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CEO: Red Hat Enterprise Linux remains straw that stirs the Hatters' drink (+ video)

Jim Whitehurst

Sep, 26 2017, 7:47 AM

Just as Reggie Jackson once said he was the straw that stirred the drink with the Yankees, Red Hat's Enterprise Linux remains at the heart of the high-earnings cocktail that continues to be mixed by the Hatters.

Raleigh-based Red Hat continues to add new products and services with the acquisition of Durham-based Ansible adding to the mix. But the Hatters' strong quarterly financial report Monday also points to the continuing importance to Red Hat Enterprise Linux, says CEO Jim Whitehurst.

Revenues soared 21 percent year-over-year as Red Hat beat earnings and revenue expectations. And Whitehurst called out RHEL for sparking a 14 percent surge in subscription revenues while "on-demand RHEL revenue from our public cloud provider partners ... now exceeds $200 million in annualized run rate and is growing twice as fast as the company overall."

Red Hat notes that "since its introduction more than a decade ago, Red Hat Enterprise Linux has become the world's leading enterprise Linux platform." And RHEL remains a top choice for Wall Street and financial services firms worldwide.

RHEL's enduring value was repeated by Whitehurst during a conference call in response to a question from analyst  Zane Chrane with Bernstein.

"So historically you guys lead with RHEL in deals, but as OpenStack and OpenShifts have become increasingly important. I’m wondering how can you leading with one of these as one of those two offerings as a driving deal flow and how should we think about the driver of the large deals going forward with these two versus RHEL, historically?"

"I would say that still much of our business ends up being driven around the RHEL renewal where we add other things to it, virtually every materially sized company has a material amount of RHEL in there and so there’s a discussion that happens around renewal time and that’s often a time that we bring in new products," Whitehurst explained, according to a transcript of the call from financial news website SeekingAlpha.

"I think you’re right where for business it’s not driven directly around a RHEL renewal. Often that is driven around discussions of digital transformation or specific projects, and then obviously, the other parts of the portfolio take a lead in that circumstance. Recently, Ansible [acquired 2015], whole different set of use cases, different set of buyers. So that ultimately is a whole different sales motion.

"So it’s hard to give you just one. A lot of it is driven by kind of net new projects for the new products and then the renewals just because the size of RHEL who have a compelling event for up-sell and cross-sell. So really is a mix."

Cloud offerings come. Some may go. Containers are hot.

Meanwhile, RHEL keeps chugging along.

Read the full transcript at:

https://seekingalpha.com/article/4109348-red-hats-rht-ceo-jim-whitehurst-q2-2018-results-earnings-call-transcript?part=single





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