Shares of Linux open-source software distributor Red Hat jumped sharply on the back of strong earnings, a clear indication the company is meeting the challenge of increased competition, the company's chief executive told CNBC.
Wall Street is evidently pleased with Red Hat's "ability to compete in the face of growing competition and the growing opportunity of Linux and open-source software globally," CEO Matt Szulik said, appearing on CNBC's "Squawk Box" Friday.
Red Hat said Thursday that it posted a profit of $29.6 million, or 14 cents a share, after adjusting for stock compensation and tax expense. That topped analysts' expectations for a profit of 12 cents a share.
During the fiscal third quarter, the company said revenue rose 45% to $105.8 million as it added 12,000 new customers amid Oracle's jump into the open-source software market.
But while Oracle is a significant competitor, in the open-source world companies tend to prefer the "open, transparent, collaborative model" rather than the closed model of older software industry companies, Szulik said.
"I think open-source software represents not just new technology, but a new and collaborative way to deliver value to large global customers," he added. "When you look at the results, 12,000 new customers in the quarter, 25 customers renewed, just really fantastic growth at the deferred revenue line. All of these, i think, is indicative of the young company responding to competitive challenge."
In October, Oracle took square aim at Red Hat by offering cheaper technical support for its own version of open-source software in a surprise bid to wrest away its rivals' customers, Reuters reported.
Linux is the most popular form of open-source software, which lets developers share code and add functions. Users pay only for custom features, maintenance and technical support.