Red Hat Banking on OpenStack for Future Growth

by Sean Michael Kerner

Red Hat's fiscal 2014 revenues top $1.5 billion as interest in OpenStack and RHEL 7 set the stage for more growth to come.

Red Hat reported its full-year fiscal 2014 earnings late Thursday, showing continued momentum for the Linux server operating system business leader. As Red Hat looks for future growth, the open-source OpenStack cloud platform is front and center.

For the full fiscal 2014 year, Red Hat reported revenue of $1.53 billion, for a 15 percent year-over-year gain. Full Red Hat Cloudyear net income was reported at $178 million, up from $150 million in 2013.

Looking forward, Red Hat provided full-year fiscal 2015 guidance for revenue to be in the range of $1.730 billion to $1.755 billion, representing an annual revenue growth rate up to 14 percent.

Large deals continue to be a big part of Red Hat's revenue. Red Hat CEO Jim Whitehurst said during his company's earnings call that all of the top 30 deals in the fourth quarter of 2014 were greater than $1 million for the third quarter in a row.

"In fact, we’ve closed a record number of deals in excess of $1 million with more than seven deals in total," Whitehurst said. "The seven deals that were over $5 million also set a record, and two of these were over 10 million."

While Red Hat's core platform technology, Red Hat Enterprise Linux (RHEL), is at the core of the business, Whitehurst stressed that cross-selling efforts for middleware, virtualization and cloud technologies are playing a leading role in the big deals.

Whitehurst said that in the fourth quarter, 75 percent of Red Hat's top deals had a technology component, including middleware, Red Hat Storage, OpenShift and OpenStack technologies.

"Our cross-selling efforts resulted in early wins for our emerging technologies which address CIO's top priorities that are driving the evolution of enterprise computing," Whitehurst said. "This demand led to closing OpenStack, OpenShift and Red Hat Cloud Infrastructure deals in all of our major geographies."

Whitehust added that Red Hat's cross-selling deals cover a broad array of industries, including financial services, technology and media, government agencies, research universities, telecommunications, health care, transportation and retail companies.


Red Hat is aggressively accelerating its efforts to advance the open-source OpenStack cloud platform.

"Our progress to commercialize OpenStack continues to advance quickly," Whitehurst said. " We continue to see additional downloads, proof of concepts and deal closing, and we are experiencing approximately 3,000 downloads per day and we closed dozens of new deals."

Whitehurst noted that most customers are still in the initial deployment phase for OpenStack, but he's already very optimistic about commercial success.

"Cross-selling in our top deals was also evident with three of the top five deals having an OpenStack component and two of these deals had an OpenStack and OpenShift component," Whitehurst said.

When it comes to growth potential and interest, Whitehurst is very bullish on OpenStack overall.

"There is substantially more interest in OpenStack, frankly, than there has been in really any products since Linux," Whitehurst said. "There's a huge need for cloud infrastructure and there are not a lot of alternatives out there; most of the industry has declared that they are behind OpenStack, so you know, there’s just a lot of organic interest where things like RHEV, you know Red Hat had to go out and create it."

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

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This article was originally published on Friday Mar 28th 2014
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