Red Hat says revenue is up

Staff WriterMarch 24, 2011 

Linux software company Red Hat is projecting revenue growth of at least 15 percent for its current fiscal year that ends in February, which would easily push it past the $1 billion mark.

Not too shabby for a company whose open-source software is available free.

The Raleigh company makes money by charging customers for maintenance and support, as well as by providing related services such as training and consulting. It's a business model that makes Red Hat software significantly cheaper than offerings from Microsoft and other rivals.

"The key is, we have very reliable, very secure software that just runs," said Charlie Peters, the company's chief financial officer. "It runs the New York Stock Exchange. It runs the German exchange. It runs the Tokyo stock exchange. It runs most major financial institutions in the world.

"And the support is very inexpensive," he added in a phone interview. "It is high value for what they are paying."

Red Hat issued its revenue projection Wednesday along with results for its fiscal fourth quarter that exceeded analysts' expectations.

"Red Hat continues to gain mind share and wallet share," CEO Jim Whitehurst said during a conference call.

Revenue for the quarter rose 25 percent to $244.8 million. Net income, after adjusting for stock compensation and amortization, totaled $51.4 million, or 26 cents per share. That was up from $36.5 million a year earlier.

Those results, issued after the stock markets closed, propelled Red Hat shares as much as 10 percent higher in after-hours trading Wednesday. Earlier in the day, shares rose 41 cents to $39.97. Shares have fallen 12 percent this year.

The latest quarterly numbers amount to "very strong results, through and through," said analyst Steven Ashley of Robert W. Baird & Co.

Ashley was especially impressed that billings, a leading indicator of future revenue, rose 31 percent in the quarter - up from 20 percent growth in each of the prior two quarters.

"The pace of business accelerated," Ashley said.

Red Hat has 3,750 workers worldwide and has been adding roughly 100 employees every quarter. It employs about 700 in Raleigh.

In January the company announced that it would remain in Wake County, although it hasn't yet settled on a site for a new headquarters building.

The company promised to create 540 high-paying jobs over the next nine years, enabling it to receive as much as $15 million in state incentives if it meets hiring and investment goals. Wake County and the municipality where the company eventually locates also will each give Red Hat 2.25 percent of the amount the project ends up adding to the tax base.

"We are considering probably three or four sites," Peters said. "We haven't made a selection yet. It will be probably some time in the coming months. It can't be too long because we do need to find more space."

For the fiscal year that ended in February, Red Hat posted $909.3 million in revenue, up 22 percent. Net income for the year, after adjustments, totaled $162.8 million, up from $138.1 million a year ago.

Red Hat is projecting that revenue for the current fiscal year will rise to between $1.05 billion and $1.07 billion, which at the high end would be an 18 percent jump. or 919-829-4877

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