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Red Hat Drops Despite Earnings Beat (Update 1)

Updated from 4:20 p.m. EST to provide guidance from conference call and latest share price.

NEW YORK ( TheStreet) -- Red Hat (RHT - Get Report) reported better-than-expected third-quarter earnings Monday, but shares fell in after-hours action following the report.

The open-source software company reported non-GAAP earnings of $55.7 million, or 28 cents per share, with revenues totaling $290 million, an increase of 23% year-over-year. The average estimate of analysts polled by Thomson Reuters was for earnings of 26 cents per share on revenues of $289.6 million in the three months ended Nov. 30.

"Red Hat continues to benefit from enterprise customers that are seeking to leverage their IT infrastructure to drive significant productivity gains and agility across their organizations. The combination of strong sales execution, market demand and market share gains contributed to organic billings and revenue growth of 23% for the quarter," stated Jim Whitehurst, the company's president and CEO, in a press release.

On its conference call, the company said that, despite the foreign currency headwinds, it is raising its forecast for the fourth quarter and full year. For the fourth quarter ending in February, it expects earnings of 26 to 27 cents a share with revenue ranging from $289 million to $292 million. Wall Street's current consensus view is for a profit of 26 cents a share in the quarter on revenue of $292.5 million.

For its full fiscal year, Red Hat now sees earnings of $1.07-$1.08 per share. The average analysts' view sits at a profit of $1.05 a share.

Red Hat also said full year operating margins are expected to exceed 26%.

Shares were last quoted at $42.81, down 7%, on volume of around 800,000. The stock is flat in the past year but had already declined 14% based on Monday's regular session close at $46.05 since hitting a 52-week high of $53.42 on Nov.16

-- Written by Chris Ciaccia in New York

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