Red Hat’s Open-Source Cloud Software Lowers Costs
October 11, 2011
Cloud computing has been compared to an electricity grid, mainly because end users can access power and services without having to set up and run the infrastructure.
With the cloud, software and applications are stored on remote servers and delivered over the Internet rather than individual computers…
Cloud service providers take on the role of utilities. They sell the products that let clients use the cloud and charge fees for technical support, software upgrades and the like.
Not so with cloud computing. Clients can choose from different service providers. They also can choose from different ranges.
Lately, many of those clients, spooked by economic uncertainty, have opted for lower-cost service.
This trend figures to benefit Red Hat (RHT) . It provides open-source software solutions as well as enterprise-ready open-source operating-system platforms.
Operating System
One of its offerings, Red Hat Enterprise Linux, or RHEL, is a much less expensive operating system than those offered by rivals UNIX and Windows Server. Red Hat also sells JBoss, its middleware product; and RHEV, its virtualization product.
Analysts reckon Red Hat’s less expensive solutions should play well in markets that face a lot of economic head wind, such as Europe.
"Since many European entities, including governments, are seeing cost pressures, management believes this could be good for Red Hat as a low-cost provider of technology," JPMorgan analyst John DiFucci wrote in a report.
Europe represented 25% of bookings during Red Hat’s fiscal second quarter. The Americas accounted for 58% of bookings, while Asia-Pacific accounted for 17%.
Revenue for the quarter rose 28% from the prior year to $281 million, comfortably above the $271 million expected by analysts. Most of the gain came from subscription revenue, which climbed 28% to $238 million.
Management credited a bigger sales force and expanded line of products for the top-line boost.
Red Hat also benefited as major customers expanded their data centers and paid more for the software needed to operate the new hardware. Red Hat has grown its business with high-profile cloud customers such as Amazon Web Services and IBM (IBM). It also belongs to the Open Virtualization Alliance, whose members include IBM, Hewlett-Packard (HPQ) and Intel (INTC).