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Red Hat Breaks $500 Million in 2007, Aims 30 Percent Higher in 2008
Published: April 2, 2008
by Timothy Prickett Morgan
Commercial Linux distributor Red Hat closed out its fiscal 2007 year and last week reported financial results for the final quarter and full year. With the absorption of JBoss more or less accomplished and Red Hat the leader in commercial Linux shipments support sales, the company is pressing on to break through the $1 billion barrier in the next few years under the guidance of a new president and chief executive officer, Jim Whitehurst.
That $1 billion target, which was set by Red Hat's chairman, Matthew Szulik, last November, should not be that hard to hit, not the way Red Hat is growing. And based on guidance that Red Hat is giving to Wall Street for fiscal 2008, the company is poised to grow whether the global economies stabilize or slow down, since Linux is one of the tools that companies want to deploy to cut costs or to standardize their IT operations. (One might even make an argument that a bad economy will accelerate Linux sales, in fact, but Red Hat has not been so bold as to wish for that--bad economies being somewhat unpredictable and all.)
In the fourth quarter of fiscal 2007 ended February 29, Red Hat reported subscription revenues of $121.9 million, up 27.1 percent. Training and services revenues in the quarter rose by 29 percent to $19.6 million. Overall sales were up 27.3 percent to $141.5 million. Red Hat had over $200 million in bookings--the first time it crested that level--and had $186 million in bookings in the quarter, which will help drive future revenues as they are recognized. That revenue growth in Q4 came at a cost, however, as the company is spending more on sales, marketing, research, and development areas, so the company's net income (diluted, not basic) came to only $22.9 million, up only 6.8 percent.
Now, under normal circumstances, Wall Street would have given Red Hat's shares a haircut last week because the company did not grow profits hardly at all compared to revenue growth in the fourth quarter. But there are a few things going on here. First, Red Hat's full fiscal 2007 numbers were pretty good. Subscription fees rose by 31.8 percent to $449.8 million, and training and services sales rose by 23.2 percent to $59.4 million, giving the company annual sales of $523 million, up 30.6 percent. For the year, net income was $80.3 million, up 25.8 percent. When you do the math, Red Hat is bringing more than 15 percent of its revenues to the bottom line--something very few companies do, and it did more than 16 percent in Q4. Moreover, this is not a normal economy. When Red Hat said that it was projecting around 30 percent growth in fiscal 2008, Wall Street seems to have cut the company some slack and investors actually drive the stock a little northward. As we go to press on Tuesday afternoon, Red Hat's shares are above $19 a pop and the company has a market capitalization of $3.6 billion.
What really made Wall Street happy, of course, is when Charlie Peters, the company's chief financial officer, said that Red Hat was projecting the same or better revenue growth in fiscal 2008, with sales of between $665 million and $680 million, kissing a growth rate of 30 percent. "From a long-term perspective, there is no change in our belief that the business could ultimately support much higher operating margins," Peters said after giving the 2008 guidance. While that falls short of saying that Red Hat can get back to the incredible operating margins it had when it was a smaller company and just selling Linux support contracts (Red Hat was bringing a quarter of revenues to the bottom line only a few years ago), what Peters said last week in the conference call with Wall Street analysts suggests that the company can generate more cash than it is doing. This probably means more acquisitions and more share buybacks, which of course drive the company's stock up further, generally speaking. The company is already on its way to making more cash, inasmuch as Peters said that revenues for the first quarter of 2008 were projected to be between $152 million and $154 million. He also said that, looking ahead, the JBoss and related middleware business is still growing at twice the rate as the core Linux business at the company, although it is considerably smaller, obviously.
Whitehurst, who is formerly the chief operating officer at Delta Airlines, is still pretty new to the president and CEO jobs, but has plenty of Linux and IT experience. And he is clearly happy to be in a new business. "Coming from the airline business, it is great to talk to customers without having them take your head off," Whitehurst said in the call among lots of laughter. "Relative to airlines and, frankly relative to other software companies, across the board I hear positive things about service, which is phenomenal. The primary thing we hear from our major customers is they value and want even more of a technical relationship."
Red Hat had $678 million in cash as it ended the fiscal year on February 29, up 28.5 percent from the year-ago period. The company also had $312 million in debt securities, and Peters said that over the past few months Red Hat has sold off any asset-backed or mortgage-backed securities, so there are not going to be any future surprises there. And it will not be much of a surprise as Red Hat builds up its services portfolio in fiscal 2008, as it just did with the Amentra acquisition a few weeks ago, adding JBoss implementation services.
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Why File-based System Backup is your Best Bet
File-based, Full System Backups Create Advantages Over Image-based Backups
File-based backups used for system recovery have been around for years. And, until recently, file-based meant a long, painstaking, manual process capable of turning off even the most meticulous system administrator. Image-based backups, then, seemed to solve this problem by eliminating the need to deal with recreating partitions, filesystems, volume groups or other details related to the system's storage configuration. In an image-based restore, the storage configuration and data from the original system are restored as a whole to the new system. While this method produced fast recovery times, Linux administrators began to realize disk image backup was more of an alternative method with its own set of problems and limitations than an answer to the challenges of manual, file-based backup.
Limitations to Disk Image Backup
Since disk image backups make no distinction between files and instead backup the hard drive as a group of sectors, bare-metal recovery can be quick and easy by simply rewriting a duplicate image onto a new, identical disk drive. A fine solution, as long as the old system and new system are indeed identical in types, sizes, locations- basically the exact same hardware. Any differences in hardware, however, could render an image backup unusable.
Many system administrators know first-hand the frustration caused by the inflexibility of image-based backup. "What I hear time and time again from clients is that they switched from image-based backup to file-based because of the limitations they encountered when trying to restore a backup onto different hardware." said Manuel Altamirano, Storix Software Director of Sales and Marketing. "Administrators assume they will have access to identical hardware after a disaster or for migration when the time comes. Unfortunately, so often this is not the case. Companies are left with unplanned, excessive downtime."
Even more advanced disk image backup products, that offer alterations to disk partition tables, still fail to understand more advanced and increasingly common storage configuration tools such as the Logical Volume Manager (LVM) or Software RAID (meta-disks) that also must be altered to match new hard disk configuration before data can be restored. In these cases, users must manually alter and build the configuration, usually through command-line utilities and manual editing of configuration files. This also requires users to have knowledge on how to make a system bootable. Rebuilding a system using a disk image backup requires experienced Linux administrators and could take days, weeks or longer resulting in crippling downtime for an organization.
Advances in File-based Backup
File-based backup tools today can automate the process of recording every aspect of a system separately such as disk, filesystem and boot loader configuration while supporting all popular Linux storage configuration tools (i.e. LVM and Software RAID). This detailed backup information is used to greatly simplify the recovery of a failed system from scratch, even if hardware differences are detected on the new system. Furthermore, systems rebuilt from the ground up using file-based backups often times operate better than the original because there is virtually no fragmentation when the restore is completed.
Flexible recovery based on file-based backup
File-based backup products have the ability to reconfigure disks, partitions, filesystems and other storage solutions to fit onto new hardware. This ability to adapt a backup to fit new hardware or alter the system's storage configuration is called "Adaptable System Recovery" or ASR. Only backup solutions that gather details about the original system have enough information and flexibility to make the ASR process of altering configuration so simple even novice Linux administrators can quickly perform the recovery. Once new configuration is completed, data files from the backup are easily restored onto the new hardware. Finally, the system is made bootable based on the new hardware.
The revolutionary adaptability of ASR found in file-based backup tools creates further added value for system administrators because these products can now be used for far more than just reactive tasks such as disaster recovery.
Applications for ASR:
Reactive
- Disaster Recovery- restore systems in minutes after a crash, even if hardware is not the same as the original
Proactive
- Provisioning/cloning- a single backup "golden image" can be used to provision different systems, even if disks, adapters or other elements are not the same.
- Storage software migration- change configuration on the same system for improved performance and availability
- Hardware migration- install the same system onto newer or virtual systems
New system backup management features
Products using file-based system backup have not neglected to consider a system administrator's daily backup responsibilities. These products now incorporate functionality for backup management as well as some of the most advanced features seen in backup and recovery solutions for Linux and AIX. Some advanced features designed to simplify daily backup management for system administrators include:
- Graphical, Web and Command line interfaces
- Local and remote backups to disk or tape devices
- Sequential and random tape autoloader support
- Support for SAN storage solutions
- Tivoli Storage Manager integration
- Oracle database backup support
- Backup data encryption
- Multiple compression levels
File-based Backup Solutions Provide Most Bang for the Buck
Inexpensive products exist that combine both file-based backup management and ASR in one program. Look for a file-based system backup product with advanced features like those mentioned above. In turn, regular backup responsibilities such as automatically verifying backups and encrypting backup data will become much easier. Additionally, combined ASR capabilities greatly reduce downtime and required expertise for both reactive (even bare metal) and proactive recovery projects. File-based system backup and recovery solutions are an economical and more comprehensive option than their image-based counterparts.
About the Author
Anne Stobaugh is an independent contractor working with Storix Software to educate Linux and AIX users on the advantages of file-based backup and recovery solutions.
www.storix.com
www.stobaughmarketing.com
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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik, Kevin Vandever,
Shannon O'Donnell, Victor Rozek, Hesh Wiener, Alex Woodie
Publisher and Advertising Director: Jenny Thomas
Advertising Sales Representative: Kim Reed
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March 22, 2008: Volume 10, Number 12
March 15, 2008: Volume 10, Number 11
March 8, 2008: Volume 10, Number 10
March 1, 2008: Volume 10, Number 9
February 23, 2008: Volume 10, Number 8
February 16, 2008: Volume 10, Number 7
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