Feeds

Red Hat swells sales and profits in fiscal Q2

So much Unix to eat, so little time

Top three mobile application threats

Commercial Linux distributor and virtualization and cloud computing player Red Hat just continues to grow organically like a batch of yeast. Or an open source collective from outer space (well, North Carolina anyway) that feasts on Unix servers.

In the second quarter of fiscal 2012 ended August 31, Red Hat's revenues embiggened by 28 per cent, to $281.3m, and net income exploded by 69 per cent, to $40m. Support subscription contracts for its Linux, middleware, and other software were up by 28 per cent to $238.3m and training and services revenues kept pace, hitting $43m. Deferred revenue rose by 25 per cent in Q2, to $813m, and the company is sitting on $937.2m in cash and equivalents. That makes Red Hat the biggest and strongest open source company in the world and perhaps the only one that will ever grow to this size because of the difficulty of competing with Red Hat.

In a conference call with Wall Street analysts going over the numbers, Jim Whitehurst, Red Hat's president and CEO, said that of the top 25 deals up for renewal in the quarter, all 25 renewed and that they renewed, in aggregate, at a rate of 150 per cent the value of the original values of the contracts at those companies that renewed. In general, these top 25 deals renew at 120 to 130 per cent of original value.

Charlie Peters, CFO at Red Hat, gave out stats on the top 30 deals (whether they were new or renewals) for the quarter, as the company has been doing for years. And for only the second time in the company's history, all 30 deals were worth at least $1m. Three of those deals actually exceeded $5m.

The Enterprise Linux distro drives the bulk of the company's sales still, but a dozen of those deals had a JBoss component and two of them were nothing but JBoss. And despite the difficulties in the financial services and government sectors, Peters said that these two industries were prominent in the top 30 deals – mainly because they are trying to cut costs and are ditching legacy systems.

With Oracle talking about a slight uptick in Sparc Unix system sales and IBM growing its Power Systems-AIX business quarter after quarter, you might be thinking that the Unix-to-Linux migration pace was slowing.

Whitehurst said on the call that whatever uptick that Oracle and IBM are seeing, Red Hat is seeing no change in the rate of migration from Unix to RHEL.

"We are in the take-share game, and we take share from Unix, we take share from free Linux, and we take share from Windows," said Whitehurst. As for the Unix opportunity, Whitehurst said that "we're nowhere near the end of this," despite what marketing reports you might read about the Unix market from researchers IDC and others.

"We're in the fourth inning, where the IDC reports show we're in the seventh inning," and that, said Whitehurst, is an assessment based on what the Red Hat sales force and channel is telling him. "You have whole markets like Korea that have hardly started on Linux," he added, and said that as far as Red Hat could tell, there were mountains of Unix still to be replaced at banking and telecommunications companies as well as government agencies – even those that had long since moved some of their workloads to Linux.

While Red Hat's commercialized KVM hypervisor, Enterprise Virtualization, has not contributed materially to revenues and profits yet, Whitehurst said that the company was gearing up to take on VMware and Microsoft in the data center with the RHEV 3.0 hypervisor that is in beta now and that will ship later this year. VMware's memory tax with its ESXi 5.0 hypervisor is compelling companies to look for an alternative to host Windows-based virtual machines, and the Linux enthusiasts within corporations are also giving RHEV 3.0 a serious look.

"We're having an exploding number of POCs," Whitehurst said, referring to proof of concepts, or probably more correctly, proofs of concept. "In fact, one of the biggest pushbacks I am getting from my sales force is resources for POCs for RHEV 3.0."

Looking ahead, Peters raised Red Hat's revenue guidance for the fiscal 2012 year by $45m, so it is now between $1.12bn and $1.13bn; non-GAAP earnings per share will be in the range of $1.03 and $1.05. For the third quarter, expect sales to be $288m to $290m, with non-GAAP EPS of 25 cents or 26 cents. ®

Application security programs and practises

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
Microsoft: We're making ONE TRUE WINDOWS to rule us all
Enterprise, Windows still power firm's shaky money-maker
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.