Red Hat's In The Black 2

Leading Linux provider Red Hat Inc. climbed into the black for the first time in its eight-year history during the quarter ended in November. The company says it had a profit of $305,000 on revenue of $24.3 million for the third quarter. A year ago, Red Hat lost $15.1 million on revenue of $20.1 million.

Although Linux is an open-source operating system that can be freely downloaded from the Internet, Red Hat has profited by selling apps support and training tied to the operating system. Revenue for both software subscriptions and services rose during the quarter. Subscription revenue was $13.2 million, up 17% from $10.9 million a year ago. Services were $11.1 million, up from $9.2 million.

Red Hat sold more than 12,000 subscriptions of Advanced Server during the quarter, a 50% increase over the second quarter. The company in March introduced Advanced Server as a version of its open-source operating system designed to entice large companies to migrate from Unix to Linux. Advanced Server includes a single-year subscription for configuration, asset-management, and maintenance services.

Red Hat has said that Advanced Server will run on workstations and be tweaked in order to appeal to a number of vertical industries, including telecom, retail, and research. "It's a sound strategy because Linux is being adopted across many different vertical markets," says Stacey Quandt, a Giga Information Group analyst. The move has legitimacy, she says, because it's based on customer demand rather than a vendor's attempt to steer a market.