Morningstar | Red Hat Posts Continuing Growth; Raising FVE to $190
Red Hat has become the face of the open-source software movement, championing the adoption of Linux as the premier server operating system. It can innovate much more quickly than traditional software companies while maintaining manageable research and development spending by leveraging a vast community of developers that refine the free software that Red Hat bundles with its valuable service and support program. Red Hat is using the open-source model to expand in the data center, but the rise of cloud computing presents opportunities and challenges.The server OS will remain a mission-critical component of IT infrastructure regardless of where workloads are processed, be it on-premises on physical servers and virtual machines or in a cloud setting, but now Red Hat must compete with free supported Linux operating systems. Enterprises have strict requirements for OS reliability and scalability, and any IT hiccups can wreak havoc on a business. This is where Red Hat’s value proposition takes hold. Red Hat provides support to its flagship product, the Enterprise Linux server OS, or RHEL, assuring customers will face minimal downtime while running applications on a flexible, scalable OS. As a result, Linux’s popularity has grown significantly, now driving roughly half of all servers. Red Hat supports 75% of paid Linux deployments. Linux should continue to take share from Unix and Windows-based servers over the next several years, providing ample opportunity for Red Hat’s core business to grow.Red Hat has roughly quadrupled its addressable market (which should eclipse $73 billion by 2020) by driving open-source projects around storage, virtualization, middleware, platform as a service, and infrastructure as a service. The firm’s middleware arm, JBoss, has evolved from an application platform when acquired in 2006 to a full suite of middleware solutions, while Red Hat is a leading contributor for cloud software solutions such as OpenStack and OpenShift. Although we think adoption of these products will be limited in public cloud settings, Red Hat appears poised to help firms make the leap into a hybrid cloud setting.Red Hat is a provider of open source software solutions, using a community-powered approach to develop and provide operating system, virtualization, management, middleware, cloud, mobile and storage technologies. The company provides its software offerings primarily under annual or multi-year subscriptions as well as on-demand through its certified cloud and service providers. The company's products and services include: Infrastructure-related offerings, which consist of Red Hat Enterprise, Red Hat Satellite, and Red Hat Virtualization; and Application Development-related and Other Emerging Technology Offerings, which consist of Red Hat JBoss Middleware, and Other Emerging Technologies.
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