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Red Hat broadens desktop push

The Linux seller's next product will be geared more toward average computer users.

Red Hat will try to reach closer toward mainstream computer users with its next version of Linux, Chief Executive Matthew Szulik said Tuesday.

The coming version 8 of Red Hat's software, expected to be announced next week, will have an easier interface to make the software appeal more to home and school users, Szulik said. For example, the software installation process now adds a "personal desktop" option that will "create a system ideal for home or desktop use," according to Red Hat.

"We will introduce Linux to a user population that we have historically been unable to reach," including home and school users, Szulik said in a conference call Tuesday while discussing the company's financial results for its second quarter of fiscal 2003, which ended Aug. 31. In an interview, though, Szulik was cautious, saying he expects the new version to appeal only to a subset of the mainstream computer user population.

Red Hat's desktop Linux push, about which the company has been hinting, comes just one day before Sun Microsystems is expected to detail its own desktop push. Red Hat and Sun both are vying to steal market share from Microsoft but face challenges making Linux easy enough to use for average people and convincing them to live in a Windows-less world.

In financial results, The company reported a net loss of $1.7 million, or 1 cent per share, on revenue of $21.2 million for its most recent quarter. That compares to total revenue of $19.5 million and a net loss of 3 cents per share for the previous quarter.

Adjusting for stock-based compensation and amortization of goodwill, the company had break-even results, meeting expectations of financial analysts surveyed by First Call.

The company had positive cash flow from operations of $6.2 million, Chief Financial Officer Kevin Thompson said. The company expects $4 million to $6 million more cash in the remaining six months of the fiscal year, Thompson said.

Though many are paying attention to desktop uses of Linux, Raleigh, N.C.-based Red Hat is focusing most of its attention on its Advanced Server version for high-end computers that must run 24 hours a day for services such as handling e-mail or logging sales orders. Red Hat has sold 8,000 copies since its May 24 debut, Szulik said.

Red Hat is the leading seller of Linux, according to market researcher IDC, but its sales are dwarfed by Microsoft. Most of Red Hat's sales efforts today, however, are directed at companies that use Unix, the operating system on which Linux is based.

In another initiative directed toward business buyers, Szulik said, Red Hat will improve the features of its Red Hat Network service, which makes it easier to manage servers running its operating system and higher-level software.

The service currently delivers automatic updates, but in the next two quarters, Red Hat will add features to monitor systems, set them up with new software and manage them more easily, Szulik said.

The new Red Hat Network features will be premium services, Szulik said.

Revenue from large customers grew 13 percent from $17.4 million in the previous quarter to $19.6 million in the most recent quarter, Red Hat said.

Executives said enterprise revenue is expected to increase in coming quarters as a result of expanded partnerships with server makers IBM, Hewlett-Packard and Dell Computer, as well as new software deals with Oracle, Veritas and BEA Systems.

These partnerships will expand Red Hat's sales channels, Chief Operating Officer Tim Buckley said in a conference call.