply put the stream on pause–something Facebook could soon adopt.

Content aggregation. Facebook’s “highlights” section of its home page does its best to show you new or otherwise interesting things from your friends if they’ve liked something. It feels like an afterthought though. FriendFeed’s solution is to create a “best of the day” which shows the most popular and fresh content that your friends like. It can also be filtered by day, week and month, which lets you get a quick digest of content without having to keep your eyeballs glued to the news feed.

Any we left off? Leave them in the comments.

FriendFeed's themes let users skin the experience, something Facebook does not currently offer.

FriendFeed's search is real time, and content-centric. Something similar for Facebook could yield good results.

File sharing. To share files on Facebook, you have to use one of Facebook’s granular applications like photos, or videos. You can use third party tools for items that fall outside of that, but that puts the hosting and control outside of Facebook’s realm. On FriendFeed you can upload all sorts of file types just for sharing purposes. Users then download them to view, listen, or watch on their own machines.

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CNET)

Now, when you are writing a status update and want to add a friend’s name to something you are posting, just include the “@” symbol beforehand. As you type the name of what you would like to reference, a drop-down menu will appear that allows you to choose from your list of friends and other connections, including groups, events, applications, and (fan) pages.

On an unrelated note, for brands using Facebook’s fan pages, this could result in an interesting analytics product. The company hasn’t yet said whether or how the managers of fan pages will be notified that they have been tagged–for a brand with a lot of fans, this could be a lot–and you might imagine that some of the demographics regarding who’s talking about them and how often could be packaged into a nice marketing tool.

The development prompted some of my industry competitors to use the word “BREAKING” in their headlines (Really? Can we please leave this term for things on the level of earthquakes, election results, and stampedes at Jonas Brothers concerts?) because it’s yet another big sign that Facebook is gradually but aggressively encroaching upon Twitter’s territory in its attempt to own the Web’s trove of real-time conversation. Twitter is nowhere near the size of Facebook, nor is it anywhere near as feature-rich, but it’s enough of a disruption in the space to make Facebook keep trying to get the upper hand.

As you may recall, this back-and-forth has included Facebook’s failed attempt to buy Twitter, the “real-time stream” upgrades to the social network’s home page, and its acquisition of FriendFeed, a streaming feed aggregator.

The feature will soon expand to third-party services that let you update your Facebook status, presumably including status message aggregators such as TweetDeck and Seesmic Desktop.

Engineer Tom Occhino explains it in a post on the Facebook blog:

It’d also be a formidable rival to the “analytics dashboard” that Twitter plans to start selling to businesses later this year, which would be the San Francisco-based company’s first concrete revenue model.

This new feature basically means that you can link to the profiles of your friends and other pages on Facebook, and that your friends will be informed when they’ve been tagged. It’s currently rolling out to members’ profiles.

Facebook on Thursday announced that members can now link to other members’ profiles in their status messages by using the @ symbol. The move is clearly inspired by the popularity of Twitter’s “@-replies.”

Here's a visual of how status tagging works on Facebook.

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Facebook)

Wolfram’s launch fanfare was followed by much confusion about what Wolfram actually is. One thing that’s clear is that the service has an impressive amount of data. What’s not clear is if and when it will ever make money.

CNET News’ Tom Krazit recently wrote about a licensing deal between Microsoft’s Bing “decision engine” and Wolfram Alpha (two non-search engines join up to create a super search engine?) that “allows Bing to present some of the specialized scientific and computational content that Wolfram Alpha generates.”

SF weather

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APIs are at least a good start in relation to monetization–holding the Alpha data captive within its site meant that it would never go beyond its own traffic, a recipe for disappointment and counter to the link economy that has been built around sites like Twitter.

According to the Guardian, Wolfram will be opening its curated data to be queried via an application programming interface, or API. Currently, you can view results in a browser, export them as a PDF, or “play” them using a Mathematica plug-in. The ability to use the data on other sites and for other means, such as computations in spreadsheets, is appealing, if not earth-shattering.

In today’s socialized Internet, APIs to your data are the barrier (or door) to getting users hooked on your data. Regardless of whether through an API that controls a cloud service like Amazon Simple Storage Service (S3), or the ability to get communications in and out of Facebook, users want to consume data in the way they feel most comfortable. Any company that creates or aggregates data needs to make it available, if it expects to ever hit critical mass.

If Microsoft is serious about taking on Google’s geek factor, and asserting its dominant position in spreadsheets and higher education as Bing grows, then the data from Wolfram adds a new dimension. From the consumer perspective, the more informed the data is, the better, but both Bing and Alpha have a long way to go to catch up to Google.

(Credit: Screenshot by Dave Rosenberg/CNET) Wolfram Alpha, the “computational knowledge engine” developed by Mathematica, will soon allow its dynamic search results to be queried and mashed up in a variety of new ways.

Sidewiki is a new addition to the Google Toolbar that will let users read comments on any Web site and add their own in a special interface on the left hand side of the screen enabled by the toolbar. This idea has been tried before by others, but Google is proposing to use an algorithm to rank comments by quality and to link comments to a user’s Google Profile.

Google Toolbar is available for Internet Explorer and Firefox, and you’ll need to download the toolbar to get started with Sidewiki. Current Google Toolbar users will see the Sidewiki button shortly as Google works out a few kinks in the delivery process, but they can re-download the toolbar if they want to get started.

Google plans to try its hand at the bane of many a Web publisher’s existence: comment moderation.

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Google)

This kind of service will likely sink or swim on the strength of its ranking algorithms, but could give readers a way to discuss, correct, or clarify static Web pages that don’t allow reviews or comments directly on the page.

You can share your comments with your Facebook or Twitter accounts, and can post a link to a blog item discussing that Web page with a snippet of the text, Sengupta said. Only Google Toolbar users will be able to see the comments on the Web page, obviously, but Google plans to work on an API (application programming interface) that will allow developers to use Sidewiki in other places.

Google has developed an algorithm that it says can filter out obvious spam, naughty words, and the classic all-caps technique employed by some of the Internet’s more unhinged pundits, said Caesar Sengupta, group product manager at Google. As comments build over time, a recursive algorithm can analyze the quality of past comments using reader votes on the comment’s usefulness.

Sidewiki–shown on the left-hand side of this page–lets Google Toolbar users add comments to any Web page.

It will be more than a little pulsating to see where the courts might bang their gavels on this issue. But perhaps the saddest part of this strange episode is the reason why Port and Cohen allegedly fell out. According to the Daily News, Cohen said some not-so-nice things about Port to her ex-boyfriend. Oh, ladies. Is it really worth getting all this publicity, all this darned fame, over something that might have started as a little tittle-tattle?

Strazzullo will invoke the Founding Fathers in his argument, he said. And it is an interesting argument, one that perhaps extends beyond the blogs Google hosts to every area of personal information that the company holds. What should anyone who uses Google’s services reasonably expect from the company in terms of privacy?

It is an interesting argument, one that perhaps suggests a future in the law, should a fashion career not satisfy.

And it seems that Port intends to test the boundaries of the law by attempting to sue Google. The 29-year-old student at the Fashion Institute of Technology told the Daily News that she will launch a $15 million suit against the entirely non-skanky company from the Left Coast (the blog was hosted on Google’s Blogger).

Oh, please think carefully before you do, Madam.

You may be moved a little by Port’s logic. Firstly, she told the New York Daily News that it was Cohen who caused all the fuss: “Before her suit, there were probably two hits on my Web site: One from me looking at it, and one from her looking at it (…) That was before it became a spectacle. I feel my right to privacy has been violated.”

However, once the judge made her order, things changed.
“I would think that a multibillion dollar conglomerate would protect the rights of all its users,” said Port. Her attorney, Salvatore Strazzullo, told the Daily News that Google “breached its fiduciary duty to protect her expectation of anonymity.”

“When I was being defended by attorneys for Google, I thought my right to privacy was being protected,” she told the News.

(Credit: Cc Foxtongue/Flickr)

Last week, a judge ordered Google to reveal the name of a blogger who may have defamed Vogue model Liskula Cohen. Now Rosemary Port, whose “Skanks in NYC” blog suggested Cohen was a “skank” and a “ho” among other potentially negative descriptions, is now turning a little of her “frank in NYC” wrath on Google.