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Red Hat quarterly earnings up 29% to $164.4 million

Monday, September 29th, 2008

Red Hat Inc. reported second-quarter revenues of $164.4 million, an increase of 29% in  quarterly revenue compared with a year ago, at $127.2 million. Deferred revenue rose somewhat faster, climbing 32% to $496.9 million. Quarterly profits also rose, but by a slimmer margin, rising 11% from $18.2 million for the second fiscal quarter of 2007 to $21.1 million for the second fiscal quarter of 2008.

The quarter’s revenues included two one-year sales of $5 million apiece.

Jim Whitehurst, the CEO of the Raleigh, N.C.-based company, said the higher-than-expected revenue growth was achieved against economic headwinds. The healthy earnings reflected strong renewals from the existing customer base, with old and new accounts alike responsive to an opportunity for cost savings, he said.

Sales of JBoss, Red Hat’s middleware product, grew twice as fast as those for Red Hat Enterprise Linux (RHEL), with rising sales as an embedded product to independent service vendors (ISVs) targeting the service-oriented architecture (SOA) market, Whitehurst said.

Red Hat’s recent $107 million purchase of Qumranet Inc. broadens its leadership in open source virtualization, which began with RHEL 5, continued with the Libvert virtualization layer and other tools to create a comprehensive virtualization portfolio, he said. Qumranet also gives Red Hat an entry into the early-stage virtual desktop market, he said.

CFO Charles Peters downplayed the potential adverse impact on future sales from the current turmoil in the financial sector. That vertical is now only 10% of the business, due to faster growing sales in government and telecommunications, he said. In addition, many of the financial customers are on multiyear contracts, he said.

Like RHEL, JBoss sales benefit from tighter economic times because corporations still need to deploy new functionality but have less money, Peters said.

Red Hat quarterly earnings up 29% to $164.4 million