Red Hat creeps into the black

Red Hat creeps into the black

Linux vendor, Red Hat, has announced second-quarter 2004 revenue of $US28.8 million, up 36 per cent from a year ago, when it posted revenue of $US21.2 million. Revenue for the quarter, which ended August 31, was up 6 per cent from the $US27.2 million posted in the first quarter, which ended on May 31.

Net income for the second quarter was $US3.3 million, more than double the net income of $US1.5 million it reported in the prior quarter. The figures also reflected a turnaround from a year ago, when the company posted a net loss of $US1.9 million.

For the second quarter, Red Hat reported a net operating profit of $US240,000, compared to a net operating loss of $US1.1 million in the prior quarter and a net operating loss of $US4.7 million in the second quarter of 2002.

"Our strong quarterly operating results reflect the strong demand for standards-based Red Hat Enterprise Linux Solutions in the enterprise," vice-president and chief financial officer of the company, Kevin Thompson, said. "The consistent improvement in our gross margins over the last three quarters to 72 per cent for the second quarter shows the significant scalability of our subscription business model."

IDC analyst, Dan Kusnetzky, said the positive numbers for Red Hat could be attributed to the strategy the company began taking in the past year on developing products for the enterprise market.

Both Red Hat and competitor SuSE Linux came out with enterprise server versions of their core Linux operating systems and had been selling them at prices far higher than their desktop versions, Kusnetzky said.

"Both companies are now showing their revenues are up," he said. "I think that the enterprise products are starting to get some traction" because they are more stable and have fewer update cycles.

"All of those things are important as Linux moves into the mainstream in more and more companies and more and more markets," Kusnetzky said. "Those two companies are largely driving the revenue stream of the Linux market."

Red Hat posted its positive numbers despite some uncertainty and volatility lately in the Linux marketplace.

In March, Unix vendor, The SCO Group, sued IBM, alleging that IBM illegally put Unix code belonging to SCO into the Linux open-source project to benefit IBM's sales. The original $US1 billion lawsuit was later amended and now seeks more than $US3 billion in damages. IBM countersued SCO last month.

In August, Red Hat itself sued SCO, alleging that the company was harming Linux in the marketplace through "unfair and deceptive" actions. Earlier this week, SCO filed a legal motion asking the court to dismiss Red Hat's suit.

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