Profit Doubles at Red Hat

Updated from March 31

Shares of Red Hat(RHAT) climbed higher after the company said fourth-quarter profit more than doubled and enterprise subscription revenue rose 92%.

The stock was recently up 92 cents, or 8.4%, to $11.83.

The company said after the bell Thursday that net income rose to $11.8 million, or 6 cents a share, from $4.8 million, or 3 cents a share, a year earlier.

Revenue rose 56% to $57.5 million, as enterprise subscription revenue grow to $45.4 million.

The results were essentially in line with analysts' estimates, which had expected earnings of 6 cents a share on revenue of $56 million. However, traders may have been hoping for more; they took the stock down 3.8% in after-hours trading to $10.50.

"We are very pleased with the strong momentum of the Linux marketplace, and our business in particular," said Charlie Peters, chief financial officer. "Based on publicly available information, we believe our enterprise subscription revenue run rate is more than six times that of the number two Linux provider, and over the past year we have expanded our market leadership position across the globe. A number of leading industry analysts believe that Linux will continue to be the fastest growing operating system over the next three to five years and we remain confident in our ability to compete.

"We were very pleased with the company's revenue and bookings performance during the quarter," Peters added. "Heading into fiscal 2006, we feel optimistic about our business opportunity based on the strength of the market and our competitive position, and the growing visibility of our recurring revenue model."

The company separately announced that its board has authorized expanding its previously announced stock buyback program to $250 million. Red Hat already has bought back about $100 million of the new expected total.

In addition, the company's board authorized the repurchase of up to $50 million of its 0.5% convertible senior debentures due 2024.

"We believe it is in the best interest of our shareholders for the company to engage in this repurchase program," Peters said. "In addition, the repurchase program will help to offset dilution associated with our employee stock plans and our convertible debentures."

>To order reprints of this article, click here: Reprints