Red Hat Inc. reported sharply higher second-quarter revenue, but still reported a loss as its cost of sales kept pace with growth.

The Linux software vendor reported a loss of $3.1 million on sales of $4.4 million for the quarter ended Aug. 31. The company posted revenue of $2.3 million in the same quarter last year.

Net losses for the most recent quarter totaled 9 cents per share, exceeding analysts' estimates of a 5-cent-per-share loss, according to First Call Corp. During the same period in 1998, Red Hat earned $132,000, or a penny a share.

Shares of Red Hat, which markets and supports enterprise versions of the open-source Linux operating system, were off 4-1/8 in late-morning trading, to 108-1/4. The company launched a successful initial public offering in August.

During the second quarter, Red Hat inked technical support deals with IBM Global Services, Compaq, and Siemens as it expanded its revenue from services and advertising. "We are continuing to move our business model toward a blended revenue mix from subscription-based products, our services business, and the Red Hat portal," chairman and chief executive Bob Young said in a statement. Revenue from services soared to more than $1 million