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Red Hat Continues to Grow by Taking Share from Others

By Sean Michael Kerner (Send Email)
Posted December 18, 2015

Red Hat reported its financial results for the third quarter of its fiscal 2016 year, once again showing continued revenue growth.

For the quarter, revenue was reported at $524 million, a 15 percent year-over-year gain. Net income was reported at $47 million, a marginal decline from the $48 million reported in the third quarter of fiscal 2015.

Looking forward, Red Hat provided fourth quarter fiscal 2016 guidance for revenue to be in the range of $535 million to $539 million, which is up 16 Red Hatpercent year over year. With the forecast, Red Hat is also raising its full year revenue guidance to a range of $2.044 billion to $2.048 billion, up approximately 15 percent for the year.

Red Hat CFO Frank Calderoni noted during his company's earnings call that large deals continue to help push the company forward.

Calderoni stated Red Hat had 11 deals that were in excess of $5 million, and of these deals three were over $10 million. Additionally, Red Hat is continuing to sell multiple products to customers as part of a broad cross-selling effort.

Calderon said 70 percent of Red Hat's deals included 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.

While Red Hat is growing by cross-selling and large deals, Red Hat's CEO Jim Whitehurst commented that a big part of his company's go-to-market motion is taking share from competitors.

"Whether that was UNIX to Linux or Windows to Linux or WebLogic to JBoss, and that continues and actually cloud accelerates that," Whitehurst said. "So we continue to take share nicely as well as win solid share of new workloads that are moving to cloud."

Red Hat Winning a High Share of Net New Workloads

There are also new workloads, which continues to be a growth area for Linux. Whitehurst commented that in terms of Linux, Red Hat wins a very high share of net new workloads.

"So when I say there is a shift going on, there continues to be some UNIX-to-Linux migrations and that kind of continues well, but a lot of this share shift just happens because we get a larger share of the application portfolio because new applications are much more likely to be built on RHEL," Whitehurst said.

"So that drives a natural share shift as we get a larger and larger percentage of the application portfolio every year," added Whitehurst.

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

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