Red Hat Inc.'s latest financial results prove the company can withstand new competitive challenges, according to Matthew Szulik, the company's chairman and CEO.

On Thursday, Red Hat Thursday reported fourth-quarter sales of $111.1 million in sales, up 41 percent from sales of $78.7 million during the same period one year ago.

The sharp rise in sales came despite stepped up competition for Red Hat, including Oracle Corp.'s introduction last October of lower-cost version of Red Hat's subscription service for businesses using open source software. In addition, Microsoft Corp. started working to make features of Novell Inc.'s Linux distribution work with Windows as part of a deal between the two companies.

These developments haven't slowed down Red Hat, which added 10,000 new customers during the fourth quarter, and 44,000 for the year, Szulik said during an interview with IDG News Service. What follows is an edited transcript of that interview:

IDG News Service: You said there was no impact in the fourth quarter of the Oracle and Microsoft-Novell deals, but Oracle is boasting that it won over 26 companies who were Red Hat customers to Oracle Unbreakable Linux, including Yahoo Inc. Your response?

Szulik: Yahoo executives communicated to me that they consider Red Hat to be an important and strategic customer and that they plan to continue to build on their historical and successful relationship with Red Hat. They said they did not replace Red Hat across the enterprise, they implemented Oracle Linux on certain Oracle database servers.

IDGNS: But there were 25 other companies Oracle claims it won from Red Hat. Have you determined that they also replaced some Red Hat with Oracle but not across the enterprise?

Szulik: When we did our analysis, most of them, if not all, had very little to no Red Hat penetration. The facts speak for themselves: We generated 10,000 net new customers in the quarter.

IDGNS: Do you see that you'll have to continue to react to the Oracle and Microsoft-Novell deals going forward?

Szulik: Since 1998, the company has had to compete against the biggest and most successful operating system companies in the world. The culture has been trained to compete and sell value. And we will continue to focus on the customer as a way to compete successfully. [Red Hat], as a pure open source play, with the combination of the development model, the service capability and the economic model, will continue to produce superior results for our customers.

IDGNS: The Oracle strategy is markedly different from the Microsoft-Novell partnership in that Microsoft is improving interoperability of Novell and Microsoft. Do you see that, in particular, as something you have to address?

Szulik: As long as I have been in the business, which is almost 30 years, I have heard that Microsoft is trying to improve interoperability. So I'm wondering what kind of magic dust is going to get sprinkled over this relationship that is going to improve the satisfaction of the customer to operate and be successful in a heterogeneous environment. There's one answer and that is vendor-neutral standards. All the marketing money in the world will not distort the truth that customers will achieve a higher degree of interoperability when there are vendor-neutral standards.

» posted by abennett

IDG News Service

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