Philip Carnelley
Good times for Red Hat (and therefore Linux) in Europe
We had a visit from Red Hat's EMEA folk recently. We tend to think of French Mandriva (née MandrakeSoft) and Novell's German SuSE operation as carrying the torch for Linux in Europe, but in fact Red Hat is not doing badly in Europe at all.Red Hat is by far the largest purveyor of Linux distributions, worldwide - it just closed its FY05 (ended February 28), showing revenues up 58% to $197m. Operating margins were up from 2% to 14%. It also has cash balances of over $900m, and deferred revenue of $137m. A very healthy way to enter its next fiscal year. What interested us, particularly, though, was how Red Hat is doing in Europe. Rather well, in fact. International revenues, including Europe, were up 60% in FY05. We don't have full information yet, but for the first nine months of FY05, Europe was about 17% of Red Hat revenues - so for the full year that would be about $33m. By comparison, Mandriva has European revenues of about $6-7m. And, in its most recent quarter, Novell reported that its SuSE operation had revenues of around $15m (worldwide). This is only about 30% of Red Hat's revenue, though it is probably skewed much more towards Europe, so the European businesses could well be about equal. We note too that Novell's figure represents a huge jump from a year ago when SuSE's revenues were around $2m.Red Hat has had some good recent contract wins in Europe. Most notable perhaps is Germany's LVM Insurance which is to run Red Hat on 8,500 desktops (including laptops). LVM is switching from a home-assembled distribution of Linux to a Red Hat - a commendable move and wiser than Munich City Council's opting for Debian, in our view. Other European wins include BPU Banca in Italy, migrating 8,000 Unix workstations (and associated servers); Norwegian StatOil, migrating applications and platforms from Unix to Red Hat; a Finnish retail chain, and the UK derivatives/futures exchange, Liffe, which is switching from Solaris. Our takeaway from all this is that Linux is thriving in Europe - albeit still tiny compared to Windows - and the three most notable players are all making progress. This is good news for government and enterprises worried about being overly dependent on single-vendor, proprietary solutions. And it's certainly doing Red Hat no harm. The company's figures show that a model where you give away the software but charge for support can be very lucrative - and stable, too. 80% of Red Hat's revenues now come from Enterprise subscriptions, with a very high proportion of renewals and great revenue visibility.
