Yet Another Robust Quarter for Red Hat

On its last quarterly earnings call, CEO Jim Whitehurst warned that Red Hat, which has lifted the pursuit of selling support for open source software to an art, wanted to lower guidance for analysts going forward. Yesterday afternoon, though, the company reported its first quarter 2011 financial results, which beat expectations. Earnings came in at 15 cents a share, or $24.1 million, compared to 12 cents a share expected by analysts, on total revenue of $209.1 million. Once again, Red Hat not only maintained its key subscribers but grew subscriptions and renewals.

Red Hat's revenues were up 20 percent over the comparable quarter last year, and the company has $968 million in cash at this point. Demand is rising for its software and services. It also continues to repurchase its own shares.

Red Hat has steadily been branching out into various kinds of training offerings, and training and service revenues for the most recent quarter jumped 14.9 percent to $30.7 million, compared to the year-ago quarter. Subscription revenues, which represent nearly 90 percent of Red Hat's total revenues, jumped 20.4 percent to $179.1 million.

With Sun Microsystems now swallowed up by Oracle, Red Hat and Novell remain the only large, public U.S. companies focused primarily on open source. Red Hat continues to illustrate the viability of a business model built around selling support and training for free software. Throughout the recession, Red Hat put together quarter after quarter of winning financial results, and the trend has not ended. At this point, despite a multi-billion dollar market valuation, one has to wonder how long it will be before a software giant swallows Red Hat up.