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.

Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. He's more of a Debian geek, but respects Red Hat all the same. VMware is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor pick. Intel and Microsoft are Motley Fool Inside Value selections. Motley Fool Options has recommended writing calls on Intel and a diagonal call strategy on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.