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Red Hat Reaches Adulthood

By Anders Bylund – Updated Nov 15, 2016 at 12:44AM

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What doesn't kill you makes you stronger -- just ask Red Hat.

Linux is all grown up these days.

Once, it was the Little Penguin That Could, mostly a hobby platform for system administrators to play around with on the side, or powering workstations rather than servers. Real business happened on proper Unix systems from Hewlett-Packard (NYSE:HPQ), or Sun (NASDAQ:SUNW), or IBM (NYSE:IBM), if not on the mainframe.

That's not the case anymore. Lend your ear to Red Hat's (NYSE:RHT) earnings call from last night, where CEO Matt Szulik painted a very different picture of Linux usage. Matt asked us to imagine an airliner taking you somewhere, where the navigation systems, reservations, weather information, and transaction processing for that Sky Mall purchase are all powered by servers running Red Hat Enterprise Linux.

It may sound like conjecture, but it's the way things are going these days. Unix isn't dead yet, but Sun released the code for its Solaris operating system a couple of years ago, under one of the many open-source licenses. There are so many advantages to the open-source model, including low costs, quick fixes to code problems, and the ability to add new features yourself. Red Hat has been leading the way for over a decade, and is now reaping the benefits of mass-market acceptance.

Back in November, when the fearsome twosome of Oracle (NASDAQ:ORCL) and Microsoft (NASDAQ:MSFT) were aligning their stars to bring doom on the Raleigh underdog, management shrugged and said that it all just serves to expand the Linux market, not to steal market share from Red Hat.

It sounded sort of flippant and dangerous at the time, but looking at the business momentum, revenue growth, and stable gross margins, it's starting to look like Matt was right. The mere fact that these software titans are taking Linux very seriously is validation of the platform's enterprise readiness.

So it's time to put away the training pants and the stroller, and swap the cap with the puce propeller for a more adult carmine chapeau. Red Hat is all grown up and ready to do some serious business.

Further Foolishness:

Microsoft is a Motley Fool Inside Value recommendation. To find out why, take the newsletter for a free 30-day trial.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, and prefers Ubuntu or Debian Linux for personal reasons. You can check out Anders' holdings if you like, and Foolish disclosure is adult reading, too.

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