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 enablement.

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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