| Red Hat results kicks rump, takes names |
Dec. 22, 2006
Red Hat Inc. on Dec. 21 announced its financial results for its fiscal year 2007 third quarter. The Raleigh, NC-based Linux company's numbers were, in a word, great.
The total revenue for the quarter was $105.8 million, an increase of 45 percent from the year-ago quarter and 6 percent from the prior quarter. Subscription revenue was $88.9 million, up 48 percent year-over-year and 5 percent sequentially.
Net income for the quarter was $14.6 million, or $0.07 per diluted share, compared with $11.0 million, or $0.05 per diluted share for the prior quarter. Non-GAAP (Generally Accepted Accounting Principles) adjusted net income for the quarter was $29.6 million, or $0.14 per diluted share, after adjusting for stock compensation and tax expense. This compares to non-GAAP adjusted net income of $22.7 million, or $0.11 per diluted share in the third quarter of last fiscal year.
At quarter end, the company's total deferred revenue balance was $311.7 million, an increase of $27.6 million, or 10 percent, when compared to the end of the last fiscal quarter.
The company's operating income for the quarter was $13.6 million. That was up 44 percent from $9.5 million in the prior quarter. Some of this revenue came from adding over 12,000 net new customers during the quarter. This quarter also saw the company's revenue coming equally from its channel partners and direct sales.
Red Hat also had total cash and investments, as of Nov. 30, 2006, of $1.1 billion in its piggy-bank.
What makes these results even more impressive was that Red Hat faced its strongest opposition in the company's life. First, database giant Oracle adopted RHEL (Red Hat Enterprise Linux) as its own, rebranded it as Unbreakable Linux, and started to compete directly with Red Hat.
Regarding this challenge to the company, Red Hat CEO Matthew Szulik said during the earnings conference call that Red Hat's customers, and prospective customers, aren't interested in saving 5 to 10 percent of the upfront cost if they don't get Red Hat's high level of service.
Charlie Peters, Red Hat's executive VP and CFO noted that Red Hat was "particularly pleased to be named by CIO Insight, for the third consecutive year, as the number one enterprise software vendor in delivering value to customers."
Days after Oracle made its RHEL-knockoff announcement, Novell and Microsoft announced that they had formed a partnership. A major theme of their agreement was that those two companies could do a better job of bringing interoperability to Linux and Windows than any other Linux company could.
Another, none too subtle jab, at Red Hat, was Microsoft's claims that Microsoft IP (intellectual property) is in Linux. Red Hat denies that there is any truth to this assertion. As Szulik said during the earnings call, attempts to throw FUD on Linux by SCO three years ago have already failed.
"The marketplace for Linux and open source globally continues to grow and it's unstoppable," said Szulik. The attempts by other companies to stop it with vague IP claims, according to Szulik, will come to nothing.
In after-hours trading, Red Hat stock zoomed up 14.42 percent on the quarter's news.
-- Steven J. Vaughan-Nichols
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