Red Hat Posts Quarterly Loss Despite Sales Jump



Red Hat Inc. (RHAT--Nasdaq) today reported a 63% jump in third-quarter revenue, but still lost money as the Linux software vendor's cost of sales soared. Sales for the period ended Nov. 30 were $5.4 million, compared with $3.3 million for the third quarter a year ago. Red Hat posted a net loss of $3.6 million, however, compared with a profit of $119,900 last year. Wall Street shrugged off the loss, boosting Red Hat's shares by $15 to $267.88 by midday. Red Hat president and CEO Matthew Szulik said in a statement that revenue growth was sparked by higher international sales and demand for Linux-related services from business accounts. Services accounted for about 30% of revenue during the quarter. Reducing its dependence on sales of boxed software has been among the company's priorities. Yet the transition is proving costly for Red Hat. Operating expenses soared 284% during the quarter to $7.3 million. Sales and marketing costs-the largest component of these expenses-increased 368% to $3.6 million. During the quarter, Red Hat agreed to acquire Linux tools developer Cygnus Solutions and signed a contract for consulting services with AutoZone Inc. The company declared a two-for-one stock split, in which shareholders of record as of Dec. 27 will receive an additional share for each Red Hat common share they own, on or about Jan. 7. The company also said it's considering a secondary stock offering.

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