Red Hat: 'Half of sales to be in Europe, Asia'

US-based Linux software maker Red Hat expects its international business to increase to make up half its sales within 12 months, an executive said on Tuesday.

Red Hat's European marketing director Paul Salazar told Reuters demand for the Linux operating system is growing as it becomes better understood outside its core market of computer enthusiasts, helped by the active promotion of many European governments.

Salazar said the company's sales outside the United States are now above 40 per cent, up from 31 per cent in its fiscal year to February.

He said in an interview at the LinuxWorld trade fair in Frankfurt: "It's a ball that's rolling and gathering more and more steam."

One of Red Hat's senior Asian executives said last year that the company aimed to raise its non-US revenues to 50 per cent of the total in three to five years. Salazar's forecast appears to be at the low end of that timetable.

"Within 12 months, we should be at 50 per cent of company revenues," Salazar said, adding that non-US business was fairly evenly split between Europe and the Asia-Pacific region.

Red Hat makes its money by selling branded, periodic updates of Linux software for the convenience of corporate clients, along with support and service contracts.

In principle, Linux can be freely distributed and modified by any user because its source code is open, unlike rival proprietary systems such as Microsoft's Windows.

In recent years, Linux has outgrown its niche image to become an increasingly serious alternative to Microsoft as companies and public bodies see advantages in costs and security as well as in controlling their own systems. Novell earlier this year established a strong position in the European open source market by buying German Linux software company SuSE, Europe's biggest player in the industry.

Salazar said Red Hat was putting increased resources into Europe mainly by developing relationships with distributors and other partners.

Salazar said: "What's happening right now with Red Hat in Europe is that we're definitely investing."

While more than three-quarters of Red Hat's revenues come from the private sector, its European business is getting a boost from some public bodies that advocate open source software on ideological grounds, Salazar said.

"They like that they have an alternative to Microsoft," he said. "That's my clear impression - you see it in France, Germany, the U.K., Sweden, some Eastern European countries."

Red Hat's European public-sector deals include Frankfurt, the French Education Ministry and several London boroughs.

The software maker increased its revenues by 60 per cent year-on-year to $46.3m in the quarter ending in August, with net income more than tripling to $11.8m.

Red Hat's strength is in the software for Linux-based servers, the networked computers that serve up web pages, store data and run complex applications.

Salazar said that the company is not yet ready to compete with Microsoft in desktop PCs.

"You've got an entrenched player called 'Microsoft' whose desktops are much more user-friendly," he said. Microsoft has 90 per cent of the world's desktop computer market.

"We bundle applications that are not made by us, and we're missing a kind of glue - like browsers, plug-and-play," he said. "You still have to be a bit of a techie to make Linux work."

He said Red Hat would have a desktop offering as part of its next release in the winter but declined to say when the company would be ready to bring a consumer retail product to market.