Red Hat beat the street when it released its first-quarter 2012 fiscal year results yesterday when it reported 24 cents a share profit, beating the 22-cents estimates from market analysts. Now, even as the company approaches $1 billion in annual revenue, CEO Jim Whitehurst wants to set expectations even higher: in five years, he predicts Red Hat will have $3 billion in sales.
That's pretty big talk from a company that hasn't broken the magic billion-dollar mark, but there's increasing evidence that Red Hat may be able to pull this off, and then some.
Whitehurst made his remarks just as he's in China, which figures to be a big reason for his strong predictions. Sales in China are predicted to rise sharply thanks to a government move to shift away from Microsoft Windows and a shift towards cloud computing, which Whitehurst sees happening faster in China as that nation's IT workers leapfrog straight from obsolete Unix boxes and right into the cloud.
The cloud remains a big bet for Red Hat, as evidenced by its recent moves within the cloud ecosystem to bolster support for KVM, the hypervisor virtualization solution Red Hat got when it acquired Qumranet in 2008. Red Hat hasn't been quiet about KVM, either, as it uses the technology as the centerpiece of the industry consortium Open Virtualization Alliance.
When it was launched in May, OVA was total reaction to VMware. Rather than watch VMware bully its way to the top, the seven OVA companies (BMC, Eucalyptus Systems, Hewlett-Packard, IBM, Intel, Novell, and Red Hat) declared their focus on the continued development and deployment of KVM. OVA members were wishing the new consortium will attract a lot of smaller vendors who don't want to get run over by VMware or Cirtix technology.
Today Red Hat and the rest of the consortium got their wish, as 65 companies jumped onboard the OVA bandwagon. This huge jump in membership is a big validation of OVA's KVM approach to virtualization and. by extension, Red Hat's virtualization toolset.
Virtualization is only part of the cloud, of course, but it's a big part. With all of these new partners, Red Hat (and the rest of the founding OVA members) have gotten all the rest of the pieces of the cloud puzzle and is now positioned as one of two enterprise Linux distribution companies within the OVA consortium. SUSE Linux is the other OVA distro, but SUSE still has a lot of Xen support in its history and even though KVM is within the Linux kernel now, it's still driven by Red Hat.
The truth is, any Linux distro can take advantage of KVM since it's in the mainline Linux kernel. (Indeed, since Xen is also now in the Linux kernel, paravirtualization fans will be looking at Linux as well.) But Red Hat should still be the go-to vendor for KVM, and Red Hat knows it. Today's OVA announcement is a big deal, if OVA can deliver on its promises and not be just another paper consortium.
I would not be surprised to see a little snarkiness from VMware and Citrix in the days ahead, as they try to position themselves in a virtualization market that's increasingly looking less-and-less friendly to proprietary vendor solutions like theirs. After all, why pay more for a separate virtualization solution when it's already baked into the operating system?
With all of these factors in play, Red Hat may indeed be able to make good on Whitehurst's predictions.