Red Hat channel expands as revenues rise

Open source vendor's channel gets bigger slice of the pie as revenue and profits soar

Open source vendor Red Hat upped the proportion of its global business transacted through the channel to more than two thirds in Q1, as its top line grew 15 per cent annually.

For the three months to 31 May, Red Hat's net profit rose eight per cent year on year to $40.4m (£26.1m) on sales which jumped 15 per cent (17 per cent in constant currency) annually to $363m.

The firm's chief financial officer Charlie Peters described the opening of its 2014 fiscal year as "solid", and said: "We continued to invest in our long-term growth initiatives around the open hybrid cloud to deliver new technologies, in particular by ramping up spending in research and development for cloud management, Red Hat Enterprise Linux OpenStack Platform and Red Hat's OpenShift platform-as-a-service technologies."

In Q1, Red Hat increased its research and development investment by 23 per cent to $73.8m, while its sales and marketing spend rose by 18 per cent to $142.4m.

The open source vendor recently opened up some of its named, direct accounts to the channel in an effort to drive net-new business through its resellers, and speaking on a conference call – transcribed by Seeking Alpha – the firm's chief executive Jim Whitehurst said the plan was working.

"The Q1 sales mix was 68 per cent from the channel and 32 per cent from our direct sales force versus a 64-36 per cent split in Q1 last year," he explained.

"[This reflects] our continued emphasis on the channel and the greater geographic mix from regions more heavily devoted to channel business."

Whitehurst added that EMEA has done well in light of challenging economic factors, while the Americas have been affected by uncertainty in federal government spending in the region.