• 12/20/2013
    10:16 AM
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Red Hat On A Roll

Red Hat is still open-source's $1 billion baby, and then some. Billings take off, suggesting the Linux company is heading for a strong conclusion to fiscal 2014.

Red Hat reported revenue of $397 million in its third quarter, endeding Nov. 30, up 15% over the same period last year. Net income was $52 million or 27 cents per share, compared to $35 million or 18 cents per share in the same quarter a year ago.

The revenue slightly outstripped the 14% increase in business operating expenses, including sales and marketing and research and development, Red Hat CEO Jim Whitehurst reported after the close of trading Thursday. Red Hat became the software industry's first $1 billion open-source company last year, its fiscal 2013. It is currently reporting fiscal 2014.

Red Hat shares were up slightly during the day at $49 in advance of its quarterly earnings report. After the report, shares rose 11% in afterhours trading to $54.40. Red Hat continues to convert more customers to its longer-term subscription pricing, which now constitutes 86% of revenue and is usually taken as a sign of subscription-company health.

[Red Hat is looking to developer platform OpenShift to compete. See Red Hat Takes On VMware For PaaS Crown.]

Red Hat appears to be gaining lift from two wider industry trends as well as its own sales efforts.

Red Hat's Jim Whitehurst.

The x86 server architecture has resumed taking over a larger share of the datacenter, according to IDC market research. It gained 2.8% of the server market by revenue and now constitutes 79% of sales. The trend favors both Linux providers and Windows. Twenty-eight percent of all servers shipped by manufacturers, a category that includes both x86 and non-x86, run Linux, while 50% run Windows. Unix servers, such as Oracle's Solaris/Sparc-based units or IBM's AIX/Power-based units, constituted just 11% of server revenue. The total for all server sales declined year-over-year by 3.7%, IDC reported.

The increasing use of x86 servers in public and private cloud computing configurations also favors Linux. Many white-box servers produced without a major manufacturer's brand are shipping to web companies, such as Google or Facebook, or public cloud providers, such as Rackspace or Amazon Web Services.

The gains are actually a little stronger, if you look at third-quarter billings, which were booked but not all collected in the third quarter, according to Charlie Peters, Red Hat's CFO. Billings were $453 million, up 19% over the year ago quarter. "We experienced an acceleration in our billings proxy growth in Q3, both year-over-year and sequentially, due in part to the strengthening of our European and U.S. federal government businesses," he said in the earnings announcement.

Red Hat's Enterprise Linux and JBoss middleware "address the high-growth opportunities in the data center to modernize and move away from legacy proprietary software in order to deploy hybrid cloud technologies," Whitehurst said.

Red Hat faces growing competition from Canonical's Ubuntu, which is also popular in developer cloud deployments. Oracle Linux, based on the CentOS copy of Red Hat, is also used by database customers to run Oracle systems. Suse Linux includes the latest version of OpenStack, Havana, in its Suse 13.1 release.

Charles Babcock is an editor-at-large for InformationWeek, having joined the publication in 2003. He is the former editor-in-chief of Digital News, former software editor of Computerworld, and former technology editor of Interactive Week.

Emerging standards for hybrid clouds and converged datacenters promise to break vendors' proprietary hold. Also in the Lose The Lock-In issue of InformationWeek: The future datacenter will come in a neat package. (Free registration required.)


Linux on the Desktop is also gaining marketshare
Regardless of what FUD you have read that was written by Microsoft, Linux on the Desktop is gaining a significant increase in popularity due to end of life for XP and no more Windows 7 license sales in 2014. A good example of this gain in Linux market share on the Desktop can be seen by looking at the meteoric growth of a new but highly innovative Linux Distro called Robolinux that runs Windows XP and 7 sand boxed inside it, making Windows 100% immune to viruses and malware. Too many Windows User's refuse to migrate to Windows 8 for a plethora of reasons and they are also fed up with viruses, but still need to run their Windows applications.
Red hat PaaS Push

Red Hat is making quite a PaaS push, as Charlie has noted in previous articles. Anyone care to chime in on what Red Hat must do to seal the deal with your company on the PaaS front?

Re: Red hat PaaS Push

I agree with you there. Thanx for the post


mentale dieet plan

Olympus is falling...

EOL for XP and no more Win 7 license sales? Microsoft is convinced that they can force you to use Windows 8, no matter how poorly it is designed, how vulnerable it is to attack, or how much people just don't want it. They are alienating their corporate user base by refusing to support XP, despite their customers significant investment in custom software that has not been ported to Windows 8. There are reasons for this, which have been hashed to death in forums and magazines, but Microsoft is not listening. Server 2012 pushes in your face an interface designed for a tablet... on a server... forcing admins to spend their time changing it,making it usable again as a server, or forcing you to install as server core.  They don't care that they are forcing you to waste your time. And now... Lets change your licensing "model". I work for a large university system in California. Microsoft is changing our license "model" to force us to repurchase licenses bought as perpetual licenses... for systems we already own and operate, not new installations. There is now a Microsoft "Certification" as a Microsoft licensing specialist...???... You PAY to be certified to figure out THEIR licensing??? and BTW, there is NO BENEFIT TO YOU for this "certification", no price breaks, nothing. And why would I do that??? When was the last time Microsoft asked YOU, what do you need?  How can we make our products better for YOU? Remember YOU, the customer? with the MONEY? That they want? This is not a customer oriented company, never has been. Their power is only in market share, they don't innovate, they don't build what you want, and what they do build is crap. You will be forced off of XP, and you will be faced with a choice; buy Windows 8... or buy something else.  The truth is that you will have to retrain your employees, buy new software that will look and be different, and live through those growing pains. The question is do you move to the next dysfunctional security,licensing, and support nightmare offered by Micro$oft and empty your wallets, or do you take this training and change scenario and move to something new and worthwhile? Turn this into an opportunity to free yourself from this ridiculous situation and invest in your own future, not the future of a flailing company that is forcing you to buy their next product in a desperate attempt to cling to that market share. Change is a fact, not a variable. Make it an opportunity for your organization and get off the micro-go-round. Look at the European nations... one by one they are moving away from windows and embracing operating systems like Ubuntu, Oracle Linux, Suse, etc. . It can be done, with a lot less pain then you already have with Windows. You do have a choice, and the alternative is not even scary, it's just different. You're going to have to learn something different anyway, now is the time to move.

Is that what's going on in Europe?

Red Hat's billings are up in Europe, for example. Is that a sign of Microsoft users there turning away from Windows 8 to Linux, on the server? On the desktop? I don't know that it is, but European users have always been Unix/Linux fans on the server and may be becoming more so.