RALEIGH, N.C. — Red Hat will announce its latest quarterly earnings today, and if the outlook of its partners provides any clue the report should be good for shareholders — as well as in future quarters.

Especially interesting in a Wall Street analyst’s recent report is a finding that 45% of Red Hat’s partners are seeing customers migrating from Windows to Red Hat. That trend could be a tremendous growth indicator for the Hatters since Microsoft dominates world markets and much of Red Hat’s growth in the past has come at the expense of Unix or other Linux providers.

“This is the reverse to what we would have anticipated, as much of Linux’s success thus far has been at the expense of Unix, and specifically, Solarfis,” wrote Kirk Materne, Kirk Materne, an analyst with Banc of America Securities, in an extensive report.
“While we are concerned that the heavy concentration of (Europe-Middle East-Africa) partners in our survey may have skewed this result, the percentage of U.S. partners (42%) seeing some migration from Windows to Linux was very consistent with EMEA and Asia/Pacific.”

Analysts are predicting earnings of 9 cents a share and revenues of $83.3 million in today’s report, according to Thomson First Call.
Red Hat partners, meanwhile, are predicting better than 30 percent growth this year.

“Overall, partners remain upbeat and expect their Red Hat biz to grow by +31%, on average in CY06, compared to our current CY06 revenue growth estimate of 35%,” Kirk Materne said.

Growth appears to especially strong in Europe-Middle East-Asia (31%) and Asia-Pacific (39%) where adoption of Linux software is catching up to the growth rate in the U.S., Matrene said.

However, Matrene said that the 130 Red Hat (Nasdaq: RHAT) partners he surveyed have concerns about prices.

“Pricing pressure from customers was cited as the greatest risk to Red Hat’s revenue stream by 35% of the partners,” the analyst wrote, “and more than 50% of the partners felt that pricing for (Red Hat Enterprise Linux) either had to come down or that it would face some pressure from customers down the line. While we do not view pricing renewals as a major near term issue, we believe it is a metric worth tracking going forward.”

Red Hat reaps a major share of its revenues from subscription support services, and renewals are a crucial indicator of the Hatters’ traction in the global enterprise marketplace.

Many of Red Hat’s partners are very bullish, with 28% saying business will increase more than 50%, and another 8% see a 40-50% jump.

However, the findings of the survey were not enough to get Materne excited about Red Hat. After reviewing the results, he maintained his “neutral” rating on the stock with a target price of $28.

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