Enterprise Linux Sales Boost Red Hats Results

Better than expected sales of Red Hat Enterprise Linux dramatically boosted Red Hat's stock in after-hour trading.

Red Hat Inc. on Tuesday reported higher net income in the quarter on better-than-expected sales of its Enterprise Linux.

Using generally accepted accounting principles (GAAP), total revenues rose to $37 million from $25.9 million for the Raleigh, North Carolina-based company. Red Hat showed a $5 million net income for its fourth quarter. In the year-ago period, the company had a net loss of $273,000. This comes on the heels of Red Hats most profitable third quarter ever.

Overall, for the fiscal year, which ended February 29, 2004, the company reported revenues of $126.1 million. This is an increase of 39 percent when compared with fiscal 2003 revenues of $90.9 million. This company had a net income of $14 million for fiscal 2004, a significant change from fiscal 2003s net loss of $6.6 million.

The result was in line with both Red Hat and analysts expectations. Despite only meeting expectations, during the day Red Hat stock rose 5.89 percent and in after-hours trading, the stock accelerated upwards, gaining another 10 percent.

Some attributed this stock rise to the rising numbers of Linux subscriptions. Red Hat reported that sales of subscriptions for Red Hat Enterprise Linux (RHEL) increased by 87,000 during the quarter while renewal rates remained at about 90 percent.

For the fiscal year, the company reported over 160,000 cumulative sales of Red Hat Enterprise Linux products. This figure was much higher than expected and could indicate that Red Hats plans to become primarily an enterprise Linux player are paying off, despite grumbling by the Linux community over the companys shut down its low-priced Red Hat line in favor of the higher-priced RHEL.

Red Hat also announced that it has expanded its agreement with IBM Corp. to allow Version 3 of Red Hat Enterprise Linux Version to be ordered concurrent with IBMs eServer hardware, including pSeries and iSeries servers, as well as with support options. Red Hats Linux will also be available on the IBM eServer BladeCenter line.

Looking ahead, Kevin Thompson, chief financial officer said in a statement that Red Hats executives "are positive on the outlook for fiscal 2005."

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