Red Hat plots restructuring as profits rise

Global expansion and strong Enterprise Linux subscription sales lifted Red Hat 's revenue and net income to double-digit growth for its second quarter to 31 August.

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Global expansion and strong Enterprise Linux subscription sales lifted Red Hat 's revenue and net income to double-digit growth for its second quarter to 31 August.

The company reported profit of $18.2m (£9m), an increase of 64% year over year for the quarter to 31 August. Last year for the same quarter Red Hat reported profit of $11.04m (£5.5m).

Subscriptions revenue continued to outshine revenue from training and services, though both segments saw increases for the quarter. Revenue from subscriptions comprised 86% of revenue, while revenue from training and services accounted for 14%.

Red Hat attributed its strong growth to overseas expansion, particularly in Japan, where a Nikkei Market Access survey ranked Red Hat Japan the number one technology vendor that customers intend to conduct business with in the future. The company also saw increases in operating margin and operating cash flow, business performance improvements that are important to Red Hat's global expansion, said Charlie Peters, executive vice president and CFO, in a press statement.

Red Hat continues to be the leading commercial provider of Linux server software, but the company also expanded its portfolio of open-source products for enterprise customers in Q2. Notable product releases during the quarter were JBoss Enterprise Application Platform 4.2, software infrastructure for helping enterprises migrate legacy applications to an open-source platform, and a beta of Red Hat Developer Studio, a development runtime and set of open-source tools built atop the popular Eclipse development framework.

Red Hat also made gains in increasing support among third-party applications for Red Hat Enterprise Linux. In Q2, the company passed the 3,000 mark for the number of applications certified to run on its enterprise OS.

On a conference call on Tuesday, Red Hat chairman, CEO and president Matthew Szulik announced some changes to Red Hat's business structure as the company prepares to expand from a Linux company into a full-service enterprise software and services provider.

From now, the company is split into three lines of business: infrastructure, middleware and online services. Each of those divisions will have a general manager who will be compensated on the profitability of his or her business, he said. General managers also will be responsible for product marketing, and Red Hat's Michael Chen, who is returning to the US from China after a three-year stint building Red Hat's business there, is now vice president of corporate marketing, Szulik said.

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