Red Hat to Acquire Gluster

SOURCE:  Red Hat

• Ushers in New Era of Software-Based Open Storage Platforms to Unify On-Premise and Cloud
• Adds Scale-Out Management of Unstructured Data to Red Hat Portfolio with Gluster’s Disruptive Open Source Storage Solutions

RALEIGH, NC – October 4, 2011 – Red Hat, Inc. (NYSE: RHT), the world’s leading provider of open source solutions to the enterprise, today announced that it has signed a definitive agreement to acquire Gluster, Inc., a leading provider of scale-out, open source storage solutions for standardizing the management of unstructured data. With this acquisition, Red Hat will define a new baseline for how enterprise IT manages the explosion of big data, whether deployed on-premise or spanning into the public cloud. Red Hat is expanding into a critical part of enterprise infrastructure, enabling it to deliver open storage solutions that protect customer investments as they approach the new era of computing.

“The explosion of big data and the new paradigm of cloud computing are converging, forcing IT to re-think storage investments that are cost-effective, manageable and scale for the future,” said Brian Stevens, CTO and vice president, Worldwide Engineering at Red Hat. “Our customers are looking for software-based storage solutions that manage their file-based data on-premise, in the cloud and bridging between the two. With unstructured data growth (such as log files, virtual machines, email, audio, video and documents), the 90’s paradigm of forcing everything into expensive, single-system DBMS residing on an internal corporate SAN has become unwieldy and impractical.”

Founded in 2005, Gluster’s goal was to simplify storage using open source software and commodity hardware. The heart of Gluster is GlusterFS, a software-only, scale-out storage system. It allows enterprises to combine large numbers of commodity storage and compute resources into a high-performance, centrally-managed and globally-accessible storage pool. By combining commodity economics with a scale-out approach, customers can deploy abundant storage without compromising on cost, performance and manageability. Gluster has emerged as an innovative open source leader, relied upon by companies such as Pandora, Box.net and Samsung to efficiently manage large volumes of data.

“We are extremely pleased to be joining Red Hat,” said AB Periasamy, co-founder and CTO of Gluster. “We believe this is a perfect combination of technologies, strategies and cultures and is a great development for our customers, employees, investors and community. Gluster started off with a goal to be the Red Hat of storage. Now, we are the storage of Red Hat.”

“Enterprises and service providers have struggled to manage their rapidly expanding unstructured data stores with conventional storage systems,” said Henry Baltazar, senior analyst of The 451 Group. “The scale out storage technology and expertise Red Hat is gaining from the acquisition of Gluster will serve as a powerful foundation for future public, private and hybrid storage clouds.”

Red Hat has agreed to acquire Gluster, a privately-held company, for approximately $136 million in cash. As part of the transaction, Red Hat will also assume unvested Gluster equity outstanding on the closing date and issue certain equity retention incentives. The transaction is expected to close in October, subject to customary closing conditions.

The acquisition is expected to have no material impact to Red Hat’s revenue this fiscal year but should begin to grow next year based on a subscription revenue model. Red Hat is reaffirming its Q3 and fiscal 2012 guidance, provided on its September 21, 2011 earnings call, for revenue, non-GAAP operating margin, non-GAAP earnings per share and operating cash flow, assuming the exchange rates of September 20, 2011 identified on the call. Non-GAAP operating margin and EPS estimates exclude the impact of stock-based compensation and amortization of acquisition-related intangibles. Stock-based compensation and amortization expenses are estimated to increase by $1 million and $2 million, respectively, per quarter.

“Industry analysts estimate the total addressable market for unstructured data storage at approximately $4 billion and growing. This is an exciting new area of potential growth for Red Hat and one in which we intend to invest aggressively,” said Charlie Peters, EVP and CFO of Red Hat. “While we expect Red Hat’s operating income to continue to grow nicely next year based on revenue growth, we expect that non-GAAP operating margin for fiscal year 2013 could be approximately 150 basis points lower than fiscal 2012 as we make additional investments to help realize Gluster’s potential. At that level, Red Hat’s operating margin will still be among the highest compared to other high-growth software companies when they were at the $1 billion revenue stage,” he added. Red Hat expects to offer additional guidance for fiscal year 2013 on its fourth quarter earnings call.

To learn more about this announcement, join Red Hat and Gluster executives for a webcast that will broadcast live at 12pm ET on October 4, 2011. To join the live webcast or to watch the replay, visit http://www-waa-akam.thomson-webcast.net/us/dispatching/?event_id=a91698cb4345fbc4096be08519bb66f3&portal_id=af9b227bf07c733390c2738ee0330646.

For more information about Red Hat, visit www.redhat.com. For more news, more often, visit www.press.redhat.com.

About Red Hat, Inc.

Red Hat, the world’s leading provider of open source solutions and an S&P 500 company, is headquartered in Raleigh, NC with more than 70 offices spanning the globe. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with cloud, virtualization, applications, management and service-oriented architecture (SOA) solutions, including Red Hat Enterprise Virtualization and JBoss Enterprise Middleware. Red Hat also offers support, training and consulting services to its customers worldwide. Learn more: http://www.redhat.com.

About Gluster

Gluster is a leading provider of open source storage solutions for public, private and hybrid clouds. Over 150 enterprises worldwide have used Gluster in commercial deployments ranging from a few terabytes to multiple petabytes, across the most demanding applications in digital media delivery, healthcare, internet, energy and biotech. Gluster is privately-held and headquartered in Sunnyvale, California. Visit us at www.gluster.com.

Forward Looking Statements

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