| Red Hat beats estimates and doubters |
Jun. 27, 2007
The big Linux-business question of the latest financial quarter was: Would Red Hat be battered by Oracle? Knocked around by Microsoft and its new Linux partners, Novell, Xandros, and Linspire? Daunted by a Sun revival? Or would the Raleigh, NC-based Linux company turn in a great quarter?
And, the answer is, with total revenue of $118.9 million, an increase of 42 percent from the year ago quarter and up 7 percent from the prior quarter, Red Hat is back to kicking rump and taking names in business Linux.
Net income for the quarter was $16.2 million, or $0.08 per diluted share, compared with $13.8 million, or $0.07 per diluted share, in the year ago quarter. Non-GAAP adjusted net income for the quarter was $33.7 million, or $0.16 per diluted share.
These results beat analysts' estimates of earnings of 15 cents per share on $117.1 million in revenue.
Looking closer at the numbers, Red Hat reported subscription revenue was $103.0 million, up 44 percent year-over-year and 7 percent sequentially for its first fiscal quarter, which ended on May 31st.
In other words, business Linux customers are still coming to Red Hat over Oracle's RHEL (Red Hat Enterprise Linux) clone, Unbreakable Linux, and Novell's SLES (SUSE Linux Enterprise Server). In addition, RHEL 5, which was released this March, is doing well for the company.
While other Linux companies, notably Canonical, Novell and Linspire are also focusing more the desktop, Red Hat continues to keep its focus on the server. Red Hat no longer devotes all its time to the server operating system however. It's also making more and more with JBoss as the middleware glue for open-source business software stacks.
Red Hat also debuted its SOA (Service Oriented Architecture) strategy in this quarter, including the addition of data management solutions and establishing developer class and enterprise class editions of JBoss. Red Hat also recently bough MetaMatrix, a company that specializes in data access software and services, to improve its SOA looks to current Unix customers.
"We started the quarter in high gear with the release of Red Hat Enterprise Linux 5 and followed with important launches for JBoss and our middleware strategy," said Charlie Peters, Red Hat's CFO. "We are pleased with our solid earnings performance as we executed on initiatives to continually garner market share and mind share in a rapidly growing market. Our investments in sales, marketing and R&D during the quarter set a solid foundation for the balance of the year."
Red Hat's total cash, cash equivalents, and investments as of May 31, 2007 were $1.2 billion. At quarter end, Red Hat's total deferred revenue balance was $363.1 million, an increase of 43 percent year-over-year and 7 percent sequentially.
-- Steven J. Vaughan-Nichols
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