Tough competition appears to be driving profits down for Red Hat but the company has hung on to one marquee customer, Yahoo, despite recent reports to the contrary.

Profits were down in Red Hat's fiscal fourth quarter, ended Feb. 28, to US$20.5 million from US$27.3 million in the same quarter last year.

Red Hat is under increasing pressure from competitors including Oracle, which now offers a support program for users of Red Hat's Enterprise Linux, and Microsoft, which poses a new threat through its relationship with Novell.

Still, Red Hat's relationship with Yahoo at least is strong, despite comments recently made by Oracle's CEO.

"I spoke with Yahoo yesterday and they were very quick to respond that they have had and continue to have a very successful relationship with Red Hat," said Matthew Szulik, chairman, CEO and president of Red Hat, during a conference call on Thursday to discuss the company's earnings.

His assurances come after Oracle's earnings conference call last week when CEO Larry Ellison said that Oracle has replaced Red Hat at Yahoo as its Linux support supplier.

Ellison, well-known for his renegade behavior, may have been exaggerating. In fact, Yahoo's current infrastructure uses both Red Hat and Oracle products, Yahoo said in a statement. Yahoo may even be considering expanding its Red Hat Linux footprint, Szulik said.

Oracle did not respond immediately to requests for comment.