Red Hat dips on downgrade, CFO departure

Red Hat shares fell 2 7/16, or 10 percent, to 21 5/16 after WR Hambrecht & Co. downgraded the stock in the wake of CFO Harold Covert's departure for the same post at SGI.

Analyst Prakesh Patel, who started the stock with a "buy" recommendation in late June, cut the stock to a "neutral" recommendation Tuesday.

"Hal Covert was an experienced manager, and we feel that his focused ability in operations and cost reduction will be difficult to replace," Patel said in a research note.

Covert's departure became official Monday when SGI (NYSE: SGI) reported its disappointing fourth-quarter results.

First Call Corp. consensus expects Red Hat (Nasdaq: RHAT) to post a loss of 2 cents a share in its second quarter.

Last quarter, it surprised analysts when it posted a loss of only $2.5 million, or 2 cents a share, on sales of $16 million.

Its shares moved up to a 52-week high of 151 5/16 in December before splitting 2-for-1 in January. The stock slumped to a low of 15 in May.

Six of the seven analysts following the stock rate it either a "buy" or "strong buy."