Red Hat Hits $1 Billion, But It's Only the Third Inning

Linux vendor hits a major revenue milestone, even as company CEO claims there's still a lot more that can and will be done.

Red Hat has been a public company since 1999, but according to its CEO the company still has a lot of opportunities left to capture. Red Hat reported its fiscal 2012 earnings late Wednesday, passing the $1 billion mark in revenues for the first time.

Red Hat is the first pure play open source and Linux vendor to achieve the $1 billion milestone. For the year, Red Hat's revenues were reported at $1.13 billion for a 25 percent year-over-year gain. GAAP Net Income for the full year was reported at $146.6 million or $0.75 per diluted share, which is a dramatic gain over the $107.3 million or $0.55 per diluted share reported for fiscal 2011.

Red Hat's solid year was capped off with a solid fourth quarter in which revenue came in at $297 million for a 21 percent year-over-year gain. Moving forward, Red Hat provided revenue guidance for fiscal 2013 for revenues to be in the range of $1.34 billion to $1.36 billion, representing an annual revenue growth rate of 20 percent.

"Red Hat associates around the globe have contributed to 40 straight quarters of sequential revenue growth, culminating in fiscal 2012 revenue that exceeded the $1 billion mark," Red Hat CEO Jim Whitehurst said during his company's earnings call. "Red Hat has become the first pure-play open source company and one of a few select software companies to have ever achieved this milestone."

Red Hat's success flows from its loyal customer base. Whitehurst reported that for the year, Red Hat renewed 99 out of their top 100 accounts with 130 percent revenue growth for those accounts.

Gains were also made from Red Hat's effort to convert free Linux users to paying Red Hat Enterprise Linux subscribers. Red Hat has actively been pursuing its Free to Pay program since at least 2008 as a way to help grow revenues.

"We continue to deliver consistent results from our Free to Pay program this year," Whitehurst said. "We added significant deals throughout the year, and during the fourth quarter, we saw one 7-figure deal and one 6-figure deal that included a Free to Pay component."

One of the drivers for Red Hat's business moving forward is the cloud, even if enterprises aren't actually putting there data in the cloud today.

"I think the thing that's driving most companies isn't necessarily a direct move now to cloud, but [it's because] they need to go ahead and get their applications ported to a platform that can move to the cloud," Whitehurst said. "So just the move from UNIX to Linux and getting those applications ported, even though they're still in their current data center, is something that's really seeing a lot of tailwind as people are getting ready to ultimately potentially move those to the cloud."

Even with the billion dollar revenue milestone, ten years of public history and wide deployment, Whitehurst still see lots more opportunity on the horizon.

"If we want to use a baseball analogy, I'll put us in about the third inning," Whitehurst said. "So there is still a massive opportunity out there."

Sean Michael Kerner is a senior editor at, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.

Tags: open source, Linux, enterprise software, Red Hat

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