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Story URL: http://hardware.silicon.com/desktops/0,39024645,11020090,00.htm

Red Hat performance falls short of chief's predictions
The CEO of Linux powerhouse Red Hat is in danger of being caught out by the recent downturn in the performance of high-tech companies after he predicted in June his revenues would double this year, and for years to come.

By Julian Goldsmith

Published: Thursday 05 October 2000

In an exclusive interview with silicon.com, Matthew Zsulik was bullish about his company's future, claiming it would become profitable within six quarters.

He said: "We told Wall Street that we will grow our business by 100 per cent a year. Top line revenues, 100 per cent a year and we will be profitable in five to six quarters and it will continue to be a target to meet that goal."

Red Hat recorded impressive revenue growth at the end of its second fiscal quarter last month, but the figure fell short of Zsulik's figure of 78 per cent.

The previous quarter was also good at a 95 per cent revenue increase, but it means the company will have to more than double its revenues for the last two quarters.

Gary Cooper, director of research at Butler Group, felt the company would not be far off the mark, as long as the recent downturn in revenues felt across the board for vendors was only a blip. However, if the slump continued, Red Hat could be in trouble.

He said: "It could be part of a trough and everything could rise again. Tech stocks are like the sea - they go up and down all the time. But in the dot-com space there has been some slowdown and if Red Hat is depending on these organisations they are going to be disappointed."

Mat Hanrahan, analyst at Bloor Research, was also sceptical that Red Hat could sustain its revenues in the face of big established players moving into the Linux market.

He said: "The PCLan market has been eroded by other forms of networking. And the big players have moved into Linux's possible revenue streams. Whatever Red Hat can offer, you can get it from IBM or Sun or HP."

A spokeswoman for Redhat insisted that whatever the underlying trend in sales, the company did not intend to revise its targets.

Click on the link above to watch an Agenda Setters interview with Matthew Zsulik.