Red Hat Says That's Not Bloat, It's "Modular Growth"

By Sean Michael Kerner | Sep 24, 2009 | Print this Page
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The recession is proving to be an opportune time for Linux vendor Red Hat as it continues to grow revenues and earnings. According to Red Hat executives, the growth is coming at the expense of rivals and as a result of customer confidence in the abilities of Linux and Red Hat's JBoss middleware platform.

The growth of Red Hat's business is not however a sign of bloat. During Red Hat's second quarter earnings investor call on Wednesday, Red Hat CEO Jim Whitehurst responded to an analyst question about Linux founder Linus Torvalds' comment earlier this week that Linux was bloated.

"As Linux has continued to grow and its applicability continues to expand, there's just more feature functionality that people are looking for to be built into the operating system," Whitehurst said. "I don't think of that as bloat."

Whitehurst added that in his view, bloat is when vendors add features that people do not want. Linux, he said, is growing but with features that people do want.

"The key differentiator is it can continue to do that in a very modular way, so I actually look at the growth as much more of a reflection that it continues to add features that people do want, and that's a good thing," Whitehurst said.

Red Hat's customers are seeing it as a good thing too, if the financial results are to be taken as an indicator.

For Red Hat's second quarter of its fiscal 2010 year, ending Aug. 31, revenues hit $183.6 million. That's a 12 percent increase over the second quarter of fiscal 2009 and ahead of Wall Street forecasts of $179.1 million, according to Reuters Estimates.

Net income also rose, coming in at $28.9 million, or $0.15 per diluted share -- up from the $21.1 million, or $0.10 per diluted share, for the year-ago quarter.

Minus one-time items, the company said it took home a $0.16 per share profit. Wall Street analyst had expected a $0.15 per-share profit.

Moving forward, Red Hat provided Q3 revenue guidance to be in the range of approximately $187 million to $189 million.

How Red Hat does it

The growth of Red Hat's business is not necessarily a sign of renewed spending in the IT sector. Rather in Whitehurst's view, Red Hat's growth is coming by way of taking share from other operating system vendors. Read the rest at InternetNews.com.