Red Hat Grows Million-Dollar Linux Deals

by Sean Kerner

Red Hat's Linux business continues to grow in the third quarter.

Red Hat (NYSE:RHT) announced its third-quarter fiscal 2012 earning results on Monday, showing continued growth.

For the quarter, Red Hat reported revenue of $290 million, which is a 23 percent year-over-year gain. Net income hit $38.2 million or $0.19 per share, up from $26 million or $0.13 per share last year. Moving forward, Red Hat provided fourth-quarter guidance for revenue to be in the range of approximately $289 million to $292 million.

Growth is coming from multiple areas of the company and thanks in no small part to a large number of big deals.

"For the fourth consecutive quarter, we set a record for deals over $1 million," Red Hat CFO Charlie Peters said during the company's earnings call. "27 of the top 30 deals in the quarter exceeded $1 million, a 69 percent increase over Q3 of last fiscal year, and five deals exceeded $5 million, a new quarterly record."

Those big deal aren't just about Red Hat Enterprise Linux, they're also about JBoss. Peters noted that approximately 40 percent of Red Hat's top deals include a middleware component, and four deals were actually standalone middleware deals over $1 million.

In terms of who is buying those million dollar Red Hat deployments, Peters said that the three largest verticals in the top 30 deals were financial services, technology and governments around the world.

"We continue to see large deals and growth potential across a number of verticals, including those that are facing greater macro challenges," Peters said.

During the quarter, Red Hat also expanded its business with the acquisition of storage vendor Gluster for $136 million.

"This software-only solution addresses storage of unstructured data spanning from bare metal to virtualized instances and in cloud deployments," Red Hat CEO Jim Whitehurst said during the call. "This $4 billion addressable market, which is growing rapidly, is a great place for Red Hat to enter the big data world and provide storage in the cloud."

Overall, Whitehurst still sees plenty of room left for his company to grow across all of its key products. "If you say the server operating system market is nearly a $20 billion business, we still have quite a bit of room left there," Whitehurst said.

Whitehurst added that the middleware business is worth around $10 billion a year and virtualization is currently worth at least $5 billion.

"So you start looking at the total addressable market opportunities for us out there to go disrupt, they are very, very large markets and obviously, at our price points, we significantly reduce the size of those markets," Whitehurst said. "But even with modest share gains across some of those products, there's a very, very large opportunity out there over the next few years."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @TechJournalist

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This article was originally published on Tuesday Dec 20th 2011
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