In a surprise move Thursday Red Hat named the former COO of Delta Airlines Jim Whitehurst president and CEO, replacing Matthew Szulik who remains chairman.

Szulik said he was stepping down after almost 10 years with the company because of serious health issues with his family that he has to pay attention to, a noble thing to do considering he'd rather be CEO of Red Hat.

Well, if nothing else, it'll give Dell vice-chairman and CFO Donald Carthy somebody to talk to. Cathy was president of American Airlines before being pluck from Dell's board amid its crisis and given his current job.

Whitehurst, who takes over January 1, is Red Hat's third CEO, Szulik being the longest serving and highly influential in keeping the company open source-pure.

The company has apparently been looking for someone who can take Red Hat to a billion dollars and beyond with experience running a large global company.

Bank of America and Global Equities Research downgraded the company last week, unhappy with its JBoss sales and having little confidence that things would change. Global Equities analyst Trip Chowdry, also critical of the rest of Red Hat's business claiming it's losing ground to Microsoft and Oracle and not cutting it in the BRIC countries, called the JBoss acquisition "a complete failure." Red Hat paid $350 million to buy the JBoss middleware.

What Whitehurst knows about software, particularly open source software, is a big question mark.

When questioned about his replacement's technical credentials, Szulik said Whitehurst runs four species of Linux at home, two of them Red Hat Fedora and one Slackware. He described him as having been at some point in his life "an experienced developer."

Before Delta, which Whitehurst joined in 2002, responsible for operations, sales and customer service, network and revenue management, marketing and corporate strategy, he was a vice-president and director of the influential Boston Consulting Group, working in Chicago, Hong Kong, Shanghai and Atlanta.

Szulik said the company did an extensive search and Whitehurst was up against competition from some of the largest technology companies in the world.

Szulik said the industry boffins showed a distinction "lack of understanding of open source development and a lack of understanding of the Red Hat model."

Whitehead comes to the company with an "unencumbered" view, Szulik said, a reference to the highly charged political environment in which Red Hat operates, and with operational and strategic experience. Szulik noted that Whitehurst was involved in Delta's bankruptcy and restructuring. He left the airline this summer.

Red Hat told the SEC that Whitehurst will get a base salary of $700,000 and has a shot at a 100% annual incentive bonus. He also gets options of 500,000 share of Red Hat common stock and 175,000 shares of restricted stock.

The news broke when Red Hat posted the results of its third fiscal quarter, ended November 30.

It exceeded revenue guidance by a few million in fiscal Q3 - the foreign exchange didn't hurt - and upped its guidance for its current fiscal year to $521 million-$523 million in revenues and 70 cents in earning with an operating margin of 21%. This quarter it expects to see $139.5 million-$141.5 million and realize 19 cents non-GAAP.

In Q3, the company earned $20.3 million, or 10 cents a share, up roughly a third year-over-year on revenues up 28% to $135.4 million. Subscription revenue was $115.7 million, up 30% year-over-year and 6% sequentially.

Non-GAAP adjusted net income for the quarter was $39.7 million, or 19 cents a share, after adjusting for stock compensation and tax expense, compared to $30.1 million, or 14 cents a share, a year ago.

Non-GAAP operating cash flow totaled $76.7 million for the quarter, up 24%. The firm has $1.3 billion in the bank with $422.6 million in deferred revenue, an increase of 36% year-over-year and 12% sequentially. (Szulik likes to add the deferred revenues to the new full-year guidance to get a company teetering on a billion dollars.)

Red Hat said it had a gross margin of 85% and a margin on subscriptions of 93%.

Red Hat said it had renewed 148 of its 150 largest accounts this year. CFO Charlie Peters said there were no large $5 million deals in Q3 like Red Hat has had in other quarters, but it did see more million-dollar deals than it ever had before. He didn't say how many, but there were two for JBoss.

Red Hat said it was seeing momentum with its RHEL Advanced Platform, but indicated that virtualization was still a Windows, not a Linux play.

Szulik made some suggestive but confusing remarks hinting of some sort of technical accommodation between Red Hat's Xen virtualization and VMware during the conference call and when asked to expand by one of the analysts, his answer was murky.

Red Hat's stock was up after-hours.