Red Hat Beats its Own Forecasts

Red Hat has reported financial results for its fiscal second quarter, which ended August 31, and the company continues to prove that a business model of supporting robust open source software can lead to remarkable success. In fact, as we predicted it would be, the company is emerging as the first ever billion dollar a year open source company. Red Hat's total revenue for the quarter was $281.3 million, an increase of 28% from the year ago quarter. Subscription revenue for the quarter was $238.3 million, up 28% year-over-year.

“The combination of strong sales execution and customer demand led to second quarter revenue that was above our guidance and represented our fourth straight quarter of accelerating revenue growth,” stated Jim Whitehurst, President and Chief Executive Officer of Red Hat. “We continued to win and strengthen relationships with enterprise customers who partner with Red Hat to reduce costs while modernizing their IT infrastructure to enable applications to run on bare metal, virtualization and in the cloud. Based on the strong first half results, we believe Red Hat remains well positioned to finish fiscal 2012 as the first billion dollar open source software vendor.”

Of course, Red Hat has benefited from being left as the only public, U.S. company focused primarily on open source. With the news of Novell's sale still fresh, and with Oracle's acquisition of Sun Microsystems fading in the rear view mirror, it's easy to forget that Novell and Sun were both once-mighty commercial open source-focused companies that are only shells of themselves now.

Red Hat is beating its own forecasts by continuing to renew its top support subscribers for increasing subscription fees. It doesn't make its money through expensive product price tags and licenses, as many software companies do.  As part of the company's quarterly announcement, Whitehurst said that Red Hat now has a war chest of more than $1.3 billion in cash, which means it can pursue acquisitions going forward.

Red Hat is diversifying its strategy, especially focusing on the cloud. As it does that, it will have to strive to remain as focused as it has been, but there is no question that, quarter after quarter, the company proves the viability of its open source model.