As Linux supplants Unix, Red Hat cashes in

Although Red Hat Inc.'s legal bills are beginning to mount, said chairman Matthew Szulik during Tuesday's earnings conference, the SCO (Group Inc.) cloud hanging over Linux has not stopped the software-subscription side of RH's business from rising 72 percent as compared to last year.

Indeed Red Hat was able to reported a profit, for the fiscal year just closed, of US14 million. Last year that figure was a US$6.6 million loss.

Reporting its financial results for the fourth quarter and fiscal year ended February 29, 2004, Red Hat this week announced 87,000 new subscriptions, US$32 million in cash flow from operations, and a net income of US$5.0 million compared to US$4.1 million in the prior quarter.

In the same quarter a year ago, results were merely break-even, so RH is delighted. "For Red Hat, fiscal 2004 was a year marked by great execution, as we delivered strong growth in revenues, cash flows, and profitability", stated Kevin Thompson, Executive Vice President and Chief Financial Officer. "The growth rate in the adoption of Red Hat Enterprise Linux has exceeded our expectations to date and we are positive on the outlook for fiscal 2005," he added.

The company ended the year with a cash balance of US$941 million, Thompson reported - an increase of US$649 million as compared to the balance at the end of the prior fiscal year.

An official press release summed up the Q4 highlights as follows:

- Fourth quarter sales of subscriptions for Red Hat Enterprise Linux technologies increased by 87,000 new subscriptions, comprised of 61,000 subscriptions sold into the enterprise IT market and 26,000 subscriptions sold into the HPC and hosting markets.

- Renewal rates for sales of Red Hat Enterprise Linux remained strong at approximately 90 percent. Gross margins increased to record levels, with blended gross margins at 76 percent and gross margins of Enterprise subscription technologies at 91 percent.

- Operating profit, before stock-based compensation, increased to US$4.6 million, or 12 percent of total revenue.

- For the fiscal year ended February 29, 2004, the company reported revenues of US$126.1 million, an increase of 39 percent as compared to fiscal 2003 revenues of US$90.9 million. The company reported net income of US$14 million for fiscal 2004, or US$0.08 per share, compared to a net loss of US$6.6 million, or a loss of US$0.04 per share, for fiscal 2003. For the fiscal year ended on February 29, 2004, the company reported over 160,000 cumulative sales of Red Hat Enterprise Linux technologies.

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