Red Hat Jumps on Strong Revenue Growth, Stock Split

The company rose despite posting a bigger-than-expected loss.
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Updated from 1:26 p.m. EST

Despite posting a bigger-than-expected loss,

Red Hat

(RHAT)

saw its shares continue to soar Monday as investors focused on the company's strong revenue figure and pending stock split.

The stock was up 12 5/8, or 5%, to 265 1/2 in afternoon trading. Since its August initial public offering, Red Hat stock is up 387%. (Red Hat closed up 15 1/16, or 6%, to 267 15/16.)

For the third quarter ended Nov. 30, Red Hat, the leading provider of the

Linux

operating system, reported a net loss of $3.6 million, or 5 cents a diluted share, compared to a net loss of $119,937, or 0 cents a share, a year earlier. The loss in the latest quarter was a penny greater than predicted by a consensus of sell-side analyst estimates polled by

First Call/Thomson Financial

. Linux is a free, or open source, competitor to

Microsoft's

(MSFT) - Get Report

Windows NT

.

In an interview, Timothy Buckley, chief operating officer of Red Hat, ascribed the larger loss to "an acceleration of opportunities out there. We thought it was appropriate to take advantage of those opportunities." A majority of those opportunities related to expansion abroad, in Europe, Japan and the rest of Asia, including Singapore, South Korea and Taiwan. There are now 50 people employed internationally by the company.

Also, Buckley said Red Hat will sign up with a partner in China by the end of the quarter, in February.

However, revenue numbers were very strong, rising 64%, to $5.43 million from $3.32 million a year earlier.

Buckley said that growth came from "stronger-than-anticipated demand on the product side." There are three packages of Linux available now: standard, deluxe and professional. The standard version, which costs $29, started shipping in late October and broadens the spectrum of the operating system's users.

Though Linux can be downloaded at no cost, customers who want technical support can buy it.

Also contributing to the stock's surge was the 2-for-1 stock split approved by the company's board of directors, effective around Jan. 7, when the company, based in Durham, N.C., will issue an additional 137.6 million shares.

Red Hat is also "contemplating" a secondary offering, which could be filed with the

Securities and Exchange Commission

as early as the week of Jan. 3. The timing and size of the putative offering are dependent on market conditions as well as other factors.