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Red Hat beats analysts' estimates

Stephen Shankland, CNET News.com ZDNet.co.uk

Published: 15 Dec 2000 14:52 GMT

Red Hat, a seller of Linux software and services, beat analyst estimates for the third quarter, by a penny, Thursday, posting revenue of $22.4m, and an adjusted net loss of 1 cent per share. Analysts, surveyed by First Call/Thomson Financial, had exepcted a loss of 2 cents per share for the company's third fiscal quarter, which ended November 30.

Revenue increased 112 percent from $10.5m in the year-ago quarter to $22.4m, while the company's net loss slimmed from $5.4m to $900,000, the company said.

Durham, North Carolina-based, Red Hat, Caldera Systems and VA Linux Systems are established Linux companies, each trying to use the popularity of the open-source operating system to carve out a niche in the computer industry.

Linux, which is available for free or very low cost, is rapidly spreading in popularity, yet that acceptance hasn't translated into instant wealth for Linux companies.

In addition, as Linux become more mainstream, it has drawn more attention from established companies such as IBM. Big Blue this week said it will spend $1bn on Linux development in 2001.

ABN AMRO analyst Keith Bachman said he has "many concerns" about Red Hat, in a report Tuesday.

"We want to see more evidence that companies are interested and willing to pay for the Red Hat Network," a subscription service in which customers pay for automatic updates to their software, Bachman said.

"While we feel the Red Hat Network is a good strategy, we also feel that it could take a few quarters for Red Hat to realise a significant financial impact."

In the third quarter, the company earned significant revenue from the market for non-PC "embedded" computing devices. Among other deals, Red Hat won a $1m contract to translate programming software to the Samsung Calm line of low-power chips.

Gross margin, a measure of profitability, improved to 60 percent from 41.5 percent in the year-ago quarter, the company said.

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