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Red Hat continues steady march toward $5 billion revenue goal

Red Hat continues steady march toward $5 billion revenue goal
From TechCrunch - October 13, 2017

The last time I spoke to Red Hat CEO Jim Whitehurst, in June 2016, he had set a pretty audacious goal for his company to achieve $5 billion in revenue. At the time, that seemed a bit far-fetched. After all, his company had just become the first open-source company to surpass$2 billion in revenue. Getting to five represented a significant challenge because, as he pointed out, the bigger you get, the harder it becomes to keep the growth trajectory going.

But the company has continued to thrive and is on track to pass $3 billion in revenue some time in the next couple of quarters. Red Hat is best known for creating a version of Linux designed specifically for the enterprise, but it has begun adapting to the changing world out there with cloud and containersand as its RHEL (Red Hat Enterprise Linux) customers start to change the way they work (ever so slowly), they are continuing to use Red Hat for these new technologies. As Whitehurst told me, thats not a coincidence.

The cloud and containers are built on Linux, and if there is one thing Red Hat knows, its Linux. Whitehurst points out the legacy RHEL business is still growing at a healthy 14 percent, but its the newer cloud and container business thats growing like gangbusters at a robust 40 percent, and he says that is really having a positive impact on revenue.

In its most recent earnings report last month, overall revenue was up 21 percent to $723 million for the quarter for a $2.8 billion run rate. Investors certainly seem to like what they are seeing. The share price has gone on a straight upward trajectory, from a low of $68.71 in December 2016 to $121 per share today, as I wrote this article. Thats a nice return any way you slice it.

Whitehurst says the different parts of the business are really feeding one another. The company made an early bet on Kubernetes, the open-source container orchestration tool originally developed at Google. That bet has paid off handsomely as companies are moving toward containerized application delivery using Kubernetes. In the same way Red Hat packaged Linux in a way that made sense for enterprise IT, its doing the same thing with Kubernetes with its OpenShift products. In fact, Whitehurst jokes OpenShift would be more widely recognized if they had just put Kubernetes in the name.

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