Wall Street wasn’t pleased with Red Hat’s second-quarter revenue miss on Wednesday, yet the software company’s outlook is usually much brighter than This particular quarter made the item seem, Red Hat President in addition to CEO Jim Whitehurst told CNBC on Friday.
An open-source software provider of which helps enterprises get onto the cloud, Red Hat gets much of its business coming from its Enterprise Linux operating system, which helps run companies’ applications via private in addition to public clouds.
yet the Enterprise Linux division’s modest second-quarter growth of 8 percent didn’t mean business was slowing permanently, Whitehurst told “Mad Money” host Jim Cramer in an exclusive interview.
“Two in addition to a half years ago, we started out down a path of trying to get our customers in three-year agreements. By getting them in three-year agreements on Linux, the item gives us time to go then sell them brand new products,” he said.
“The problem with of which is usually those three-year agreements are typically fixed, in addition to so they don’t go up in value every year, so the bulk of our Linux business in addition to these three-year deals isn’t growing at all,” Whitehurst continued.
As the three-year deals come closer to their renewal dates, however, the Linux business should turn up, the CEO said.
“We did say we expect This particular is usually the bottom in addition to the item should re-accelerate coming from here. We have not bad visibility in addition to our total backlog grew 20 percent This particular quarter, so we have a pretty not bad sense of which the item’ll accelerate coming from here,” he told Cramer. “Next year, having a lot more renewals coming from those, you should see more growth.”
Investors were also concerned by what Red Hat called a “larger competitive loss” to a legacy on-premise software provider inside the second quarter. The company chalked the loss up to cost competition.
Whitehurst came back at the criticism by noting of which of the 300 deals Red Hat has made inside the last three years, only two clients left for competing offers in addition to didn’t return.
“We’ve only had one some other customer beyond This particular one which went away in addition to didn’t then later come back,” he told Cramer. “If you went all 300 out of 300, the item probably means you’re underpricing. So I’m OK losing one every right now in addition to then. Let the customer try something else in addition to then realize the value of what we do.”
Red Hat’s stock ended Friday trading up 0.61 percent, at $134.62 a share. The company has announced partnerships with Microsoft in addition to IBM to speed up cloud adoption across industries.
Disclosure: Cramer’s charitable trust owns shares of Microsoft.
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