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Red Hat CEO: Expect Better Economy in 2013

Stocks in this article: RHT MSFT VMW HPQ

NEW YORK ( TheStreet) -- Red Hat (RHT), the largest provider of open-source software, noted that the IT spending environment isn't as strong as everyone would like it to be. However, it's not getting worse, either.

In an interview with TheStreet, CEO Jim Whitehurst noted that it's a "tough IT environment" right now, but nothing has fundamentally changed for Red Hat. "It's a little bit of a slower IT environment right now, and projects are a little slower. Nothing has fundamentally changed about the business, though."

Whitehurst said that the environment for IT spending in the federal government has dipped a little, especially because of the sequester, but the outlook has gotten better. It's still seeing slowish growth, but there has been a slightly better outlook, especially at the state and local levels. Budget surpluses will get spent. "On the macro side, I'm doing to defer to Ben Bernanke. He said he sees the U.S. economy getting better this year. Right now, we're bumping along, and we're waiting for it to get better, but it's not getting any worse."

For the first-quarter, Red Hat earned 32 cents a share on $363.3 million in revenue, a gain of 15.4% year-over-year. Analysts polled by Thomson Reuters were expecting 31 cents a share on $360 million in revenue.

For the second quarter, Red Hat expects to earn 32 to 33 cents a share on $370 million to $373 million in sales. For the full year, Red Hat expects to earn $1.31 to $1.35 a share, with revenue ranging between $1.51 billion to $1.54 billion.

Operating margins came down during the quarter, but Whitehurst noted that the Raleigh, N.C.-based company is investing in a slew of new categories, which will play out over time, including Open Shift and Open Stack.

"The power of Open Stack is that it has massive participation," Whitehurst noted. "It has everyone from Microsoft (MSFT) to VMware (VMW), to HP (HPQ) to us participating in it. An industry is coalescing around an open source standard. There's a lot of momentum and a lot of interest in Open Stack, but it's still early days."

Whitehurst noted that while Open Stack and Open Shift are promising, revenue is not expected from these initiatives for another year or so.

-- Written by Chris Ciaccia in New York

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