Red Hat Proves That Open Source Is Good for Business

Critics of free and open source software are fond of making the argument that software must be locked up, patented and jealously guarded if it is to serve as the basis for a successful business. Well, Red Hat just refuted such claims in a big way this week with its fourth quarter earnings report, which blew away analysts' expectations and placed the company well on track for billion-dollar revenues in the upcoming year.

Total revenue for Red Hat's fiscal fourth quarter ending Feb. 28 was $244.8 million, the company announced on Wednesday, representing an increase of 25 percent from the same quarter a year ago. Subscription revenue for the quarter, meanwhile, was $209.3 million--up 24 percent year-over-year. For the full fiscal year, Red Hat's total revenue was $909.3 million--representing an increase of 22 percent over the prior year--while subscription revenue was $773.4 million, up 21 percent over last year.

"With record bookings and billings in the fourth quarter, we are on a run rate to become the first pure-play open source company to achieve a billion dollars in revenues next fiscal year, a milestone achievement for Red Hat and the open source community," said Jim Whitehurst, the company's president and CEO.

The Linux Advantage

Strong demand experienced by the company recently was "largely driven by customers who are modernizing their data centers and preparing their infrastructure for cloud computing," Whitehurst explained. "The comprehensive portfolio that Red Hat has developed with platform, virtualization and middleware products provides enterprise customers with a foundation to deploy the next generation infrastructure."

As a result of this week's report, multiple investment management firms have raised their ratings of Red Hat from "neutral" to "outperform," the Wall Street Journal reported Thursday.

Based in North Carolina, Red Hat is the company behind both the Fedora and the Red Hat Enterprise Linux (RHEL) Linux distributions. Fedora is the free, community version of the software, while RHEL is sold as a commercial product with support and services.

Focus on the Cloud

Given that Red Hat has shown stellar results quarter after quarter--even through the tough times we've seen recently--I've been expecting for some time that it wouldn't be long before the company reached a billion in revenues per year. The company's increasing focus on cloud computing, of course, has only hastened that growth.

Still, amid a business climate that continues to be largely dominated by "Microsoft Trained Brain Syndrome," Red Hat's stellar success is a shining testament to the power of Linux. There's no more denying it -- open source software is officially and incontrovertibly good for business.

Follow Katherine Noyes on Twitter: @Noyesk .

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