Sales Surge Lifts Red Hat

Updated from 4:50 p.m. EST

Red Hat(RHT Quote) got back in the good graces of investors with a strong third-quarter financial report that featured a 2-cent-a-share upside surprise and a 45% jump in revenue.

The news gave shares of the open source software provider a much-needed boost: In after-hours trading Thursday, the stock was up $2.54, or 14%, to $20.50.

The Raleigh, N.C., company earned $15.5 million, or 7 cents a share, including options expenses, down from $24.6 million, or 12 cents a share, a year ago. Total revenue was $105.8 million.

But excluding options outlays, Red Hat, which develops and supports a popular version of the Linux operating system, earned $29.6 million, or 14 cents a share.

Analysts polled by Thomson First Call were looking for earnings of 12 cents on sales of $104.2 million.

Subscription revenue was up 48% in the latest quarter to $88.9 million, and operating cash flow jumped 44% sequentially to $13.6 million.

Looking to the current, or fourth quarter, the company told investors to expect pro forma earnings of 14 cents to 15 cents a share on revenue ranging from $112 million to $113 million. Analysts were forecasting EPS of 13 cents on revenue of $111 million.

Red Hat needed the good news. The company has had a very tough year on Wall Street as investors worried about competition from Oracle(ORCL Quote), which is now selling support for Red Hat's version of Linux, and from Novell(NOVL Quote), which teamed up with Microsoft(MSFT Quote) to push its rival version of the open source operating system.

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