Red Hat revenue booms on Linux

SEATTLE: Red Hat Inc. reported that its quarterly profit more than doubled after revenue rose 55 percent on increased corporate demand for its Linux software update and support services.

Shares in the company slumped more than 5 percent, however, after failing to beat analysts' expectations and predicting a profit on the lower end of Wall Street's forecasts.

Red Hat, which provides update and support services for Linux, said it had a net profit of $10.8 million, or 6 cents per share, in its fiscal third quarter ended Nov. 30, compared with a profit of $4.3 million, or 2 cents per share, a year earlier.

The result matched analysts' expectations, on average, for a profit of 6 cents per share, according to forecasts compiled by Reuters Estimates.

Red Hat Chief Executive Matthew Szulik said that cash flow, which stood at $29.7 million from operations during the third quarter, dipped slightly due to an increase in cash receivables as the company signed more customers onto longer contracts.

"It was a good quarter," Szulik said in an interview.

Red Hat, based in Raleigh, North Carolina, provides update and support services for its version of Linux, which can be copied and modified freely, unlike proprietary software such as Microsoft Corp.'s Windows operating system.

"I don't know of any businesses our size that are generating this kind of deferred revenue," Szulik said, referring to the company's balance of $121.4 million in deferred revenue, which are contract-based sales that are booked but not yet recognized as income.

Third fiscal quarter revenue rose 55 percent to $50.9 million from $32.9 million. Wall Street had projected $51.5 million in revenue.

For the current fourth fiscal quarter, Red Hat said it expected a profit of 6 or 7 cents per share on $55.5 million to $56.5 million in revenue.

Analysts, on average, are looking for a profit of 7 cents per share on $57.9 million in revenue.

Shares in Red Hat were trading at $14.23, down 5.6 percent from their Nasdaq close of $15.07. The shares have lost more than half of their value from a four-and-a-half-year high of $29 in July.