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Red Hat

(RHT) - Get Free Report

has traditionally seen financial services, government, technology, media and telecom as its biggest segments. However, the company's future lies in the head of not the early adopters, but the mainstream segments of the economy.

In a phone interview with


discussing the

company's earnings,

CEO Jim Whitehurst said Red Hat's technology is going toward the mainstream. "Traditionally, the leading edge industry verticals have always been our early adopters and users, including financial services, and military and intelligence agencies, but we're starting to see more sectors."

Red Hat's biggest deal during the quarter was a health care company and Whitehurst noted health care could eventually become as important or more important than financial services and government. "Health care companies are starting to show up in big way. They're huge users of IT, but they're more conservative. I think there's a shot that health care could get there

the top."

The Raleigh, N.C.-based open source software company earned 36 cents a share on $348 million in revenue. Analysts polled by

Thomson Reuters

were looking for earnings of 30 cents a share on $349.42 million in revenue.

Red Hat provided guidance for fiscal 2014 on the conference call. CFO Charlie Peters said Red Hat expects to generate sales between $1.51 billion and $1.54 billion, up to 16% year-over-year growth. Earnings are expected to be between $1.31 and $1.35 per share. Red Hat expects Non-GAAP operating margins around 24% for the full year.

Fiscal first-quarter revenue is expected to be between $358 million and $361 million, with non-GAAP earnings between 30 cents and 31 cents per share.

Even though Europe is mired in an economic malaise and slow or little-to-no growth, Red Hat continues to see strength, especially in Northern Europe. Whitehurst noted that Red Hat is seeing "really good strength across Europe," going to 25% of the company's bookings, up from 23%. The APAC (Asia-Pacific region) underperformed mostly because of Japan and a significantly weaker yen.

Despite some concerns about weakened currencies around the world, Red Hat is able to leverage the fact its open source model has technology coming from all over the world, which mitigates expenses in times of weaker revenue. "We continue to deliver solid double-digit growth, though that's clouded by currency," Whitehurst said. As the company's service revenue gets pushed more to its partners, its subscription revenue, which is growing at a double digit rate, should gain more focus.

Shares of Red Hat, which fell sharply in after-hours trading following the report, were down 3.9% to $48.01 in early Thursday trade.


Written by Chris Ciaccia in New York

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