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Red Hat Grows Top Deals as Private Cloud Management Enters Batting Practice
At the core of Red Hat's business is the company's Red Hat Enterprise Linux (RHEL) operating system for servers. It's a business that continues to grow as the company pushes further into the cloud.
Red Hat reported third quarter fiscal 2013 revenues late Thursday, with revenues rising 18 percent year-over-year to $344 million. Net income was reported at $34.8 million, or $0.18 per share.
Red Hat is growing its business in no small part thanks to a loyal customer base.
"I'm pleased to report that all of our top 25 deals that were up for renewal this quarter not only renewed but did sell with a value of well over 120 percent of the original value," Red Hat CEO Jim Whitehurst said during his company's earnings call. "These results are a great endorsement of our customers for our reliable, open source solutions that enable ROI and investment in the data center."
Red Hat CFO Charlie Peters noted that the company's top 30 deals are spread across multiple global industry verticals. He added that all of the top 30 deals during the third quarter exceeded $1 million, including five deals that were in excess of $5 million and one that was over $10 million.
"Financial services was particularly strong and represented the leading vertical of our largest 30 deals," Peters said. "We had several large wins across a spectrum of financial services companies, including large banks and investment firms, insurance companies and financial service information providers."
Peters also highlighted the growing importance of public clouds to Red Hat's financial health. During the third quarter, Peters said that Red Hat saw strong wins with public cloud providers, with the telecom/service provider vertical accounting for 10 percent of the top 30 deals.
As part of Red Hat's emphasis on the cloud, the company also announced the acquisition of cloud management vendor ManageIQ for $104 million.
"ManageIQ brings an adaptive and integrated approach to important cloud management capabilities such as server and storage provisioning, workload optimization, policy-based compliance, charge-back, virtual machine life cycle management, discovery and control, and analytics," Whitehurst said. "ManageIQ's technology combines well with the direction that we are headed in developing cloud management for open hybrid clouds."
Red Hat's push into the cloud also involves the OpenStack cloud platform. Red Hat's OpenStack Enterprise release is still not generally available and is currently in preview release.
Whitehurst said that there is a massive amount of interest in OpenStack but very little production deployment to date.
"So we see tremendous interest in someone doing to OpenStack what we did for Linux, which is providing the point where vendors can certify in that long-term stability," Whitehurst said.
When it comes to cloud management overall and the move to hybrid private cloud deployments, Whitehurst sees a lot of opportunity, though he warns it's still early in the game.
"A lot of people will say they have a private cloud because they have a bunch of virtualized servers, but truly when you think about managing an application portfolio or an elastic infrastructure, that is still quite nascent," Whitehurst said.
"So that's a very large opportunity, we believe, in the future," Whitehurst continued, "but we are, again, we're in batting practice. We haven't even started the first inning."
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