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Red Hat CEO Optimistic on OpenStack Revenue Opportunity

By Sean Michael Kerner (Send Email)
Posted September 22, 2015


Red Hat continues to accelerate its growth thanks to an evolving mix of platform and infrastructure technology revolving around Linux and the cloud. Red Hat announced its second quarter fiscal 2016 financial results on September 21, once again exceeding expectations.

For the quarter, Red Hat reported revenue of $504 million, for a 13 percent year-over-year gain. Net income was reported at $51 million, up from $47 Red Hatmillion in the second quarter of fiscal 2015.

Looking forward, Red Hat provided some aggressive guidance for the coming quarter and the full year. For the third quarter, Red Hat provided guidance for revenue to be in the range of $519 million to $523 million, which is a 15 percent year-over-year gain.

On a full year basis, Red Hat's full year guidance is for fiscal 2016 revenue of $2.044 billion, for a 14 percent year-over-year gain.

Red Hat CFO Frank Calderoni commented during the earnings call that all of Red Hat's top 30 largest deals were approximately $1 million or more. He noted that Red Hat had four deals that were in excess of $5 million and one deal that was well over $10 million.

As has been the case in recent years, cross selling across Red Hat products is strong with 65 percent of all deals including one or more components from Red Hat's group of application development and emerging technologies offerings.

"We expect the growing adoption of these technologies, like Middleware, the RHEL OpenStack platform, OpenShift, cloud management and storage, to continue to drive revenue growth," Calderoni said.

OpenStack Revenue Prospects Addressed

During the earnings call, Red Hat CEO Jim Whitehurst was repeatedly asked about the revenue prospects for OpenStack. Whitehurst started by remarking on how the recently released Red Hat OpenStack Platform 7.0 is a big jump forward thanks to the improved installer.

"It does a really good job of kind of identifying hardware and lighting it up," Whitehurst said. "Of course, that means there's a lot of work to do around certifying that hardware, making sure it lights up appropriately."

Whitehurst said he is starting to see a lot more production applications start to move to the OpenStack cloud. He cautioned however that it's still largely the early adopters moving to OpenStack in production and it isn't quite mainstream, yet.

From a competitive perspective, Whitehurst talked specifically about Microsoft, HP and Mirantis. In Whitehurst's view, many organizations will continue to use multiple operating systems and if they choose Microsoft for one part, they are more likely to choose an open-source option as the alternative option. Whitehurst said he doesn't see a lot of head-to-head competition against HP in cloud, but he does in Mirantis.

"We've had several wins or people who were moving away from Mirantis to RHEL," Whitehurst said.

Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist

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