Red Hat posts strong first quarter

jmurawski@newsobserver.comJune 19, 2013 

Raleigh software developer Red Hat is wagering on private cloud computing as the next big thing as it prepares to introduce technology that could someday redefine the 30-year-old company.

Red Hat outlined the emerging strategy to investors and analysts Wednesday after reporting a strong first quarter and forecasting healthy financial performance for the coming months. The company beat analyst expectations on sales and earnings, and executives talked about long-term plans to maintain momentum.

Red Hat’s OpenStack software, to be unveiled next month, will allow businesses to build their own private computing clouds, rather than depending on remote servers operated by third parties.

CFO Charlie Peters said demand is growing for private computing systems as concerns rise about privacy, security and reliability. The potential market for private cloud computing is estimated to grow to multiples of Red Hat’s annual sales, which now exceed $1 billion.

“Frankly, at this point it’s so new that no one is really sure,” Peters said. “It’ll take years for OpenStack to be a really big number, but we think it’ll be a really big number.”

The cloud computing trend is less than 5 years old, and Red Hat is pursuing the next-generation phase of that trend. Peters said OpenStack builds on technology that was developed just two years ago by NASA and a private technology company in Texas.

“It would allow you to have full control,” Peters said.

Red Hat now employs 5,500 people worldwide, including more than 900 in downtown Raleigh, where the company just completed its move from N.C. State University’s Centennial Campus. The official ribbon-cutting for Red Hat’s new downtown office tower is scheduled for Monday, with a passel of public officials and dignitaries invited, including Gov. Pat McCrory.

Red Hat’s core business is designing open-source software that is available for free, but the company makes its money by charging customers for maintenance, support and related services, such as training and consulting.

The company reported a 15 percent boost in first-quarter sales, to $363 million. Net income for the quarter rose to $62 million this year from $58 million a year ago, or 32 cents a diluted share from 30 cents a diluted share.

The company announced first-quarter financials after the close of market trading.

Red Hat shares closed Wednesday at $46.22, down 41 cents. The stock is down nearly 13 percent this year.

Murawski: 919-829-8932

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