The Motley Fool's readers have spoken, and I have heeded your cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first and are generally deserving of praise from investors. For reference, here is last week's selection.
This week, I want to take a closer look at Red Hat (NYSE: RHT ) CEO Jim Whitehurst and show you why a mixture of growth, hiring, and humility makes him a fantastic leader.
Kudos to you, Mr. Whitehurst
First of all, yes, Linux does still exist. In fact, Red Hat's open-source software is thriving now more than ever. Linux systems are being used in everything from mobile phones to cloud-computing servers and the Linux operating system even used at Facebook (Nasdaq: FB ) to help fuel its amazing growth.
Because Red Hat's open-source software is free (it makes money from the training, maintenance, and support required to run its software), it has a veritable sea of customers willing to try out its software. This is the same premise that made me highly optimistic on Internet security company AVG Technologies (NYSE: AVG ) . Its platform provides its antivirus software free-of-charge and relies on the upgrades to power its profits, which is working quite well may I add. Now back to Red Hat...
In Red Hat's first-quarter results released in June, non-GAAP profits jumped 25%, operating cash flow rose 38%, and revenue continued to tick higher at an incredible rate, 19% over the year-ago quarter. Subscription revenue also tacked on a 21% gain. What's more, the company is making serious strides to further its presence in virtualization, cloud-computing, and data storage -- three areas where companies are clamoring for investment dollars, but have primarily unmet needs at present.
The same can't exactly be said for Red Hat's competitors. Oracle (Nasdaq: ORCL ) has had numerous problems in transitioning to a dual-threat software and hardware company with its purchase of Sun Microsystems in 2009. According to research by Business Insider, dissent within the corporate ranks and an inability to properly combine the software and hardware sales team from both companies has made the going tough. Even Microsoft (Nasdaq: MSFT ) , whose Windows operating system still dominates the PC landscape, has seen growth figures slow to a crawl -- just 4% as of its April-ended quarter.
A step above his peers
Clearly, Red Hat is growing quickly and putting many of its peers to shame, but it and its CEO, Jim Whitehurst, haven't forgotten about the two key factors that have contributed to its success: its employees and humility.
With the global growth environment being sketchy at best, given the ongoing debt crisis in Europe and China's GDP slowing to its lowest levels in three years, you'd think Red Hat's growth would be met with tepid hiring. Luckily for America, that's not the Jim Whitehurst way! This year, Red Hat and Whitehurst have made aggressive plans to hire 1,000 workers, about 250 per quarter, to increase the workforce in accord with the company's 20% growth rate. What's more, don't think that Whitehurst has any plans of stopping the hiring after this year. As long as Red Hat can fit employees within the confines of its walls -- and it's growing -- it will be looking to hire.
Humility also plays a key role in why Red Hat is such a successful company. Last year, Whitehurst took home $7.4 million in compensation for his role as CEO. You might think he would have a swanky corner office complete with lavish paintings and Mont Blanc pens, but that just isn't the case. In fact, Whitehurst shares a cubicle with his fellow employees. This is an $11 billion company where the CEO is just as easy to reach as the employee in the cubicle next to you. Communication is a big key to rapidly growing companies, and it's clear that lavish excess isn't written in the cards for this down-to-earth corporate leader.
Two thumbs up
That's two weeks in a row we've looked at software companies that are run by great leaders. Red Hat itself may not be the cheapest apple in the basket (no pun intended), but Whitehurst has done a marvelous job of fostering a sense of equality in the workplace, of putting America back to work, and of outpacing his competition. I see a bright future ahead for Red Hat and its shareholders and they have Jim Whitehurst and his employees to thank for that. Two well-deserved thumbs-up!
Do you have a CEO you'd like to nominate for this prestigious weekly honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just might see your nominee in the spotlight.
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