Red Hat, Inc. (RHT)

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Red Hat (RHT)

Q3 2012 Earnings Call

December 19, 2011 5:00 pm ET

Executives

James M. Whitehurst - Chief Executive Officer, President and Director

Charles E. Peters - Chief Financial Officer and Executive Vice President

Tom McCallum -

Analysts

Brent Thill - UBS Investment Bank, Research Division

Adam H. Holt - Morgan Stanley, Research Division

Gregg Moskowitz - Cowen and Company, LLC, Research Division

Nabil Elsheshai - Pacific Crest Securities, Inc., Research Division

Philip C. Rueppel - Wells Fargo Securities, LLC, Research Division

Mark R. Murphy - Piper Jaffray Companies, Research Division

Tim Klasell - Stifel, Nicolaus & Co., Inc., Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Kash G. Rangan - BofA Merrill Lynch, Research Division

Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division

Heather Bellini - Goldman Sachs Group Inc., Research Division

Michael Turits - Raymond James & Associates, Inc., Research Division

Richard T. Williams - Cross Research LLC

S. Kirk Materne - Evercore Partners Inc., Research Division

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

Presentation

Operator

Good afternoon. My name is Allie, and I will be your conference operator today. At this time, I would like to welcome everyone to Red Hat's Q3 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Tom McCallum, VP of Investor Relations. Mr. McCallum, you may begin your conference.

Tom McCallum

Thank you. Hello, everyone, and welcome to Red Hat's earnings call for the third quarter of fiscal 2012. Speakers for today's call will be Jim Whitehurst, President and CEO; and Charlie Peters, Executive Vice President and CFO. Our earnings press release was issued after the market closed today and may be downloaded from redhat.com on the Investor Relations page. Also on this page, you'll be able to find historic reconciliation schedule of GAAP to non-GAAP financial metrics as well as a schedule on currency rates.

Various remarks that we may make about the company's future expectations, plans and prospects, including the statements containing the words believe, anticipate, plan, project, estimate, expect, intend or will, constitute forward-looking statements for the purposes of the Safe Harbor's provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-Q filed with the SEC, as well as the Safe Harbor statement in today's press release.

In addition, any forward-looking statements represent our estimates or views only as of today, December 19, 2011, and these estimates or views may change. While the company may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates or views do change. And therefore, you should not rely on these forward-looking statements as representing our estimates or views as of any date subsequent to today.

With that, I'd like to turn the call over to Jim.

James M. Whitehurst

Thank you, Tom, and let me add my welcome to all of you joining us on today's call. Market demand for Red Hat remained strong on a global basis, and we continue to gain market share as a result of strong execution and our ability to deliver value to our customers. The combination of these factors contributed to strong year-over-year organic growth across each of our key financial metrics, including billings, revenue, operating income and cash flow, leading to results that were at or above the high end of our expectations for every metric.

Even in a challenging global economy, demand for Red Hat's innovative solutions continue to benefit from customers, who are driving productivity gains and agility across their organizations by investing in their IT infrastructure.

Now let me provide some recent business highlights. Our big news this quarter was the further expansion of our market opportunity and footprint in the data center by entering the storage space via the acquisition of the open source software company, Gluster, Inc. This software-only solution addresses storage of unstructured data spanning from bare metal to virtualized instances and in cloud deployments. This $4 billion addressable market, which is growing rapidly, is a great place for Red Hat to enter the big data world and provide storage in the cloud.

Storage is complementary to our business, fits with our core infrastructure stack and is aligned with our enterprise customer base. Also, the Gluster technology has me excited. It is a software solution for solving the scale-out storage problem. It's open source with a vibrant community and fits well with our cloud vision of being able to deploy applications anywhere. It's already used by companies like Pandora and Limelight [ph] for their unstructured data needs.

Because the IT landscape is changing, storage architectures are changing, too. Traditional hardware-based storage solutions present a problem for customers who are now faced with having to replicate data in multiple cloud, including on-premise and public. There's a need for a common storage solution for customer data, whether that data -- wherever that data maybe. Because Gluster is software-based, it's a great solution for the challenge of storage in the cloud.

For example, you can't ship hardware to Amazon to run on top of their cloud but you can move the Gluster solution into a virtual machine instance running on a public cloud. Gluster provides choice. It's already available on Amazon's Cloud, and we are driving innovation to enable it with other cloud offerings. The Gluster technology, now known as Red Hat Storage, will be a foundation to bring products to market that not only provide a compelling value and performance proposition but solve some of the new challenges of storing the explosion of unstructured data.

Read the rest of this transcript for free on seekingalpha.com