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What is an Open Source Company Really Worth?

ScuttleMonkey posted more than 6 years ago | from the sleeping-with-dollar-signs-in-your-eyes dept.

Software 82

CNet has an interesting profile of MySQL, JBoss, and Zimbra, exploring what an open source company is actually worth. "Given how slowly revenue accumulates in an open-source company--assuming it is recognizing subscriptions over 12 months--bookings is probably the valuation metric being used or at least strongly considered. It surely is the metric by which the start-up wishes to be measured. So while Savio suggests we open-source entrepreneurs may be "sleeping with dollar signs in (our) eyes," there's clearly a lot of work to do before most open-source companies are worth selling. It's not worth selling out for $100 million. Not for the venture-backed companies, anyway."

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82 comments

Well this is a new low... (4, Funny)

JordanL (886154) | more than 6 years ago | (#22097738)

So I guess since no one reads TFA anyway the link wasn't included...

Re:Well this is a new low... (1)

Mateo_LeFou (859634) | more than 6 years ago | (#22098012)

Maybe CNET forbids linking to their site, y'know, to protect their intellectual property

Last time a checked (0)

Anonymous Coward | more than 6 years ago | (#22097784)

I'd say they're worth many bags of Cheetos and cases of Mountain Dew, which is after all, the preferred open source currency.

Link to TFA (5, Informative)

linumax (910946) | more than 6 years ago | (#22097794)

Re:Link to TFA (1)

mqduck (232646) | more than 6 years ago | (#22103600)

*Busts out the anti-Offtopic mod spray*

I have gone to look for myself, if I should return, before I get back, keep me here.
Dude, your sig and mine should hook up.

I can't RTFA! (2, Insightful)

TibbonZero (571809) | more than 6 years ago | (#22097834)

How did this make it to the front page? Someone needs to know that links are better than just a summary. I'm honestly interested in reading for this, but instead of clicking on a link (hello, this is the web!) I have to Google around for it. Lame submission.

Re:I can't RTFA! (1)

MarkovianChained (1143957) | more than 6 years ago | (#22098062)

Someone needs to know that links are better than just a summary.
You must be new here. Once you get used to your stay, you won't notice if there's a link, or fifty links, or no link.

Re:I can't RTFA! (1)

argiedot (1035754) | more than 6 years ago | (#22098446)

There's some irony in a millions-uid user saying that to hundred-thousands-uid user.

Most recent example (0, Redundant)

MrMarket (983874) | more than 6 years ago | (#22097862)

$1 Billion [reuters.com]

Re:Most recent example (3, Interesting)

moderatorrater (1095745) | more than 6 years ago | (#22098018)

Most recent example
That's covered in the article...

What's missing from the article is the usual valuation of a closed source company. Anyone know the answer to that?

Re:Most recent example (1)

dekemoose (699264) | more than 6 years ago | (#22098322)

Same thing as an open source company really. Whatever someone else is willing to pay.

Re:Most recent example (0)

Anonymous Coward | more than 6 years ago | (#22099080)

Thank you. I was hoping someone would have figured out the obvious. Anything, from a stick of chewing gum to a software company, is worth exactly one amount: whatever someone else is willing to pay for it. If someone is ready to write a check for $1b, then you are worth $1b. It's very simple.

Definitions (0)

Anonymous Coward | more than 6 years ago | (#22100252)

Let's start with something simpler. How do you define "open source company" or "closed source company"?

For example, what's Sun?

OSS does not eliminate old rules. (4, Insightful)

jedidiah (1196) | more than 6 years ago | (#22097996)

How do you value ANY company?

They own stuff (buildings), they have staff and they have current revenue.

It really shouldn't be that hard.

I wouldn't evaluate the worth of Oracle based on what I thought the
value of the Oracle RDBMS sourcecode was worth. I would look at what
they are selling to people.

With enterprise software, frontend licensing is just the tip of the iceberg.

MySql corp really isn't that much different than Sun, IBM or Oracle in this respect.

Re:OSS does not eliminate old rules. (1)

cexshun (770970) | more than 6 years ago | (#22099120)

How do I value a company? A company is only worth as much as someone will pay for it, regardless of what the books say. Something I learned a long time ago collecting baseball cards after I bought my first price guide.

Re:OSS does not eliminate old rules. (1)

zippthorne (748122) | more than 6 years ago | (#22101424)

Your metric is trivial. It is useless for evaluating what someone would probably be willing to pay, or what you would be willing to pay.

For that you do what the parent suggested: You examine the revenue, costs, compare to the risk-free interest rate (among other metrics), estimate the value of their physical holdings, estimate realistic growth or subsidence of the revenue stream, and button that up in a nice package you call, "what I'm willing to pay."

Works for billion dollar businesses down to corner stores, though most people will only be able to buy a fraction of a billion dollar business, whereas they might be able or willing to buy an entire corner store.

Re:OSS does not eliminate old rules. (2, Interesting)

tppublic (899574) | more than 6 years ago | (#22099202)

They own stuff (buildings), they have staff and they have current revenue. It really shouldn't be that hard.

But it's not really that easy, either. If you really believe you should measure Google, Microsoft, Intel, GE, P&G, Citibank, and Caterpillar using the same method, then I *guarantee* your formula isn't simple or isn't accurate.

Revenue as measured in GAAP is an accounting construct, not necessarily a great measurement of the prospects of a company. This becomes particularly apparent in cases where revenue must be recognized over time due to support contracts. It also gets modified in strange ways due to reserves for non-payment and the like (note the recent impact on financial companies due to insufficient loss reserves for the risk they were bearing)

These issues result in various differences between cash flow and revenue. In the case of software support, you end up with a revenue stream that is more predictable than it would be with a company that only sells a physical item without support (because the sale event already occurred, and you are recognizing deferred revenue; the cash flow may also differ depending on the contract).

Anyway, the greater predictability of revenue reduces the risk of that revenue, which should alter the value of the company. Note that it can alter it BOTH up and down - there are places where reduced risk implies no upside (think government bonds) and places where the increased predictability of revenue can support a higher valuation (software support contracts)

Re:OSS does not eliminate old rules. (1)

syphax (189065) | more than 6 years ago | (#22099582)


If it were that simple, Warren Buffett [wikipedia.org] wouldn't be worth $55B.

A company's value is the discounted sum of its future cash flows, which are determined by revenues, costs, and anticipated changes in both over time.

The last part is the kicker. Today's costs and revenues tell you something, but they don't always provide great indicators of costs and revenues 1, 2, 5, 10 years down the line.

That's one reason why Buffett has historically avoided new technologies- it's too hard to predict what's going to happen.

Take Apple for example (it's a link to Yahoo! Finance, I promise). Go look at their [tinyurl.com] 1998 10-k [corporate-ir.net] . Revenue had dropped from ~$10B in 1996 to ~$7B in 1997. Apple had losses in both 1996 and 1997. And yet AAPL's market cap (which is the market's aggregate opinion of Apple's value) increased 40x over the past decade.

Did you predict that? I sure as hell didn't. Good job, Steve.

Re:OSS does not eliminate old rules. (1)

merreborn (853723) | more than 6 years ago | (#22099608)

How do you value ANY company? They own stuff (buildings), they have staff and they have current revenue.


You forgot about intellectual property, growth potential, etc.

Using your formula, YouTube would probably have warranted a negative valuation, what with their negligible revenue, huge operational costs, and quarter after quarter of huge losses.

And yet google bought them for a billion dollars.

They had a few things that your formula omits: a uniquely scalable, proven, video sharing/delivery application, millions of users, and the vast majority of the internet video hosting market.

Re:OSS does not eliminate old rules. (1)

rtb61 (674572) | more than 6 years ago | (#22104528)

Actually it is tricky in terms of an open source software company. There is first off the very hard to assemble team of open source software experts (the staff) finding those people and getting them to work together is not as easy as it sounds (just ask M$), then there is the reputation the company has achieved and the level of branding identity it has achieved in the market place, then of course there are the simply things like current revenue, past revenue history and future revenue forecasts and now add to that the growth forecasts not necessarily for that company but for that segment of the industry in which the company participates.

Now on top of all that the buying company can completely fuck up the company that have just bought in as little as one year. So for open source companies it is going to be a tricky. You could be a bit wobbly and do some damage to your purchase before you manage to get you shit together, ala Novel and SuSe or be a SCO and end up smouldering in your very own Caldera.

There are useful formulations available by example (4, Interesting)

postbigbang (761081) | more than 6 years ago | (#22098000)

A public company (think RedHat) trades for X times earnings. Buying RedHat would rationally need to have a return after debt service and 'thinning'. The software is free, but the services and integration and packaging that RedHat does is where the money is.

A private company like Digium, who does Asterisk, has a NIBT and may have additional potential for digital PBX widgets (look at their recent deal with 3Com for an example). They'd probably bring in 7 years run rate as a buy price.

Hyperic, while smaller, has great community development and might bring in more, because of a wider breadth of products touched. I'd value them at 10x annual run rate.

MySQL AB did a great job. Hurray for those guys; they deserve what they got. I hope that Sun can integrate MySQL well without butchering the company and product. Professional results can pay off.

Re:There are useful formulations available by exam (2, Interesting)

smilindog2000 (907665) | more than 6 years ago | (#22098366)

I recently sat next the Digiums VP of sales on a flight. Personally, I feel Digium is on the cusp of a revolution in telephony, but the company needs some good leadership to capitalize on it. I also just spent two days reinstalling freaking TrixBox which had trouble dealing with the crummy TDM400 card I bought from Digium. The VP of sales seems to think their future is in proprietary software sales, like the deal with 3Com. He also is hyped about some acquisition of some proprietary software front-end to Asterisk, but the whole worlds seems to use TrixBox, and I don't see anyone lining up to switch to a non-free alternative from Digium.

Understanding open-source company strategies is a bit mind-bending, and unfortunately, I don't think Digium's current leadership gets it. They may be missing the real opportunity. Instead of making the software great and easy to use, which would lead to virtually universal adoption, they're doing the opposite, to help sell their services and proprietary solutions. If they were able to understand the value of being the provider of virtually all new telephony systems as an open-source platform, I think they'd bag their current strategy.

Problem is, most people think of open-source ventures as having 0 assets, and being worth 0.

Re:There are useful formulations available by exam (2, Interesting)

postbigbang (761081) | more than 6 years ago | (#22098496)

Their current management fits their profile and run-rate. Attracting and incentivizing management takes time, as well as the ability to structure the organization for rapid growth. One more PBX company will need to battle with seventy+ PBX/keyswitch companies already in the marketplace. They're distracted by their hardware revenues, as this makes up a disproportionate amount of their current revenues. I'm hoping it's a phase they're going through or things might go badly for them despite the current quality (very good) of their stable branch of code. Their community relations people have a bit to learn, but herding cats isn't easy. Overall, we would agree.

Re:There are useful formulations available by exam (1)

rbanffy (584143) | more than 6 years ago | (#22100458)

"I don't see anyone lining up to switch to a non-free alternative from Digium"

Don't underestimate the power of the one-stop-shop. Most people really don't care whether their solution is or not proprietary - they only care how much it costs and how well it works.

I don't know TrixBox, but if the proprietary solution they are considering costs significantly less to maintain than the alternatives, I see their users flocking to it.

One of the key selling points of FOSS is the misinterpretation of the "free" part.

Re:There are useful formulations available by exam (1)

postbigbang (761081) | more than 6 years ago | (#22100994)

All of the valuations can be reduced to value. The product/code may have high value, but integration also has value. So does research into device compatibility, features, inherent reliability/stability, as well as use by civilians. The code is free. The implementation beyond that may come at a price.

But this is about the companies, and the added value they provide in a public/private context, too. MySQL has traction as one of the most popular open source projects going. It's strong but not unique in its profile; it's well supported and thoughtfully applied into a myriad of productive applications. The 'staff' is behind it. Sun will use it on many integration projects in a competitive stance with their perceived competitor, IBM, Oracle, and others. Oracle has purchased BEA for a lot of money. Oracle's going after applications, and with vigor. This pays off for them. More power to them.

If we're valuing open source 'companies' and organizations, then it's long term value that's for sale and purchase. The code will improve if the community and others stay with it. Valuations are necessarily a function of this long term return on investment.

Wrong Question (3, Insightful)

curmudgeon99 (1040054) | more than 6 years ago | (#22098070)

This has it backwards. After a vendor such as JBoss has created a fully functionnal application server such as JBoss, what are properties such as WebSphere, WebLogic and JRun worth? How much would you pay once you realize you can get the same outcome for free? Sure, there are some old companies out there who still need the warm fuzzy that comes from paying $15,000 for WebSphere--but in the long run, what is that business worth? Not a lot. JBoss has already pulled a fast one anyway. What used to be free, circa JBoss 4.0.2, (embedding the app server in a shrink-wrapped application) is now for a fee. I used to work for a company that bet the farm on JBoss 4.0.2. And you know what they're doing now? PAYING JBoss. They have no choice.

Re:Wrong Question (1)

Fezzick (913356) | more than 6 years ago | (#22099110)

JBoss has already pulled a fast one anyway. What used to be free, circa JBoss 4.0.2, (embedding the app server in a shrink-wrapped application) is now for a fee. I used to work for a company that bet the farm on JBoss 4.0.2. And you know what they're doing now? PAYING JBoss. They have no choice.
Not sure what you mean by that... I can download the latest JBoss app server for free at: http://labs.jboss.com/jbossas/downloads/ [jboss.com] I'm currently using JBoss 4.2.1 in production without paying a cent (well, I don't have support either, but that's ok for me). What do you mean they have no choice?

Re:Wrong Question (1)

curmudgeon99 (1040054) | more than 6 years ago | (#22099232)

Sorry, I was not clear enough. JBoss is still free when used on a corp's own servers. However, if you are SHIPPING IT IN A SHRINKWRAPPED application, you must pay. That used not to be the case.

Re:Wrong Question (1)

$1uck (710826) | more than 6 years ago | (#22101212)

Still is not the case according to their own FAQ. "Yes, you may bundle JBoss with your software and hardware applications without compromising your commercial licenses. JBoss, Inc. wants to promote the adoption of JBoss, and this is precisely why we chose the LGPL."

Re:Wrong Question (1)

$1uck (710826) | more than 6 years ago | (#22101172)

How did that happen? As long as the company you work for is willing to provide the source code for all the open source software included inside the box (ie JBoss) and specifically any tweaks/changes that the company made to it, they should be free to distribute their software however they see fit including charging for it in shrink wrapped boxes.

2 seconds of googling brought this up:

http://www.jboss.org/opensource/lgpl/faq#bundle [jboss.org]

Hrm... seems like you are spreading misinformation.

GPLv3's Poison Pill and Open Source buyouts... (3, Interesting)

nweaver (113078) | more than 6 years ago | (#22098096)

When a program is "GPLv2 or later" and "Contributions are signed back to the company", if the OSS software is useful the GPL's patent poison pill actually makes it a more attractive buyout target.

You see, when Apple buys out CUPS, or Sun buys out MySQL, they can distribute the code under whatever liscence they want as copyright holders.

Which means, for THEM, its non GPL. But for everyone else, it is GPLv2 or later.

Thus you can still get community support with copyright transfer, but you have a competitive advantage in selling/using it commmercially.

I wonder if the FSF realized that this is a side consequence of GPLv3 and the "or later" clause?

Re:GPLv3's Poison Pill and Open Source buyouts... (4, Insightful)

Alphager (957739) | more than 6 years ago | (#22098200)

That is no side-effekt.
The copyright-owner can _ALWAYS_ choose whichever damn license catches his fancy, including some evil, sign-to-sell-your-soul-style EULA.
It is working as intended.

Working as intended?! (1)

Anonymous Brave Guy (457657) | more than 6 years ago | (#22099172)

It is working as intended.

Well, apart from the whole "commercial entity duping people who were sharing their code under GPL into allowing arbitrary commercial, closed-source uses" part, anyway.

I don't understand why anyone who has chosen to use the GPL after considering what it implies (rather than just because of hype or fashion) would ever sign away their copyright to some commercial entity like this. If you're OK with anyone using your code however they like, just release it to the public domain or pick some BSD-style licence. If you want those distributing work built on it to have to allow others to do likewise, giving your copyright to another group whose primary interest might become the opposite is silly. (I'm not sure how likely it would be to stand up in court, either; a contract generally requires consideration on both sides, so what did you get in return for the other guys getting your copyright?)

Re:GPLv3's Poison Pill and Open Source buyouts... (1)

Kjella (173770) | more than 6 years ago | (#22098876)

This isn't a feature of the GPL (and I'm not sure where patents come into this at all), it's a feature of copyright transfer. They say "We want to make money off dual licensing", you say "I just don't want to maintain and synch my own fork". So you hand it over to them in full understanding that they may use it commercially. In theory, this could happen with any license from GPL to MS Shared Source. Furthermore, I'm not sure what you're trying to say with the "and later" clause. They can't take away old licenses, and they can make new releases be any license they want because they're the copyright holders so how does the "or later" matter at all, except that those that already have a GPLv2 and later license can choose to go GPLv3? In short, there's absolutely nothing the GPL could ever do to meddle with the ownership of the code. The one who writes it, owns it. He can sign it away, in which case the new owner can use it for whatever he wants. That's the consequence no matter the license.

OTOH, we have the BSD license... (1)

ivoras (455934) | more than 6 years ago | (#22098948)

It's curious that the number of big BSD-licensed software (and I'll attach the "BSD-like in spirit" licenses like the Apache license to the bunch) owned by big successful companies is disproportionally small. The OSes (Free|Net|Open)BSD, PostgreSQL and Apache are examples of successful software that's not being supported by a single company - they're practically totally consumer-supported. The only counter-example I know of is PHP, but despite that it's more widespread than both MySQL and PostgreSQL together (and probably as wide-spread as Apache), it's rarely a buzzword of the day. (of course, then there are Microsoft's open source projects released under BSDL but that's a completely different thing).

It looks like while GPLed software can be viral and dangerous to other companies, this very property protects GPL software in a way that's beneficial to the company that developed it. A BigCompany can't realistically fork a GPL software and make it into a separate product, but it doesn't need to when it can simply buy the company that developed it.

Re:GPLv3's Poison Pill and Open Source buyouts... (1)

CrazedWalrus (901897) | more than 6 years ago | (#22099182)

I understand you're including "copyrights are signed back to the company", but this isn't standard in the GPLv3, is it? I haven't read it through, but this phrase would seem out of place. More like an addendum from the copyright holder.

That would mean that straight GPLv[23] software doesn't work that way. The copyright belongs to all of the contributors, not just the author. They'd also have to agree that contributions added by the acquiring company can be kept secret (if distributed) because they contributed to the project under those terms.

Where am I wrong here?

Re:GPLv3's Poison Pill and Open Source buyouts... (1)

HomerJ (11142) | more than 6 years ago | (#22099810)

It's the practice of most open source software to assign copyright back to the project if you contribute.

Example, Program X has some buy that annoys the hell out of me. So I go in, fix it, and submit a patch. Since I wrote the patch, I own the copyright to that portion of the code if they accept my patch.

But this limits what the project can do. If they want to change so some sort of different license, they would have to start either contacting everyone that submitted a patch, or take out the code. So before they officially accept a patch into the main tree, they want the copyright of the code too. This gives them full control over the entire codebase.

So if some major project didn't have a clause that said they want copyright if I want my patch into the main tree, they really couldn't be bought. They wouldn't actually OWN pieces of the project's code.

This isn't actually part of the GPL, it's part of a project's rules in accepting code from the outside.

Re:GPLv3's Poison Pill and Open Source buyouts... (1)

CrazedWalrus (901897) | more than 6 years ago | (#22100294)

Hm. Well, I understand the reasoning, I just wasn't aware this was so widespread.

Isn't this issue the other major blocker for the Linux kernel going to GPLv3 (besides Linus)?

Re:GPLv3's Poison Pill and Open Source buyouts... (2, Interesting)

ChunderDownunder (709234) | more than 6 years ago | (#22103834)

It is a problem for Linux but attempts to avoid the problem have caused another issue in a major free software endeavour: duelling copyright holders.

The codebase? Java.

Back in the old days, Java was licensed with a scary EULA. This was fine for the end user because it was free as in beer. But it was trapped [gnu.org] . OpenJDK [java.net] is the cure. This is fine for end users and end developers. Now if a developer sees a bug (s)he'd like to fix, the license [java.net] allows that.

Before Sun Microsystems released their code through OpenJDK, a rival GNU Classpath effort had been, and still is, producing a clean-room implementation. This prompted Sun to release their code under the same license in the hopes of cross-pollination.

The problem? Classpath and related projects have copyright assignment to FSF. OpenJDK requires copyright assignment to Sun. (Each, I think Sun does, may have copyright shared with the original author.)

So at the moment there's a something of a stand-off regarding this copyright. They're licensed under the same licensed but some code belongs to FSF and some belongs to Sun. So, effectively you either sell your soul to RMS or James Gosling! :) Ironic, given their bitter infamy over emacs!

Until lawyers of FSF and Sun can resolve this dispute, Classpath-derived code won't appear in OpenJDK and OpenJDK-derived code won't appear in Classpath. Third party repositories have been hosted for such hybrids. For the first scenario, IcedTea [classpath.org] exists while for the second scenario BrandWeg [nabble.com] has recently been announced. I quote the announcement for BrandWeg, which may be helpful in clarifying the issue:

This project is still very experimental, and is being conducted outside the repositories of either GNU Classpath or OpenJDK to retain the stability of these code bases and also avoid any unnecessary legal issues at this point (specifically the use of GPLv2 only code in OpenJDK which, if committed to the GNU Classpath codebase, would cause problems should Classpath want to move to GPLv3).

Re:GPLv3's Poison Pill and Open Source buyouts... (1)

rbanffy (584143) | more than 6 years ago | (#22100528)

This is not an effect of the "or later" part. It's an effect of the copyright holder always being able to license the code under whatever license it feels adequate.

Open-source Money License (1)

davidwr (791652) | more than 6 years ago | (#22098114)

You may make as many copies of this money as you want for internal use.

You may distribute copies of this money as long as you provide copies of the printing plates or provide a way to get the printing plates for no more than the costs of copying.

You may include copies of this money in derivative works for internal use.

You may include copies of this money in derivative works you distribute as long as you provide copies of the printing plates or provide a way to get them for no more than the costs of copying.

Worth of a Company (1)

Captain Al (1221246) | more than 6 years ago | (#22098166)

A company worth is based on how much money it will make. How much money it will make is dependent on how much it makes now, and how well you think it can guard and grow this revenue stream. Other databases are available, and other companies could support the MySQL database, and not just the MySQL company itself (Oracle comes to mind). So I'm not sure how they could guard it. Sun should file a 10-K or another SEC filing to show how they valued it. McNealy needs to pull a Jobs, good luck!

Easy Answer (3, Informative)

Nintendork (411169) | more than 6 years ago | (#22098168)

It's worth whatever someone is willing to pay. As is anything else in this world. Make something valuable to someone with lots of money and they'll pay lots of money for it. It really is that simple.

Re:Easy Answer (2, Insightful)

goldspider (445116) | more than 6 years ago | (#22098370)

Informative?

Make something valuable to someone with lots of money and they'll pay lots of money for it.

Doesn't that require one to quantify "value"? And isn't that determination the whole point of TFA??

I imagine such simplistic cliches aren't of much use to real accountants.

Re:Easy Answer (0)

Anonymous Coward | more than 6 years ago | (#22098396)

It's worth whatever someone is willing to pay. As is anything else in this world. Make something valuable to someone with lots of money and they'll pay lots of money for it. It really is that simple.

I don't see how stating the obvious is "Informative" when the article goes beyond this and tries to answer, "What makes an open source company valuable to someone with lots of money?"

Re:Easy Answer (1)

AutopsyReport (856852) | more than 6 years ago | (#22099148)

Not quite that simple.

I'm willing to pay $100 for a Dodge Ram. But does my wish define the price? Of course not. Even if I was willing to pay $100,000, the price of the $40,000 truck will not change. This isn't a wishing game.

What someone is willing to pay is a price that resulted from another's work to determine the value of the company. Don't kid yourself into thinking it's determined by someone playing with rand()

Re:Easy Answer (2, Informative)

Anonymous Coward | more than 6 years ago | (#22099450)

It's worth whatever someone is willing to pay. As is anything else in this world. Make something valuable to someone with lots of money and they'll pay lots of money for it. It really is that simple.

Actually, you've got it wrong. The eBay Theorem states that everything is worth what two people are willing to pay for it.

Re:Easy Answer (1)

ABoerma (941672) | more than 6 years ago | (#22101922)

Actually, everything is worth what the second-highest bidder is willing to pay, plus some epsilon that's needed to outbid him.

The point... (4, Interesting)

rtechie (244489) | more than 6 years ago | (#22098270)

The extremely poorly articulated point of the posting and article is that open source companies are often criticized because they face a serious issue other software companies do not. That issue is the re-use of their source code by other companies.

What is to keep another company, say NySQL Inc. from taking the source code to MySQL, compiling their own product, and then reselling it? Nothing. You might say "It's illegal!", but that's ONLY in the USA. I'd bet there are at least 3 companies in China reselling MySQL right now. Since they keep their source code release up to date, this means NySQL's product will always be up to date. And since NySQL has a bigger presence in China, Chinese customers will always go to them first.

Re:The point... (3, Insightful)

blitzkrieg3 (995849) | more than 6 years ago | (#22098786)

What is to keep another company, say NySQL Inc. from taking the source code to MySQL, compiling their own product, and then reselling it? Nothing. You might say "It's illegal!", but that's ONLY in the USA.
Where do you get your information? It is legal to do that in the USA, as long as you adhere to the GPL. Though I suspect MySQL would have an extremely strong case for trademark infringement.

Re:The point... (2, Interesting)

rtechie (244489) | more than 6 years ago | (#22099290)

Where do you get your information? It is legal to do that in the USA, as long as you adhere to the GPL. Though I suspect MySQL would have an extremely strong case for trademark infringement.
I proposed that a company would obtain the GPL source code for MySQL, compile it, and then SELL the resulting binaries. That clearly is illegal, both a violation of the GPL and MySQL's trademarks.

It's worth noting that this is technically illegal in China too, it's just that these laws are really only enforced in the US and (to a lesser extent) Europe.

Re:The point... (1)

masdog (794316) | more than 6 years ago | (#22099660)

You can sell the resulting binaries - provided you give buyers access to the machine readable source. There is nothing that prevents you from selling GPL'ed software.

Re:The point... (1)

rtechie (244489) | more than 6 years ago | (#22099792)

You can sell the resulting binaries - provided you give buyers access to the machine readable source. There is nothing that prevents you from selling GPL'ed software.
You're right, my bad. However, in my scenario, the reseller WOULDN'T give buyers access to the source since he's trying to impersonate the MySQL corporation.

Re:The point... (1)

rhizome (115711) | more than 6 years ago | (#22102688)

in my scenario, the reseller WOULDN'T give buyers access to the source

Yeah, you might want to mention that up front next time.

Re:The point... (1)

merreborn (853723) | more than 6 years ago | (#22099796)

Selling binaries for GPL'd apps is perfectly legal, as long as you offer to provide the source upon request.

That's exactly what redhat does. They sell linux binaries. They only have access to the source of the linux kernel thanks to the GPL.

There's a whole industry around selling open source binaries. It's called "software distribution", and the FSF condones it. Not everyone has a high bandwidth internet connection, so for many people, downloading a linux ISO is out of the question -- they'd much rather pay a couple of dollars to have someone ship them a DVD.

Re:The point... (1)

Scarblac (122480) | more than 6 years ago | (#22099898)

There's no restriction in the GPL against that at all. Yes, you can SELL the binaries. As long as, obviously, you give the customer all the GPL rights, like an offer to give them the source. But it appears you're saying that selling it isn't legal, while it is.

Re:The point... (0)

Anonymous Coward | more than 6 years ago | (#22099962)

Umm no, the GPL allows you to sell a binary, just need to make the source code available to anyone who has the binary. Also under the GPL whom ever bought your binary has the right to re-distribute to anyone they wish, for any price.

Re:The point... (1)

abigor (540274) | more than 6 years ago | (#22100030)

Maybe I'm misunderstanding you, but it's not illegal to sell GPL software binaries. However, you have to supply the source to the buyer if they ask for it. From the GNU "Selling Free Software" essay:

"Actually we encourage people who redistribute free software to charge as much as they wish or can. If this seems surprising to you, please read on."

Your NySql company would have to comply with this, of course. Maybe you meant they were just selling the binaries and not distributing the source to their customers and I misunderstood.

Re:The point... (1)

Kitsuneymg (815431) | more than 6 years ago | (#22100068)

I proposed that a company would obtain the GPL source code for MySQL, compile it, and then SELL the resulting binaries. That clearly is illegal, both a violation of the GPL and MySQL's trademarks.
No it's not. As long as the package they sell also contains the source and all files needed to build the application, they are still adhering to the GPL.

GPL doesn't preclude selling binaries. It just mandates that the user be able to easily obtain the source from the distributer.

Re:The point... (1)

blitzkrieg3 (995849) | more than 6 years ago | (#22100260)

I proposed that a company would obtain the GPL source code for MySQL, compile it, and then SELL the resulting binaries.
This is one of the most famous misconceptions [gnu.org] about GPL'ed code. I'm surprised that a slashdot reader with such a low uid (in comparison to mine) doesn't know this. Also, look at what Oracle has done with the Red Hat source (just what you've suggested).

Re:The point... (1)

rbanffy (584143) | more than 6 years ago | (#22100680)

You can fork MySQL all you want, but only MySQL AB has the right to re-license it as they please.

Better summary (2)

moosesocks (264553) | more than 6 years ago | (#22098274)

A better summary of TFA: The three most recent high-profile Open-Source acquisitions were massively overvalued (20x+ annual revenue). If you're not being offered at least an order of magnitude more than what your company is actually worth, you aren't trying hard enough.

Of course, if $100mil is the best offer, I'd still take it ;-)

It's not worth selling out for $100 million (4, Funny)

Un pobre guey (593801) | more than 6 years ago | (#22098328)

It's not worth selling out for $100 million

Of course not! It's nothing! It's peanuts! What an insult! What do you take me for, some kind of fool? One day you'll all look up from the gutter, you will, and see King Zoidberg caressing your fancy box!

FP CUM (-1, Troll)

Anonymous Coward | more than 6 years ago | (#22098962)

To any BSD proj?ect, Fly They lloked

Google is not Open Source (0)

Anonymous Coward | more than 6 years ago | (#22100132)

They do a great service to the community by contributing code and projects, but their openness isn't that big compared to other much smaller companies. Not only all their major applications (search algorithms, google earth, etc.) are closed like hell, but they wrote here [google.com] they contributed well over 1 million lines of code and 100 projects. True, and thanks for all the fish, but still the linux kernel alone is over 6 million lines of code. And the rest of the GNU utilities that make the complete system are open too.

Don't take this as bashing or trolling: helping or contributing to FOSS is one thing, being identified as the Open Source company is a very different story.

Re:Google is not Open Source (0)

Anonymous Coward | more than 6 years ago | (#22100962)

it is interesting that you bring this up. for as much as slsahdotters do harold google as an open source giant the fact is that anything that really makes google cash is closed. it speaks volumes for the truth about google.

OSS is simply not traditional (1)

Evets (629327) | more than 6 years ago | (#22100958)

The value of any company is based on the kind of revenue it can generate. The measurements for an OSS company have to be different because they not only can generate revenue directly, i.e. through support contracts, but also they can generate a great deal of money indirectly - through community influence.

There is also the issue of operating costs and how predictable they are.

One must also take into account intellectual property, but relatively few open source projects maintain intellectual property of their own.

For instance, take MySQL. MySQL has one of the largest install bases for a server side application. Taking advantage of the installed base to influence the kinds of functionality people are implementing could be very powerful. There is a very loose connection between MySQL and their installed base, however, so marketing directly to existing customers would not predictably yield a high percentage of success. There's no magic formula for most OSS companies. I think the value must truly be discerned by the way the purchaser intends to utilize the project and it's community.

The more obvious the potential revenue streams, the more potential suitors a project has, and therefore a higher value will need to be placed on it. Also, the predictability of the revenue streams is important. The easier it is to predict how much can be gained through the purchase, the more comfortable businesses will be in making the decision to swallow the project.

With many projects there is also the issue of competition, and how the purchase would influence a market niche. Urchin wasn't OSS, but Google's purchase of Urchin gave their technology mass marketshare nearly overnight and changed the dynamic of the web stats niche dramatically. The value in Urchin wasn't their sales - Google understood the value of influence and information and that particular purchase was very key to their overall strategy and in maintaining the search engine market share that they enjoy.

it's a non-sensical question (1)

ellisbright (1217670) | more than 6 years ago | (#22101572)

There are 2 sides to any transaction. To value a company requires one to know what that company is worth to the buyer. An open source company that makes negative profits could be worth much more than another one that turns a profit if the former one can give the buyer a competitive advantage. Jboss for instance is very valuable for a linux platform (red hat and possibly novell) but of much less value to IBM being that websphere is a competing product and has a large mkt share in the mkt. For open source companies where revenues tend to be softer, than their commercial counterparts the value is tied up in intangibles that matter only when considering the buyer.

Open Source Support (1)

infonote (1065258) | more than 6 years ago | (#22106626)

Open Source companies can make $ by having support contracts with companies. Other companies can provide software customizations to businesses. In other words treat software as a service, not as a product.
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