Red Hat remains open-source’s $1 billion baby, after which some. Billings take off, suggesting the Linux company is heading for a robust conclusion to fiscal 2014.
Red Hat reported revenue of $397 million in its third quarter, endeding Nov. 30, up 15% over an analogous period last year. Net income was $52 million or 27 cents per share, in comparison to $35 million or 18 cents per share inside 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 can be currently reporting fiscal 2014.
Red Hat shares were up slightly in the course of the day at $49 just before its quarterly earnings report. After the report, shares rose 11% in afterhours trading to $54.40. Red Hat continues to transform more customers to its longer-term subscription pricing, which now constitutes 86% of revenue and is often taken as an indication of subscription-company health.
[Red Hat is asking to developer platform OpenShift to compete. See Red Hat Takes On VMware For PaaS Crown.]
Red Hat seems to be gaining lift from two wider industry trends in addition to its own sales efforts.
The x86 server architecture has resumed taking on a bigger share of the datacenter, in accordance with IDC market research. It gained 2.8% of the server market by revenue and now constitutes 79% of sales. The rage favors both Linux providers and Windows. Twenty-eight percent of all servers shipped by manufacturers, a class that features both x86 and non-x86, run Linux, while 50% run Windows. Unix servers, along with Oracle’s Solaris/Sparc-based units or IBM’s AIX/Power-based units, constituted just 11% of server revenue. The whole for all server sales declined year-over-year by 3.7%, IDC reported.
The increasing use of x86 servers in private and non-private cloud computing configurations also favors Linux. Many white-box servers produced with no major manufacturer’s brand are shipping to web companies, similar to Google or Facebook, or public cloud providers, equivalent to Rackspace or Amazon Web Services.
The gains are now just a little stronger, once you have a look at third-quarter billings, that have been booked but not all collected within the third quarter, in step with 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 partly to the strengthening of our European and U.S. federal government businesses,” he said inside the earnings announcement.
Red Hat’s Enterprise Linux and JBoss middleware “address the high-growth opportunities within the data center to modernize and move faraway from legacy proprietary software as a way to deploy hybrid cloud technologies,” Whitehurst said.
Red Hat faces growing competition from Canonical’s Ubuntu, that’s also popular in developer cloud deployments. Oracle Linux, in response to the CentOS copy of Red Hat, can also be utilized by database customers to run Oracle systems. Suse Linux includes the newest 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’s the previous editor-in-chief of Digital News, former software editor of Computerworld, and previous technology editor of Interactive Week.
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