Customer wins help Red Hat to healthy first quarter

Red Hat on Tuesday reported a profit on an adjusted basis for the first time in its history, citing customer moves to the Linux operating system as a reason for success in its first fiscal quarter.

One of the leading Linux distributors, Red Hat reported adjusted net income of $US600,000 for the quarter ending May 31, or break even on a per share basis - in line with the expectations of analysts polled by Thomson Financial/First Call. This compared to an adjusted loss of $3.7 million or $0.02 per share for the same quarter last year.

Revenue for the quarter was $25.6 million, an 18 percent improvement from a year ago, officials said.

"In an increasingly difficult IT environment, Red Hat delivered a profit and generated positive cash flows for the first time," Matthew Szulik, Red Hat's president and chief executive officer, said in a statement.

In fact, the income figures above exclude the amortization of goodwill and intangibles, stock-based compensation and costs related to mergers and acquisitions. On a reported basis, Red Hat reported a net loss of $27.6 million, or $0.16 per share, compared with a reported net loss a year ago of $17.4 million, or $0.11 per share, the company said.

Red Hat officials cited a number of customers migrating their systems to Linux as reasons for the positive quarter. Red Hat signed deals with Adobe Systems, Lucent Technologies, NEC, and Nortel Networks for various software applications and services during the quarter, helping the company achieve its revenue growth.

The company also said that it had increased revenue from software subscriptions and embedded development services year-over-year. In addition, it more than doubled its open source services revenue from $2 million a year ago to more than $4.3 million this quarter. Revenue from network consulting services dropped slightly, however, to $5.2 million.

While Linux remains a stranger to most desktop computers, the software continued to gain traction during the start of 2001, according to figures released last week by International Data Corp. (IDC). Revenue from the sale of Linux servers grew 49 percent in the first quarter, to $443 million, IDC said.