Menu
Red Hat joins the billion-dollar club

Red Hat joins the billion-dollar club

Red Hat is the first open-source company to generate $1 billion in annual revenue

It's official: Red Hat is the first open-source software company to generate a billion dollars in annual revenue.

Red Hat released its financial results Wednesday for its 2012 fiscal year, ended Feb. 29. Revenue was US$1.13 billion, up 25 percent from the year earlier, and net income was $146.6 million, up from $107.3 million the year earlier, Red Hat said.

Passing the $1 billion milestone is "a statement about open source, and the relative ubiquity of open source. Very few companies have been able to reach that mark," CEO Jim Whitehurst said in an interview. "It's quite a statement that we've been able to achieve that with a radically different business model."

With a billion or more in annual revenue, Red Hat joins a somewhat elite league of midsized enterprise software companies, such as OpenText ($1 billion in 2011) and Nuance Communications ($1.3 billion).

"The billion-dollar figure is a kind of a magic figure for technology companies," said Charles King, chief analyst at Pund-IT. Though an arbitrary milepost, it's a good indicator that the company executives have found a formula not only for success, but for maintaining success.

Perhaps more significantly, Red Hat's success validates the idea that open-source software can form the basis of a viable business model.

"Red Hat's success is a testament to the role it played in bringing Linux to the mainstream, and the continued shift towards open source in the enterprise," said Mark Shuttleworth, founder of fellow Linux distributor Canonical, in an email exchange.

When Red Hat held its IPO (Initial Public Offering) in 1999, the idea of making money from open-source software was not a proven concept. Although open-source software was widely used then by academics and the technically inclined, enterprises were still wary of using the software, citing security fears and the need for holding a vendor accountable when something goes wrong. And investors would ask how a company could make money giving away the source code of its software at no cost.

"Consensus among many in the IT community [then] was that open source was a goofy, post-hippie kind of thing," King said.

Red Hat's basic business model consists of making the source freely available, and then charging subscription fees for enterprise-grade support. Today that model is copied--albeit on a smaller scale--by a wide range of open-source software companies, such as Eucalyptus (for cloud computing software), Alfresco (content management software) and Jaspersoft (business intelligence). Large IT vendors, such as Oracle, IBM and Dell, routinely offer some of their software as open source. Even the world's largest proprietary software vendor, Microsoft, has dipped its toes in the water, releasing some of its ancillary code as open source on its Codeplex repository.

"Today, we're at a place in IT where online collaboration is such a broadly accepted concept," King said."Red Hat is an extremely well-run company, and collaborative development is paying off for everyone in the ecosystem," said Jim Zemlin, executive director at The Linux Foundation. The company is one of the largest contributors to the source code of the Linux kernel, he noted. "It is this commitment to collaborative development that is one of the key ingredients to its success."

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is Joab_Jackson@idg.com

Follow Us

Join the ARN newsletter!

Error: Please check your email address.

Upcoming

Slideshows

IN PICTURES: Nutanix's .NEXT channel event in Sydney (+20 photos)

IN PICTURES: Nutanix's .NEXT channel event in Sydney (+20 photos)

Nutanix recently held its customer and channel event, .NEXT, in Sydney. The event, held at the Sheraton on the Park saw attendance from more than 150 channel and technology partners and customers. It was the first in a series of events Nutanix is holding in A/NZ in August and September, the objective of which is to brief partners and customers on “what’s next” in the design and management of datacentre technology.

IN PICTURES: Nutanix's .NEXT channel event in Sydney (+20 photos)
IN PICTURES: EDGE 2015 sponsor debrief (+23 photos)

IN PICTURES: EDGE 2015 sponsor debrief (+23 photos)

Some of the sponsors of ARN's inaugural EDGE 2015 event got together at the ARN office for a debrieef of the event. Over some drinks and cheese, these attendees got an update on some key statistics that arose from the EDGE event and discussed potential topics and improvements that can be made at next year's event.

IN PICTURES: EDGE 2015 sponsor debrief (+23 photos)
IN PICTURES: ARN Distributor Roundtable, Sydney, 26.08.15 (+26 photos)

IN PICTURES: ARN Distributor Roundtable, Sydney, 26.08.15 (+26 photos)

ARN hosted a distributor roundtable at Cafe Del Mar in Sydney, at which attendees and their partners discussed the changing role of the traditional IT distributor. They spoke about the challenges of digital disruption, the blurring lines of the channel in the age of digital transformation, and examined the ever-evolving business models. This roundtable was sponsored by Distribution Central, Exclusive Networks, Rhipe, and Hemisphere Technologies. Photos by ARN Editorial Director, Mike Gee.

IN PICTURES: ARN Distributor Roundtable, Sydney, 26.08.15 (+26 photos)

iasset.com is a channel management ecosystem that automates all major aspects of the entire sales, marketing and service process, including data tracking, integrated learning, knowledge management and product lifecycle management.

Show Comments