For all the hoopla around Microsoft (NASDAQ:MSFT) releasing Windows 7 last quarter, it's Linux vendor Red Hat (NYSE:RHT) that's stealing Mr. Softy's thunder now.

One might think that the sequel to Vista hitting store shelves -- not to mention spendthrift IT directors -- would cut into the competition's sales. I guess we'll have to ask Apple (NASDAQ:AAPL) about Mac sales in a few weeks, then, because enterprise Linux sales have not suffered at all.

Powered by a 21% increase in subscription revenue, Red Hat's third-quarter sales soared to $194 million, 18% above the year-ago period. Renewable subscription contracts now make up 85% of Red Hat's sales, and that steady revenue ain't going away. For seven quarters in a row, Red Hat has renewed every one of the top 25 contracts up for renewal in each period -- for 20% more money than the old agreement, on average. That's particularly impressive when you consider that this span includes the bloodcurdling business free-fall of 2008.

Red Hat is not content to rest on its laurels. Management recognizes that virtual computing is a game-changing technology, and now offers a virtualization platform of its own. Red Hat Enterprise Virtualization (RHEV) is a fast and powerful virtual server platform built around virtualization features in recent chips from Advanced Micro Devices (NYSE:AMD) and Intel (NASDAQ:INTC).

This product competes directly with established leaders like VMware (NYSE:VMW), Microsoft, and Citrix Systems (NASDAQ:CTXS). Despite the heavy competition, Red Hat reports good traction with its existing customers and hopes to make RHEV a significant revenue generator in coming years and quarters. It's a bold step into a market that fueled VMware's $1.9 billion of 2008 sales, and the Red Hat name holds serious weight in IT circles.

Is your company converting to Linux on RHEV instead of Windows 7 on VMware machines? Spill the beans in the comments below.