This is a recurring theme for Red Hat. The margin situation has not been appealing for some time. But I did notice some improvement this quarter. Unfortunately, Oracle is improving as well. Red Hat's investors have never appeared bothered by this sort of detail as long as the top line looks good. To that end, the company delivered. Revenue arrived up 17% year over year, but only advanced 1% sequentially. However, even though Red Hat was coming off of a strong third quarter, which produced 18% revenue growth that then advanced 7% sequentially, the fact that this quarter's sequential improvement was almost flat was not a surprise. Essentially, after Oracle's revenue miss, which arrived down 2%, it wasn't hard to expect unfavorable results from Red Hat, especially since VMware had issued weak guidance for this quarter. Also, according to Richard Williams, an analyst at Cross Research, who has a hold rating on the stock, "The channel checks showed that activity just stopped after the first week of December." He was proven right. Consequently, Red Hat reported sales of $347.9 million for the quarter, which was shy of Street estimates of $349.3 million. That being said, 17% is still solid in this environment. But investors were disappointed by fourth-quarter billings. This is the metric that indicates the strength of future sales. Billing arrived at $454 million, which was more than 3% shy of estimates.
Here again, investors are left of reflect on what these numbers and the soft guidance might actually mean. The fact that the virtualization/cloud industry appears to always be in transition introduces doubt. This makes Oracle's results, from a relative perspective, even more critical. However, unlike Red Hat, Oracle is more diversified. This brings us back to the issue of leverage. If Red Hat can improve that, the stock would be less risky.