Measuring Profits: Microsoft vs. Red Hat

Microsoft’s stock dropped sharply today because the company’s latest quarterly profits didn’t quite meet Wall Street’s expectations. Meanwhile, The VAR Guy and other open source bloggers continue to hype Red Hat and Linux as growing threats to Microsoft. But before you suggest open source will destroy Microsoft’s profits, take a look at these stagging financial figures.

Microsoft’s income for its most recent quarter was a staggering $4.3 billion. In other words, Microsoft generates a robust $47.3 million profit every day of each quarter. Or, $1.97 million in pure profit every hour. For a dead company, that sure sounds healthy to The VAR Guy.

Now, compare Microsoft’s profits to Red Hat’s financial results. During its most recent quarter, Red Hat’s net income was $17.3 million. Do some fast math, and you’ll discover that it takes Microsoft less than half-a-day to exceed Red Hat’s entire quarterly net income.

So, the key takeaway: Open source has great momentum and Red Hat is on its way to becoming a $1 billion company. But anyone who suggests open source has destroyed Microsoft’s business hasn’t really looked at the numbers.