Red Hat 1Q Loss Less Than Expected

Red Hat (RHAT Quote), the leading Linux software operating-system distributor, reported a smaller-than-expected first-quarter loss Thursday, reinforcing expectations that the company would be profitable by next year.

Red Hat officials said that adjusting for one-time expenses, the company lost $2.5 million, or 2 cents a diluted share, in its first fiscal quarter ended May 31, compared with an adjusted net loss of $3.8 million, or 8 cents a share, in the year-earlier period.

Wall Street analysts surveyed by First Call/Thomson Financial had predicted a loss of 4 cents a share in the latest quarter of 2000.

Including non-cash charges and one-time acquisition expenses, Red Hat said its net loss for the quarter rose to $14.9 million, or 10 cents a diluted share, compared with a loss of $4.1 million, or 8 cents a share, a year earlier.

Shares of Red Hat ended regular trading up 7/8, or 4%, at 23 3/8. In heavy after-hours trading, the stock climbed to 24 7/8 following the release of its financial results.

The company also reported revenue rose 95% to $16 million in the first quarter of the year, up from $8.2 million a year earlier. That is more than 20% higher than the previous quarter's $13.1 million.

Matthew Szulik, president and chief executive of Red Hat, said the company's performance in the first quarter represents continued execution of "our plan to double revenue and become profitable in calendar 2001 while leveraging our acquisitions to enter new markets and create new revenue streams.''

Red Hat, based in Durham, N.C., markets a commercial version of the Linux operating system, which boasts more than 12 million users. Linux was developed by hundreds of collaborating programmers as an alternative to the Windows operating system offered by Microsoft(MSFT Quote). The Linux operating system is distributed free off the Web, but Red Hat sells a CD-ROM version of it with technical manuals and support services.

"Overall, it was a solid quarter, consistent, better-than-expected," said Chris Galvin, an analyst at Chase H&Q, a Red Hat underwriter. "It sounds like the outlook is better than what we had and consistent with the company's recent statements about doubling revenue this year."

Chase H&Q has had a buy rating on the company's stock since it went public. Galvin attributed the lower-than-expected losses to better cost control and revenue.