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By Laton McCartney
Red Hat president and CEO Jim Whitehurst waited until after yesterday's closing bell on Wall Street to break the good news on the company's 1Q earnings for fiscal 2010. "I'm pleased to announce we got off to a strong start to fiscal 2010 as we reported better than expected revenue and earnings per share in the face of a challenging global economy," Whitehurst said.
Total revenue for the quarter was $174.4 million, an increase of 11% from a year ago. Subscription revenue for the quarter was $148.8 million, up 14% year-over-year. Moreover with IT spending generally in free fall, Whitehurst stated that for the fifth consecutive quarter, all of Red Hat's top 25 customers up for renewal did so at a total value of over 120 percent of the original value of their contracts.
"Even in this economic environment CIOs continue to revaluate their overall IT architectures in order to better take advantage of state-of-the-art solutions such as virtualization, cloud computing and middleware," Whitehurst said.
Over the past few weeks, Red Hat announced several technology milestones such as its JBoss Open Choice strategy, which is intended to address the evolving needs of application developers and the changing market by embracing a variety of programming models, frameworks and languages. Executing on this strategy, Red Hat now has application platform solutions for common Java application workloads; from simple Web applications, to light and rich Java applications, to Java Enterprise Edition (EE) based applications.
Perhaps more importantly, it began beta testing its Red Hat Enterprise Virtualization Portfolio (RHEV) that includes a standalone hypervisor as well as server and desktop virtualization management products. RHEV is being beta tested by several key customers and partners in Red Hat's ecosystem. "There's been strong interest," Whitehurst said. "The beta tests are over subscribed."
Red Hat views enterprise virtualization as the cornerstone of its future growth. In February the company announced its virtualization strategy for 2009 and beyond, outlining plans to significantly expand and enhance its server, client and management products to enable ubiquitous adoption of virtualization and subsequently cloud computing across the enterprise. "Virtualization provides a foundational component of Red Hat's broader strategy to deliver flexible cloud computing environments with the ability to deploy any application, anywhere, at anytime," according to the strategy announcement.
"Virtualization is the enabler of clouds," Red Hat's marketing director Nick Carr told CIOZone.
Carr said that the standalone hypervisor—software that is layered upon hardware—enables a server to function effectively as multiple servers and run multiple operating systems concurrently.
Those who have seen the RHEV portfolio beta products have come away impressed. "The demo I saw was mainly displaying the management UI and features," said Gary Chen
Research Manager, Enterprise Virtualization Software at IDC. "The hypervisor I didn't get a direct look at, but in the management interface it certainly did everything a hypervisor would be expected to do. Live migration worked and it was able to run Windows and Linux VMs….. As for the management tool, it is vastly improved compared to Red Hat's prior offerings."
Chen said that Red Hat is at a bit of a disadvantage with the new offerings, as the rest of the market has matured and gone through several versions already while Red Hat is just coming out with an initial release. "From what I've seen though, the initial release seems pretty solid and was better than I expected," he noted. "They have an interested search-based UI, which comes in handy when dealing with large deployments. They also have high-end features such as resource balancing, distributed power management, memory overcommit, and high availability. We will have to wait and see how well it performs and the reliability/stability of it, but my first look was encouraging."
Red Hat is expected to announce additional capabilities to the REV portfolio in the next few months.
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