Landmark day for Red Hat

Red Hat become first $1bn open source company

Chris Mayer

Linux kings post their fiscal results and show that they are leading the way for open source

The world’s leading provider of open source solutions, Red Hat
certainly lives up to that moniker after their financial results
showed they had broken the $1bn annual revenue barrier – the first
open source company to do so.

The 2012 fiscal report released on Wednesday showed total
revenue at $1.13 billion, with the fourth quarter revenue
at $297 million. This figure represents an increase of 21%
from the same quarter a year previously. The final quarter’s
net income was marginally down ($36m) from the previous one
($38.2m) however.

The huge boost to the Linux specialists’ coppers can mostly be
put down to them broadening their horizons, targeting software to
both public and financial sectors and releasing technologies like
OpenShift to capture new sectors beyond enterprises. It’s a
monumental moment for the company set up in 1993, one which was
coming after making good financial noises for several years and
growing exponentially.

Jim Whitehurst, President and Chief Executive Officer of
Red Hat spoke about the results and why he believes Red Hat have
struck a chord with the entire industry:

The strength of our fourth quarter was a fitting conclusion to
a remarkably strong year for our business. Our investments to
expand our geographic sales footprint and add sales people
with targeted industry and product knowledge has accelerated
our growth.

Red Hat is the first pure-play, open source company, and
one of only a select few software companies, to have achieved
the billion dollar revenue milestone. The open source
technologies which we provide are being selected by more
customers every day as they re-architect the infrastructure of
their data centers for greater efficiency, agility and cloud

Charlie Peters, Executive Vice President and Chief
Financial Officer of Red Hat discussed how Red Hat had achieved
this huge feat:

We experienced impressive breadth and depth of demand for
our technologies this quarter whether by geography or by
industry vertical. This resulted in record financial metrics
for both the fourth quarter and the full fiscal year 2012.

Our strategy for growth, coupled with relentless day-to-day
execution of the business, has been successful. We experienced
a significant increase in large deals, both in Q4 and for the
full year which contributed to annual organic growth of 25% in
revenue, 33% in non-GAAP operating income and 35% growth in
operating cash flow.

With forecasts for the next year’s revenue to be around $1.36bn,
it’s pretty clear that Red Hat has set the benchmark pretty for
quality open source software. Floyd Stirmling notes in his
excellent blog that Red Hat adapted to achieve this:

With all due respect to other Linux distributions such as
Canonical (Ubuntu) and SUSE, Red Hat is the de facto standard for
Enterprise Linux.  They have a reputation for building a
quality product, have a stable of certified applications from
leading ISVs, maintain a “Cisco-like” army of certified
professionals, and provide long term support for their
products.  Unlike the early years of their business, Red Hat’s
biggest threat does not come from a new operating system challenger
ala Microsoft; it comes from virtualization vendors with all eyes
on VMware, Microsoft, Citrix, and Oracle.

Sure, it’s a massive day in the history of Red Hat but also one
for open source business models as well – with so many putting
faith in open source software, it’s an indication that it is the
way forward for the entire industry.

To take a look at Red Hat’s financial results more closely, head
over to their investors site. Congratulations Red Hat – you’re
leading the open source charge.

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