Red Hat edges ahead of estimates
The company's revenue declines 26 percent from the year-ago quarter, and competition is intensifying--both from Microsoft and from Unix companies.
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Excluding restructuring charges and other expenses, the company had net income of $1.3 million, or 1 cent per share, on $21.5 million in revenue. Analysts surveyed by First Call expected break-even results.
Including the charges, Red Hat had a loss of $15 million, or 9 cents per share. In the second quarter, the company had a loss of $55 million.
Revenue increased 2 percent from the company's second quarter, but declined 26 percent from the year-ago quarter, Red Hat said.
Red Hat has been transforming itself to focus chiefly on two areas: converting Unix customers to Linux and helping to create software for "embedded" systems such as network routers or consumer electronics. The rejiggering, bolstered by the acquisition of some employees who lost jobs at VA Software when it shucked its server business, is making some progress, executives said on a conference call.
Large corporate accounts switching some computers from Unix to Red Hat Linux include Morgan Stanley, Cisco Systems, Nortel Networks, and Credit Suisse First Boston. In addition, Lawrence Livermore National Laboratory is spending millions of dollars with Red Hat to create visualization software for modeling complicated 3D structures.
In the embedded market, Red Hat customers include Hitachi, Fujitsu, NTT, IBM, Philips Electronics and others.
"Red Hat has made solid financial progress in the last 90 days," said Chief Financial Officer Tim Buckley.
Some agreed. "I'm very happy to see the sequential revenues up this time around," said Merrill Lynch analyst Peter von Schilling in the conference call.
Competition is intensifying, though--both from Microsoft and from Unix companies, Chief Executive Matthew Szulik said.
Charges in the quarter included $12.5 for amortization of goodwill, $2.4 million for restructuring charges including severance pay for laid-off employees, and $1.5 million for stock-based compensation.
About 30 percent of Red Hat's revenue in the quarter came from overseas, the company said.
Red Hat benefited from two public stock offerings when Linux still was a hot item among investors. The company has $292 million in cash and investments.