Over the years Linux users has been consistently growing due to un-parallel benefits like cost and critical load performance over its competitors like Microsoft Windows. Red Hat Software (NYSE:RHT) is one such company that provides Linux operating system for desktop and web servers. Red Hat is a leading player in open-source Linux that crossed $1 billion in annual revenue, and it has a solid plan to keep growing its business in the years ahead. Red Hat partners with enterprise vendors like IBM, HP, Intel, Cisco, Dell, and SAP this also provides a deeper penetration in the global market.
The company recently declared quarterly results and was firing all cylinders, it set records for new bookings and billings with strong renewals. It reported a record number of 30 deals that crossed $1 million, with 7 deals that crossed $5 million and 2 were over $10 million. Revenue of $400.4 million was recorded, up by 15.1% year over year also beating the management’s guided range of $397.0 million to $400.0 million.
The Growth Market
A remarkable growth in the use of Linux for critical workloads has grown constantly year-over-year to reach 73 percent in 2013. The main reason for this growth is reliance on Linux for cloud and big data. Global spending on public cloud services is expected to grow 18.6% in 2012 to $110.3B, achieving a CAGR of 17.7% from 2011 to 2016.
The future is shining for Linux operating system with 80 percent of the world's largest enterprises planning to increase their use of Linux servers over the next five years, while the number who plans to purchase Windows servers is at an all-time low of 20 percent.
Another big market that Red Hat is all set to tap is the .NET environment for windows users. It now plans to offer Microsoft .NET and SQL server capabilities on OpenShift. This will be available to user on Platform as a service (PaaS) model. Once this is released, it will add on to the revenue of Red Hat in the future, although the exact date of release is not known but it’s expected soon. The OpenShift service will use cgroups, a feature built into the Linux kernel to ensure each service gets its allotment of CPU and memory resources.
New Releases & Strategic Collaborations
New releases will further have a positive impact on the revenue. Red Hat Enterprise Linux (RHEL) 7 RC is also released by Red Hat. This will also be available to strategic partners which also include OEM and ISV partners RHEL 7 RC will be made available to the public in third week of this month, allowing interested users at all levels to try out a release that incorporates the improvements made over the course of the RHEL 7 beta program.
Strategic collaboration with Docker will enable Red Hat to wider its customer base. Red Hat is now in a strategic alliance with Docker. As part of this expanded collaboration, Docker and Red Hat will work together on inter-operability between Docker's hosted services and Red Hat certified container hosts and services. This alliance now enables Red Hat to bring Docker container technologies to Red Hat Enterprise Linux high-touch beta program and OpenShift Platform-as-a-Service offering.
The company is also focused on open hybrid cloud solutions, which it sees as a growth initiative in future. The company is establishing relationships with large public cloud providers for a wider customer reach.
Red Hat is making all the right moves to enhance its business to capture a larger share of the Linux global market. The company has delivered positive earnings surprises in all of the last 4 quarters with an average beat of 15.6%. As the Red Hat users count is consistently increasing, the future growth is certain. So, it can be a good long-term buy.