The Cloud is Paying Off for Red Hat, as it Moves to Acquire FeedHenry

Red Hat posted strong quarterly results on Thursday that beat Wall Street’s expectations, and a big part of the news was that the company is starting to see meaningful revenue from its many initiatives surrounding the OpenStack cloud computing platform. If things go according to the company's playbook, it will start to draw recurring revenue from subscription support for OpenSack deployments similar to the subscription revenues it gets for supporting its other open source platforms.

Meanwhile, Red Hat announced that it has signed a definitive agreement to acquire FeedHenry, an enterprise mobile application platform provider. FeedHenry fits into Red Hat’s portfolio of application development, integration, and Platform-as-a-Service (PaaS) solutions.

Charlie Peters, Chief Financial Officer at Red Hat, said that its cloud business is having a positive impact on revenue. “The fastest growing part of our channel business comes from the 80+ Red Hat certified public cloud providers that provide our technologies on-demand in their clouds," he added. "The rapid revenue growth from these public cloud partners, which we recognize immediately and contains no deferred revenue, helped us to meaningfully exceed our second quarter revenue guidance.”

“Broad demand for open source technologies, combined with Red Hat’s value proposition and market leadership position, has helped to drive organic revenue growth in the mid-to-high teens for the last 10 quarters,” said Jim Whitehurst, President and Chief Executive Officer of Red Hat, in a statement. “Our high level of execution and commitment to investing across our technology stack, including enabling open, hybrid cloud computing in the enterprise, has led to Red Hat being recognized once again by Forbes, Inc. on its list of the World’s Most Innovative Companies.”

Red Hat's GAAP operating income for the second quarter was $64 million, up 16% year-over-year. Non-GAAP operating income for the second quarter was $109 million, up 15% year-over-year. Total revenue for the quarter was $446 million and subscription revenue for the quarter was $389 million, both increased 19% year-over-year.

According to Red Hat's statement about FeedHenry:

"Aligned with Red Hat’s open hybrid cloud strategy, FeedHenry enables enterprises to accelerate their mobile app development and backend integration via private clouds, public clouds, and on-premises. FeedHenry is an important addition to Red Hat’s JBoss xPaaS for OpenShift strategy, announced in September 2013, providing a platform and services for mobile developers and applications. With its xPaaS services for OpenShift, Red Hat is delivering a rich set of enterprise application, integration and business process automation capabilities and services in an extensible open PaaS platform, and is well-positioned to enable accelerated development and deployment of next-generation enterprise applications and business processes in the cloud."

FeedHenry has an open and extensible architecture based on Node.js for client and server side mobile app development. Red Hat agreed to acquire FeedHenry, a privately held company, for approximately 63.5 million Euros in cash, or approximately $82 million U.S. dollars.