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Red Hat (RHAT) , a favorite of Microsoft (MSFT) - Get Microsoft Corporation Report-haters, earned its first-ever profit, the company announced Tuesday. Red Hat distributes a popular version of Linux, a free rival to Microsoft's Windows and Sun's (SUNW) - Get Sunworks, Inc. Report Solaris operating system.

The Raleigh, N.C.-based company met analysts' expectations, with a third-quarter net profit of $300,000 calculated according to generally accepted accounting principles and break-even earnings.

The company generated its second-consecutive quarter of positive cash flow from operations -- approximately $1 million dollars in Q3, an increase of $429,000, or 74%, over the positive cash flow from operations of $582,000 in Q2.

Revenue was $24.3 million, up from $20.05 million a year earlier and above analysts' consensus forecast for sales of $23.43 million.

Trip Chowdhry, an analyst with Midwest Research Securities, says Red Hat Linux is gaining market share through factory installation on servers (representing 85% of its revenues) from

Dell

,

IBM

,

TheStreet Recommends

H-P

and

Fujitsu

. It is also gaining ground by rewriting its Advanced Server software to run with software products from

Oracle

,

Veritas

,

Computer Associates

and others.