Red Hat Posts 53 Percent Jump in Sales

The company reports a profit of $10.7 million, surpassing expectations, but a fickle market still punishes its stock.

Linux vendor Red Hat posted strong quarterly results Thursday that showed large gains in sales and net income, setting the stage for a continued expansion beyond servers.

Red Hat Inc. reported that its sales increased by 53 percent from the same quarter a year ago to $41.6 million, for a net income of $10.7 million, or 5 cents per share.

But that didnt keep the companys stock from being knocked around in the after-hours market. On the combined Archipelago and INET markets, the stock slumped to $20.19, a drop of $2.09, or 9.33 percent, after the 5 p.m. EDT results call.

Despite this, Red Hat Inc.s gross income was only slightly less than the $43 million average expected by analysts. The companys net income, on the other hand, surpassed expectations. It was reported at $10.7 million, or 5 cents per share, a penny higher per share than predicted.

The Raleigh, N.C.-based company was rocked on the market earlier in the week by the surprise announcement that its chief financial officer, Kevin Thompson, is resigning for personal reasons.

Despite a nervous market, the company sold 98,000 subscriptions to its Red Hat Enterprise Linux (RHEL) software, up 13 percent from the 87,000 reported during the fourth quarter of 2003. The average sale price, though, decreased from $455 per subscription to $430, due to volume sales.

The company has also quietly made available the desktop side of RHEL, Red Hat Desktop, with little fanfare. This is a pure business play, with the desktop available only in 10- and 50-user packs, which also require a RHEL server.

Red Hat CEO Matthew Szulik said during the earnings call that the company will be installing 8,400 copies of Red Hat Desktop at German insurance company Landwirtschaftlicher Versicherungsverein Mnster AG. European markets have recently been proven to be early adopters of Linux desktops.

While having little immediate impact on Red Hats bottom line, the move in Germany clearly indicates that Red Hat intends to be a player in the business desktop market.


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