Herald-Sun

Red Hat posts first profit since 1995 -- as promised By JEFF ZIMMER : The Herald-Sun jwz@herald-sun.com Jun 19, 2001 : 9:54 pm ET

DURHAM -- Red Hat reported its first profit on Tuesday -- as the company had promised it would.

At $600,000, it wasn’t a big number -- earnings per share were break-even — but it represented the Durham company’s first profit since it started in 1995 as a supplier of the Linux computer operating system.

During the same quarter a year earlier, Red Hat reported an adjusted net loss of $3.7 million, or 2 cents a share. For the first quarter that ended May 31, Red Hat said it had revenues of $25.6 million, an 18 percent increase over the $21.7 million it reported during the previous first quarter.

Still, the earnings report came with caveats.

First-quarter profit didn’t take into account the cost of acquisitions, stock-based compensation and other expenses. With those costs included, Red Hat lost $27.6 million, or 16 cents a share.

While the company reported an adjusted net income of $600,000, Red Hat’s operations lost $3.9 million. Interest income of $4.5 million helped produce the profit.

Still, the first-quarter $600,000 profit met analysts’ expectations and could represent a turning point for the company. Red Hat has gone from a company that made money selling its version of Linux -- a increasingly popular low-cost computer operating system -- to one that offers a variety of open-source software products and related services.

Linux, a Microsoft rival, is known as open-source software because people can download the code free from the Internet.

Red Hat went public with much fanfare in 1999 and saw its stock soar to a split-adjusted high of $148 in January 2000. But the stock sold in the $5 range for much of 2001 as technology stocks foundered.

The company released its earnings after the market closed on Tuesday. Red Hat closed at $4.75 on Tuesday, up 39 cents.

Earlier this year, Red Hat officials said they expect to generate $140 million in revenue in fiscal year 2002, which began in March. For the fiscal year, the company has said it expects to post a profit of $17.4 million, or 10 cents per share.

While its first quarter was a small step toward that goal, Red Hat delivered the profit in a tough market, the company’s president said in a release.

-- Anonymous, June 20, 2001