Red Hat continues its bullish run, but a bit less profitably than previous quarters, as reported by Forbes and other sources. Red Hat nailed $400M in FY 2007 revenue, up 48% over the previous year. Sales were up 41% over Q3, but profit in Q4 decreased to $20.5 million, or 10 cents per share, from $27.3 million, or 13 cents per share, in Q3. Profit was pulled down by higher operating expenses, which were up 66 pe Red Hat continues its bullish run, but a bit less profitably than previous quarters, as reported by Forbes and other sources. Red Hat nailed $400M in FY 2007 revenue, up 48% over the previous year. Sales were up 41% over Q3, but profit in Q4 decreased to $20.5 million, or 10 cents per share, from $27.3 million, or 13 cents per share, in Q3. Profit was pulled down by higher operating expenses, which were up 66 percent to $77.1 million, from $46.5 million in the same quarter last year.Total revenue for the quarter was $111.1 million, an increase of 41% from the year ago quarter and 5% from the prior quarter. Subscription revenue was $95.9 million, up 44% year-over-year and 8% sequentially. For the full year, total revenue was $400.6 million, an increase of 44% over fiscal 2006 revenue, and subscription revenue was $341.2 million, up 48% from the prior year. Net income for the quarter was $20.5 million or $0.10 per diluted share compared with $14.6 million or $0.07 per diluted share for the prior quarter. Non-GAAP adjusted net income for the quarter was $32.7 million, or $0.15 per diluted share, after adjusting for stock compensation and tax expense as detailed in the tables below. This compares to non-GAAP adjusted net income of $29.6 million, or $0.14 per diluted share in the prior quarter. For the full year, net income was $59.9 million or $0.29 per diluted share, compared with $79.7 million or $0.41 per diluted share in the prior year. Non-GAAP adjusted net income for the year was $113.6 million or $0.54 per diluted share, compared to $77.9 million and $0.40 per diluted share the year before. Non-GAAP operating cash flow, as detailed in the tables below, totaled $56.4 million for the quarter and $217.5 million for the full year. At year end, the company’s total deferred revenue balance was $338.6 million, an increase of 52% on a year-over-year basis and 9% sequentially. Total cash, cash equivalents, and investments as of February 28, 2007 were $1.2 billion.Very good numbers, but the profits are of concern. Red Hat has always run such a tight ship – I can’t imagine that the company is significantly deviating from that. Perhaps the sales required more travel to convince shaky customers to re-up. I’m not sure, but missed the part of the call when Red Hat management discussed profit. A few interesting points:A Merrill Lynch asked about competitors and whether recent rumblings (Oracle, Microsoft, etc.) have affected Red Hat. Matthew Szulik’s response was classic (I’m paraphrasing): “Since Red Hat’s inception, dealing with bigger competitors – hardware, software – has been a fact of life for us. We compete by providing value to our customers, and will continue to do so.” Average length of contracts has continued to be ~18 months, with no change in discounting or other incentives to drive long-term deals. Matthew was emphatic that they have not had to resort to discounts to compete. On Microsoft/Novell, Matthew Szulik indicated that Red Hat has been working with (and will continue to work with) Microsoft to improve Linux/Windows interoperability, which I found interesting. That’s the first I’ve heard of it, though I knew Red Hat was talking with Microsoft before…. A Citigroup analyst asked about JBoss integration…and Charlie Peters indicated that sales/marketing/engineering are all fully integrated into Red Hat. I know that this has not been painless (at least, from the JBoss side), but I’m not sure how telling that is. It’s hard to be assimilated. Global Equity Research asked about Yahoo’s alleged defection to Oracle. Matthew indicated that he spoke with Yahoo! executives yesterday, and they were “quick to affirm their support for Red Hat.” They expect to continue to use and expand Red Hat Enterprise Linux usage within Yahoo! This same analyst (Mark Murphy) also asked about how it’s going selling subscriptions to JBoss, given how good the product works (such that many elect to use JBoss without buying support). Matthew indicated that Red Hat has brought JBoss into new channels and new geographies (EMEA, APAC), and has been successful in adding value to JBoss subscriptions such that uptake has been strong (and better for Red Hat’s involvement). In addition, JBoss traditionally hadn’t sold many three-year deals, but that length of deal is going up considerably with Red Hat’s involvement. That said, Charlie did indicate that he’s not going to separately break out JBoss revenues going forward, perhaps to guard a Still, he also said that JBoss is Red Hat’s “fastest growing product on a percentage basis.” Someone asked about acquisitions (given Red Hat’s growing cash horde), and Charlie cautioned people to expect Red Hat to “not go up the stack, but rather “across the enterprise,” from development to production. I have no idea what this means. It must mean something to Red Hat in terms of the kinds of companies it buys (if any), but what, exactly, does it mean? Does it mean it would buy an open source ESB? Or a developer tool company? Or what? Not super important, but I was left scratching my head on Charlie’s “guidance” on this one. Maynard asked about RHX, and whether the guidance for FY 2008 includes RHX revenues. Matthew indicated that it is not. RHX is designed to augment the growing role of Red Hat’s channels in bringing its products to the market. It’s supposed to be complementary to existing channels – customers (new and old) learn about Red Hat (or its partners’) products, and buy and get support online. So, it’s not something that sales reps will be quota’d against, but rather just another way to buy into the Red Hat ecosystem. Matthew later said to think of RHX as “upside,” and that no one should hold it to a material revenue increase. Renewal rates. Charlie said renewal rates continue to improve, but are better for direct sales versus indirect channels (and that the company is trying to improve renewal rates for its indirect channel sales). Top 20 customers all renewed at 120% of dollar value over last year. JBoss did not make its earn-out target for the year.All in all, very impressive. Some wonder why I’m a Red Hat fan. It’s because the company delivers. It executes. I heard from a friend that I’m persona non grata over at Novell these days. Not surprising. But, Microsoft patent deal aside, my main problem with Novell is that it doesn’t execute. It was my biggest complaint when I was an employee of the company, and absence has not made my heart grow fonder of ineptitude. If you want to be taken seriously in business, you deliver. Red Hat delivered today, as it did last quarter, and the quarter before, and….Oracle? I have my issues with the company, but it delivers. Same with Microsoft. Open source is not an excuse for ineptitude – it amplifies it. Congratulations to the Red Hat team on another excellent quarter. Open Source