Red Hat Sales to Reach $3 Billion in 5 Years With Fastest Growth in China

Red Hat Inc. (RHT), the largest seller of Linux software, aims to triple sales to $3 billion in five years, helped by the rising popularity of cloud computing, Chief Executive Officer Jim Whitehurst said.

“We will accelerate the growth rate of the business,” Whitehurst, 43, said in an interview in Beijing today. “The market is coming to us because all the new development is happening on Linux or, more broadly, on an open-source platform. Clouds in general run an open source.”

Red Hat will “blow by” the $1 billion in sales this year that Whitehurst first targeted in 2008. That doubling of sales in three years wasn’t aggressive enough, he said. The shift to cloud computing and updating of old Unix systems to Linux will allow for even stronger growth going forward, with the fastest pace in China, he said.

The company, which had sales of $909 million in the 12 months ended February, yesterday forecast annual revenue may be as much as $1.09 billion this fiscal year.

Sales in China are aided by a government-supported drive to reduce the reliance on Microsoft Corp. (MSFT)’s Windows operating system, Whitehurst said.

Overseas Sales

Red Hat entered China in 2004. The Raleigh, North Carolina- based software maker now gets 40 percent of sales from overseas, while more than 50 percent of its employees are outside the U.S. as it seeks engineers in countries including China, the Czech Republic and India, the company said in May.

Red Hat will increase staff in China 50 percent this year after doubling it to about 300 workers last year, Whitehurst said. He declined to provide a figure for China sales.

Red Hat reported first-quarter profit, excluding certain items, of 24 cents a share, on sales of $264.7 million. Profit was projected at 22 cents a share, the average of 21 analyst estimates compiled by Bloomberg. Sales were estimated at $253.6 million.

The stock fell 0.1 percent to close at $43.72 in New York Stock Exchange composite trading yesterday. Red Hat has declined 4.2 percent this year.

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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