was rallying again Tuesday, continuing a recovery from its recent slide as a restatement of the company's last quarterly results released Monday raised its top and bottom lines.
After rising to as high as $16.62 intraday, shares of Red Hat recently vaulted up $1.49, or 10%, to $16.39.
In a regulatory filing with the
Securities and Exchange Commission
Monday, Red Hat increased total revenue by $149,000 to $41.8 million, net income by $243,000 to $10.9 million, earnings per share by a penny to 6 cents, and deferred revenue by $1.3 million to $92.7 million for the quarter ending May 31.
For the year-earlier quarter, Red Hat lowered total revenue $1.1 million to $26.1 million and net income by $472,000 to $1.0 million. Net income in the May 31, 2003, quarter remained the same, at a penny a share.
The Linux open-source software maker also disclosed that at least 14 firms announced the filing or plan to file 15 class-action lawsuits against Red Hat in the wake of the restatements.
Red Hat first announced it would restate results July 13 as a result of a change in the way it recognizes revenue, sending shares spiraling downward 22.7%. At that time, the company also said it was responding to questions from the SEC. The stock's decline came on the heels of previous drops following disappointing quarterly results and the surprise resignation of the company's CFO -- all within a month's time.
Previously, Red Hat recognized revenue for subscription agreements on a monthly basis, starting on the first of the month a deal closed rather than the actual date it closed. But Red Hat said its auditor advised recognizing revenue on a daily basis, beginning on the date the contract takes effect and not earlier.
Last week, Red Hat released only an estimated range showing how its numbers would be affected. The restatements for last quarter disclosed Monday actually slightly exceeded the range estimated by Red Hat last week.
"We believe the May 2004 10-Q filing is likely to come as a relief to shareholders, who might have been expecting more accounting changes, the announcement of an SEC investigation or something even worse," Jefferies analyst Katherine Egbert wrote in a note Tuesday. "While the stock is unlikely to recover its former multiple, we believe the company and management's credibility are now on the initial road to recovery."
Egbert said the only near-term negative catalyst she sees on the stock is the potential for a mild reduction in August quarter guidance related to the accounting change. (She has a buy rating on the stock and the firm has done investment banking with Red Hat.)
But W.R. Hambrecht analyst Victor Raisys was more cautious. He noted four issues still remain unclear, even after Monday's filing: the reasons for the company's change to daily revenue recognition; the nature of SEC questions; the full impact and details of the restatements for fiscal years 2002 to 2004; and who will be the new CFO. (Raisys maintained a hold rating; his firm hasn't done banking with Red Hat.)