Red Hat posts big growth, scores another win for its KVM hypervisor

Red Hat closes in on a billion in revenue and gains more an unusual ally for KVM.

Red Hat (RHT.N) announced its fourth quarter earnings today, proving once again, that open source doesn't mean free, and can be very profitable indeed. The company posted annual revenue of $748 million, up 15% year-over-year. This inspired CEO Jim Whitehurst to declare, "With double digit revenue growth and record billings, our fourth quarter capped off a year of solid performance, moving us closer to our milestone revenue goal of a billion dollars."

Net income was $87.3 million compared with $78.7 million in the prior year. The company has cloud computing and virtualization in its sites to get it that last quarter of a billion in revenue needed to cross the $1B mark, said Whitehurst.

As far as virtualization goes, Red Hat landed an unusual ally in the fight to prove that that KVM is ready for business -- Novell. With Novell's announcement of the upcoming summer release of Service Pack 1 (SP1), the company also slipped in the news that it will officially support the KVM in version 11 of its SUSE Linux Enterprise Server. Novell isn't yanking out support for Xen, which has grown to be associated with Citrix. Notes the HOpen blog:

"Support for the Kernel-based Virtual Machine was already included as a 'technology preview' in SLES 11, however, with SP1, Novell will offer official support for guest systems including SLES 9 to 11, Windows Server 2003 and 2008, XP and Vista, as well as Red Hat Enterprise Linux (RHEL) 4 and 5."

The news caused many pundits to proclaim that Novell was taking its first steps toward abandoning Xen altogether. This would be especially odd, since it was only in February that Novell and Citrix announced that they were partnering on virtualization, an extension of a year-od partnership between the two for Xen. The news in February was that Novell's SUSE Linux Enterprise Server was certified as a "Perfect Guest" running on Citrix XenServer and both companies will provide joint technical support to customers.

Obviously, Citrix has been working hard to compete against Red Hat's implementation of KVM, trying to explain why KVM makes sense in some cases but is not a full Xen replacement. Guess Novell believed Citrix and is opting to butter its bread on all sides (including, mind you, supporting Hyper-V thanks to its close relationship to Microsoft.)

This week marks the second big news that KVM has been validated in a big way. Yesterday I wrote about IBM using KVM in its new giant, EC2-killer cloud platform. (I guess I should use the latest buzzword for clouds that compete with Amazon's EC2, Infrastructure as a Service or IaaS).

As for the take-away from Red Hat's finanicals, I'll note that, although the company mostly beat analysts expectations, it missed expectations on its deferred revenue, the money it has not yet collected on subscriptions sold. This helped send the stock down in after hours trading. But I'm calling that Wall Street fickleness. Red Hat remains the poster child for the commercial open source model and its quarterly and year-end resuults confirmed this.

During a year when layoffs were the norm, Red Hat hired over 350 employees over the year, mostly in engineering and sales, it said. Now that Sun is gone (and Unix nearly dead) and KVM is clearly coming along, Red Hat remains a favorite Windows-alternative for the enterprise server operating system.

Which Linux operating system do you use? And are you ready to give KVM a try?

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