Red Hat's record revenue not enough for Wall Street

Open source vendor posts record sales and profit figures for Q4 but share price still drops by up to 11 per cent

Open source vendor Red Hat's share price took a tumble last night as its fourth-quarter revenue fell short of Wall Street expectations, despite growing annually by a record 17 per cent.

For the three months to 28 February, Red Hat's profits rose 19 per cent to $43m (£28m) annually on sales which jumped 17 per cent to $348m over the same period – just shy of Wall Street expectations of $349.4m, causing a share price slump of up to 11 per cent in after-hours trading.

In its fiscal 2013, Red Hat's spend on sales and marketing rose 17 per cent to $136mm annually, while its research and development spend jumped by 29 per cent to $71m over the same period.

During the last year, the vendor edged closer to its goal of having a 70:30 split between its channel and direct sales team, despite a surge in direct deals in its final quarter of 2013.

For the whole of its 2013 fiscal year, Red Hat increased its channel's share of sales from 60 per cent to 62 per cent, but its resellers got only 57 per cent of bookings in its last quarter. The vendor puts the setback down to an increase in large deals which were mostly handled by the direct teams.

In its Q4, Red Hat claims to have closed a record number of deals in excess of $5m and $10m.

Speaking on a conference call discussing the firm's full-year and final-quarter financial results, transcribed by Seeking Alpha, chief executive Charles Peters said "good progress" was being made to sell more through the channel.

Earlier this year, Red Hat vowed to open up some of its named accounts to its reseller partners in order to drive net new business through the channel.

Peters added: "During fiscal year 2013, we invested aggressively in new product areas such as storage, cloud computing, management and big data through new internal initiatives and three acquisitions in the second half of the fiscal year.

"These investments enhance our strategic position in the datacentre and increase our addressable market."