Tag Archives: rht

AT&T Leads In Private Cloud, OpenStack Software: Goldman Sachs

AT&T ( T ) will likely be the biggest user of OpenStack cloud computing software worldwide, says a Goldman Sachs report on growth in private clouds. “AT&T will likely become the largest OpenStack environment in the world, as they expect to build out their private cloud to 500,000 nodes (servers) and span across hundreds of data centers,” said Heather Bellini, a Goldman Sachs analyst, in a research report. AT&T and Verizon Communications ( VZ ) in January joined Facebook ’s ( FB ) Open Compute Project , which helps companies design and build low-cost data centers with open-source software. Behind VMware ( VMW ) and Microsoft ( MSFT ), OpenStack is the third-most-popular software technology for private clouds  —  data centers that operate behind a corporate security firewall. OpenStack helps corporate IT departments manage data centers packed with computer servers. Rackspace Hosting ( RAX ) and government space agency NASA co-developed OpenStack in 2010, aiming to make the software a cloud computing standard. Many companies now back OpenStack, including Hewlett Packard Enterprise ( HPE ), Red Hat ( RHT ), Intel ( INTC ), IBM ( IBM ), Cisco Systems ( CSCO ) and Dell. AT&T plans to transform its massive network by 2020 — with software running on standard computing gear replacing specialized hardware. “AT&T hopes to run every call through its OpenStack infrastructure by 2020,” said the Goldman Sachs report. “The company believes it can take out  billions of dollars in capital spending and operating expenses from moving to private cloud as they can use commodity pizza boxes instead of proprietary Cisco boxes. The entire infrastructure will be automated, helping AT&T operate at a faster pace and bring in new services, which is easier to do when they are software-based.” AT&T is using OpenStack software provided by startup Mirantis, says Goldman Sachs. It says Verizon is also a Mirantis customer. Privately held Mirantis, based in Sunnyvale, Calif., says its investors include the venture capital arms of Intel, Ericsson ( ERIC ), Dell and Goldman Sachs ( GS ). Goldman Sachs says Red Hat and VMware are the leading providers of OpenStack software for private clouds. Image provided by Shutterstock .

Amazon Customers Confirm: Cloud Transition Still Biggest Trend

After tracking down top tech execs of 10 Amazon Web Services customers and nine AWS “premier consulting partners” for interviews, Deutsche Bank analysts came away convinced that the migration to the cloud is still “the biggest and most disruptive trend in the enterprise IT market today.” Aside from “assessing macroeconomic risks to 2016 IT budgets (as) the topic du jour,” many tech execs are slowing their IT spending as they prepare to move their enterprises to the cloud, said Deutsche Bank analyst Karl Keirstead in a research note Tuesday. Keirstead questioned whether the macro headwinds that many blame for the current softness in tech spending are really at fault. “Even Tableau Software ( DATA ) cited this phenomenon,” he wrote. Tableau stock notoriously gapped down 49.5% Feb. 5, spooking investors and dragging many software stocks with it, after offering 2016 guidance that missed Wall Street expectations. Tableau stock, down a fraction, near 40, in afternoon trading in the stock market today , is more than 50% off its Feb. 4 close and 70% below its all-time high above 131 set last July. Amazon ( AMZN ) stock was up 2.5% in afternoon trading Tuesday, near 520 and 25% off its all-time high of 696.44 set in December. The runway is still enormous for cloud migration. Amazon’s AWS, Microsoft’s ( MSFT ) Azure and Alphabet’s ( GOOGL ) Google Cloud Platform combined have grown revenue to about $10 billion annually, a “tiny penetration” of the $500 billion to $1 trillion spent annually on tech services and products, Keirstead said. “The trend to AWS is clear … as more and more large enterprises are shuttering private data centers in a quest to become ‘data center independent’ and younger and smaller customers are piggy-backing on AWS as a faster and cheaper way to scale up in new geographies,” he wrote. Neutral Toward Oracle, Security Vendors The big legacy IT infrastructure vendors are feeling the brunt of the migration, he said. Those interviewed were “cautious” toward managed hosting and colocation data center vendors, neutral toward enterprise software developer Oracle ( ORCL ) and neutral (not negative)  toward security vendors because “most” customers won’t rely only on AWS security, Keirstead says. “It was a mixed  bag for Red Hat ( RHT ), as several of the ‘all-in’ customers seemed content to move to Amazon’s own Linux distribution,” he wrote. He said feedback was “bullish” on software-as-a-service companies  Salesforce.com ( CRM ) and Workday ( WDAY ). “We now wonder if AWS is creating a tailwind for the SaaS (Software as a Service) vendors … and if the IT services vendors could get a lift as enterprises look to move or re-platform workloads to make them more cloud-friendly,” Keirstead mused. Deutsche Bank maintains buy ratings on Microsoft, Salesforce and Amazon.  Salesforce is expected after the close Feb. 24 to report earnings up 36% for the January quarter. Salesforce stock was down a fraction Tuesday afternoon, near 59 and 29% off a Nov. 19 all-time high at 82.90. Rival Workday stock was up 2.5% Tuesday afternoon, near 50.50, still 48% off nearly two-year high set in October 2014. It’s scheduled Feb. 29 to report an adjusted loss of 4 cents per share for its fiscal Q4 ended in January, vs. 6 cents lost in Q4 a year earlier. Keirstead said he doesn’t doubt that macro pressure is “keeping a lid on infrastructure IT spending,” but big legacy players Cisco Systems ( CSCO ), IBM ( IBM ) and EMC ( EMC ) “have cited a ‘tough macro’ seemingly every quarter for 12-plus months, he says. “It is entirely plausible that the ongoing weakness in technology capex, private data center build-outs and hardware refresh activity is also due to ongoing structural shifts as large enterprises rethink their IT infrastructures to prepare for a transition to the public cloud model.”                  

Red Hat Warms Up, And Microsoft Azure Hasn’t Even Kicked In Yet

Didn’t take long for investors to follow analyst Gregg Moskowitz’s upgrade clue. Red Hat ( RHT ) stock turned red hot again briefly, up 3% in morning trade in the stock market today , before cooling to close up 1.4% at 68.62 Thursday, 19% off a 16-year high of 84.44 touched Dec. 30. An analyst for Cowen, Moskowitz had just issued a research report Thursday morning, making the case that Red Hat’s “valuation looks compelling once again” and upgrading the stock to outperform from market perform with an 86 price target. Red Hat, based in Raleigh, N.C., is the fast-growing developer of software, built on the open-source Linux operating system, that manages vast enterprise data, be they in the cloud or in traditional on-premise operations. Microsoft ( MSFT ) announced in November that it would run Red Hat hybrid software on Azure, Microsoft’s cloud service. How fast is Red Hat moving? Earnings grew 14% and revenue 15% in the third quarter ended Nov. 30, although analysts polled by Thomson Reuters think that for the current quarter, Q4, profit will moderate to 9% growth from a year earlier of 47 cents per share minus items, on sales up 15.7% to $537 million. “While we have been positive on the stock for a long time, our recent market perform rating was largely valuation-based,” Moskowitz said. “However, the stock has significantly underperformed this year (down 18%, vs. the Nasdaq down 10%), which has presented investors with a favorable risk/reward once again.” Moskowitz said that his crew’s recent checks with midsize and big IT customers suggest that Red Hat Enterprise Linux (RHEL) — its core software, first issued 13 years ago — is likely to grow faster than the 2% annual pace that research firm Gartner gives the overall Linux market. “Meanwhile, though not yet inflecting, demand for OpenStack continues to rise, and we expect another year of high growth (off a still relatively low base),” Moskowitz wrote. OpenStack is a free, open-source software platform for cloud computing. “We also believe RHT’s recent partnership with Microsoft Azure (not in our numbers) should create significant revenue synergies for RHEL (and Azure) over time,” Moskowitz added. “Further, one of our public cloud contacts we recently spoke with sees material upside from the partnership and believes the power of Microsoft’s distribution could also drive an inflection in sales for RHT’s CloudForms hybrid cloud management software. “Longer term, we believe containers will become increasingly prevalent and that RHT is very well placed to benefit from this unfolding trend, with native support built into RHEL and OpenShift, and with RHEL Atomic Host specifically targeting the opportunity.” Containers allow software to run reliably in a variety of computing environments. OpenShift is a Red Hat platform-as-a-service product; RHEL Atomic Host is an operating system. With a market cap of $12.5 billion, Red Hat is the third largest member of IBD’s Computer Software-Desktop industry group — led, of course, by Microsoft with about a $409 billion market value. Adobe Systems ( ADBE ) is second-largest at just over $43 billion. Red Hat’s stock, however, earns a 79 Composite Rating, which means that it performs better than 79% of all publicly traded firms on a variety of metrics. Microsoft carries a slightly better Composite Rating of 83 and Adobe a strong 96. Microsoft closed down 0.4% Thursday and Adobe fell 1.3%.