Who Sat on My Red Hat?

Linux vendor Red Hat (NYSE: RHT) reported third-quarter results last night, and shares dropped 8% the morning after. You'd think the company missed analyst targets, management guidance, and the inside of a barn with a shotgun, judging by the market reaction.

That's not the case at all. Revenue jumped 23% year-over-year to $290 million, right in line with analyst expectations, while $0.28 of non-GAAP earnings per share beat the $0.26 Street target. The next-quarter and 2012 outlooks also generally fell in line with analyst expectations.

But then, Red Hat came into this report looking red-hot. Shares had risen some 15% since the last report, crushing a mostly flat broader market. Meeting expectations just isn't good enough when investors want you to demolish them every time.

Red Hat has always been a very flexible and low-cost alternative to traditional computing platforms from Microsoft (Nasdaq: MSFT), IBM (NYSE: IBM), and Hewlett-Packard (NYSE: HPQ). In an exclusive phone conversation after the report, CEO Jim Whitehurst said that his company is stealing market share from all of the above. The biggest growth opportunity on the table is still new server installations, but Red Hat is indeed replacing incumbent Windows and Unix servers at a brisk pace. And since there's still "a significant amount of Unix left to take," the slice of market-share pie should continue to grow for years to come.

To that end, Red Hat is even ripping pages out of IBM's famed playbook. The acquisition of storage management firm Gluster leaves Red Hat about one networking buy short of replicating Big Blue's top-to-bottom data-center solutions. It's also a direct play on both cloud computing and the Big Data explosion.

This stock is helping my CAPS portfolio beat the market, and I think it'll continue to do so for many years to come. Today's dip had more to do with overheated expectations than performance flaws, and looks like a terrific buy-in point.

Red Hat is far from the only great technology play you can make today -- check out one top idea from Fool analysts right here.