Red Hat profits beat forecast

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Shares in Red Hat, the world’s leading distributor of open-source software, jumped more than 12 per cent in after-hours trading on Thursday after results at the company beat expectations.

The results marked a change in fortunes for the company, whose shares had fallen more than 40 per cent since May amid a threat of increased competition from software heavyweights such as Oracle and Microsoft.

Red Hat said it made a net profit of $15.5m in the third fiscal quarter. That was down from $24.6m in the third quarter last year, owing to expensing of stock options, but well ahead of analyst estimates.

Excluding special items, profits were $29.6m, up from $23.2m one year ago. Revenues were $105.8m, up from $73.1m in the year-ago period.

Charlie Peters, Red Hat’s chief financial offer, said the performance was driven by strong demand and good execution across the company’s business lines.

“Enterprise and government buyers have grown very comfortable buying open-source software,” he said.

Mr Peters said the company was poised to benefit from the entry into the open source market by big competitors.

Red Hat’s shares fell 24 per cent in October after Oracle, the business software company, said it would enter the Linux market. Microsoft, the world’s biggest software company, last month entered into an alliance with Novell, a rival open-source company, to improve interoperability between platforms.

“There was a time when I thought we were going to be a category leader in a category of one,” said Mr Peters. “To get the huge entrants into the category validates for our customers that Linux is here to stay.”

Shares of Red Hat fell 4.2 per cent to $17.96 on Thursday ahead of the company’s earnings announcement. The shares had fallen from a high of $32.37 in May.

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