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TheStreet Open House

Red Hat CEO: Downturn Equals Dollars

Stocks in this article: RHT MSFT ORCL

RALEIGH, N.C. ( TheStreet) -- The jittery economy presents big opportunities to software maker Red Hat (RHT - Get Report), according to CEO Jim Whitehurst, fueling demand for the company's open source products.

Red Hat sailed past analysts' estimates in its second quarter results, released last night, and hiked its full-year guidance. Whitehurst told TheStreet that a difficult spending environment has added to the appeal of the firm's open source offerings, which it touts as a cheaper alternative to products from the likes of Microsoft (MSFT - Get Report).

"In a tight economy, people are looking to save money," he told TheStreet. "We have been able to do quite well selling value in an uncertain economy."

Whitehurst, the former chief operating officer of Delta Airlines (DAL), also struck a bullish tone on his company's long-term prospects.

"No matter what the market is, we will see strong double-digit growth," he explained. "It beats the hell out of the airline business!"

Red Hack racked up second-quarter revenue of $281.3 million, a 28% increase on the same period last year, and comfortably above analysts' estimate of $271.8 million. The company's subscription revenue climbed 28% year over year to reach $238.3 million during the second quarter.

Specifically, Whitehurst credited the explosion of cloud computing as driving demand for his firm's Enterprise Linux offerings.

"Clouds run Linux -- it's a reality," he said, pointing to open source deployments at cloud trailblazers Google (GOOG) and Amazon (AMZN - Get Report) which have set the tone for other companies. "Our products, I think, are seen as clear long-term winners in the next-generation of computing."

Additionally, the CEO said Red Hat's annuity-based subscription model ensures a solid revenue stream, even in an uncertain economic climate.

"The nature of the economic model relatively buffers us," he said.

Concerns about IT spending are swirling round Silicon Valley although Red Hat rival Oracle (ORCL - Get Report) deftly side-stepped these fears earlier this when it posted robust first-quarter numbers.

Red Hat's shares surged following the company's results on Wednesday, and continued their momentum on Thursday, climbing $1.69, or 4.19%, to reach $41.98.

--Written by James Rogers in New York.

>To follow the writer on Twitter, go to http://twitter.com/jamesjrogers.

>To submit a news tip, send an email to: tips@thestreet.com.

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