Questions and chatter about Red Hat’s nascent OpenShift Platform-as-a-Service (PaaS) and CloudForms Infrastructure-as-a-Service (IaaS) offerings dominated last night’s second-quarter earnings call, but CEO Jim Whitehurst was cautious on revenue predictions.
“OpenShift is as much an R&D effort on the business model as it is on technology — and so obviously, because it’s not for sale, I’ll really believe all the kudos when people start writing checks,” Whitehurst told analysts. But “we’ve got a lot of momentum.”
CloudForms is a bit further out, barely in alpha test phase, but Whitehurst said early customer reaction to the service — which he said will not compete directly with Amazon EC2 or other “lower-level” platforms — is strong. “But again, that’s not out yet and I’ll believe it when I see the real revenue numbers once it’s [generally available.]”
It’s not exactly clear when that will be, but at that time, there will be a free level and two pay levels. “Right now we already see significant use of the paid levels. It’s just that we haven’t started charging for it yet,” Whitehurst told me in an interview after the call.
But it’s hard to move customers from free to paid. And there’s a lot of “free” out there, Whitehurst acknowledged.
People are trying out these freebies, so adoption is viral at this point, he noted. “But we are more differentiated because we run all languages that run in the JVM — Ruby, Scala, and we have years of Java experience from Jboss,” he said. That multiple language claim is a bit hazy: Both VMware’s Cloud Foundry and Salesforce.com’s Heroku support multiple languages, as well.
But if any company knows how to wring money out of “free,” it’s Red Hat, which makes its dough on subscription services around its Red Hat Enterprise Linux (RHEL) and JBoss middleware.
For the second quarter, which ends on August 31, Red Hat’s income soared 69 percent, to $40 million, up from $23.7 million, or 20 cents per share, up from 12 cents for the year-ago quarter, beating analyst forecasts.
And going forward, Red Hat views VMware — not Microsoft, nor other backers of other Linux distributions — as its most direct competitor.
“We’re both moving from our strengths. VMware is going from virtualization to broad infrastructure, we’re going from the operating system and app infrastructure to broad infrastructure,” Whitehurst said.
People have a habit of underestimating Red Hat, said senior analyst Jay Lyman with The 451 Group. Microsoft was supposed to kill it. Other Linux distributions were supposed to kill it. Then former partner Oracle, (s orcl), with its Unbreakable Linux, was supposed to kill it. That didn’t happen. “Now VMware is trying to out-open Red Hat with CloudFoundry,” Lyman said. This could get interesting.
A former Red Hat executive who still follows the company said it has other, stealthier challenges than VMware to contend with.
“I just see a lot of innovation leaving Red Hat,” he said. “If I were them I’d watch what RPath and Eucalyptus are doing.”