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Red Hat Shows Long-Term Thinking in a Short-Term World

Stocks in this article: GOOG RHT RAX VMW

In collaboration, credibility is the coin of the realm. You have to scale intimacy. You have to be transparent on things like fixing bugs and handling contributions. You must manage relationships among companies that, in all other areas, may be direct competitors.

It took Red Hat years to get JBOSS functioning in this way, after buying the middleware company for $350 million in 2006, as reported by Information Week . It's still one of the biggest deals on an open source code base. It took some courage to commit to OpenStack, first sponsored by Rackspace (RAX), as its cloud infrastructure solution, as ZDNet reported in August. Red Hat programmers are now among the biggest contributors to that code base, as a recent analysis at Github showed.

I saw some of this in person, this summer, at the Red Hat Summit in Boston. There is not a lot of "I" there. There is a whole lot of "we" there.

Now there are problems with Red Hat's story. VMware (VMW) still outsells it in virtualization, an important cloud ingredient, by a wide margin. Red Hat is investing well ahead of the "private cloud" boom, so some earnings weakness is to be expected, and the future of its own cloud offerings, like "OpenShift," a cloud platform, remain unknowns.

But, like Google, and like other quality companies, Red Hat knows what it's about. It has a clear vision, one that its employees understand, one that is easy to communicate. It has a lot of opportunity, within that vision, to grow further.

That's what I look for in a tech investment. Stocks will rise and stocks will fall, but companies that grow know their way.

At the time of publication, the author had positions in GOOG and RHT.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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