Linux market leader Red Hat has restructured its business to widen
its focus on the enterprise market while scaling back its embedded
Linux operations and closing its network consulting unit.
In an announcement yesterday, the company revealed the strategy as
part of its fourth-quarter and year-end financial results. Red Hat
decided to restructure after poor performance in a soft economy.
For its fourth quarter ended 28 February, Red Hat reported revenues
of $18.6m (£13m), down from $20.1m (£14m) the previous quarter and
off from the $22m (£15.4m) in revenue in the same period a year
ago. For the fiscal year, revenues were $78.9m (£55.2m), down from
$80.8m (£56.5m) the year before.
The company reported a net loss of $41.9m (£29.3m) for the fourth
quarter, which included a loss of $28.9m (£20.2m) from continuing
operations and additional write-offs for discontinued operations
and related expenses. That compares with net losses of $24.2m
(£16.9m) one year ago and $15.1m (£10.6m) in the third quarter
ended 30 November. The net loss for the fiscal year was $139.9m
(£97.8m), compared with a net loss of $86.7m (£60.6m) a year ago.
Red Hat said its adjusted pro forma results - before amortisation
of good will, stock-based compensation and restructuring charges -
showed $1m (£700,000) in net income from continuing operations for
the fourth quarter, compared with an adjusted net income of $1.9m
(£1.3m) a year ago.
Kevin Thompson, Red Hat's chief financial officer and an executive
vice president, said the restructuring would help the company shed
unprofitable ventures and increase its renewed emphasis on moving
Linux into business computing.
"The enterprise is where the large opportunity for Red Hat is,"
Thompson said. "We need to rid ourselves of distractions to be able
to take advantage of that."
To bolster its claims of increased traction in the enterprise, Red
Hat announced several new customers who are making large-scale
deployments of its products. They include America Online, UBS
Warburg, Morgan Stanley Dean Witter, Amazon.com, Cisco Systems,
Nortel, Dell, DreamWorks and Oracle. Red Hat began a major push
last September to go after the enterprise market with its products
and services.
Meanwhile, Red Hat is cutting back its embedded systems business
while the economy remains soft, but will restore it when demand for
embedded systems improves, Thompson said. He added that about eight
to 10 workers have been moved to different areas within company as
part of the retreat.
Another part of Red Hat's restructuring includes closing its
network consulting group, with about 20 to 25 workers moving to
other companies along with the vendor contracts they were working
on. The company's overall workforce remains at about 630, he said.
Red Hat is also saving approximately $700,000 (£490,000) a year by
moving its headquarters to the campus of North Carolina State
University.