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Red Hat Profit Improves on Growing Linux Demand

Reuters
Thursday, 28 Jun 2007 | 12:27 PM ET

Red Hat reported higher profit Wednesday on higher sales of its version of Linux software that companies are increasingly choosing over rival products to run business computers and data centers.

Fiscal first-quarter net income rose to $16.2 million, or 8 cents a share, from $13.8 million, or 7 cents a share, a year earlier. Revenue rose to $118.9 million from $84.0 million in the quarter ended May 31.

Red Hat Earnings
The Linux software company posts a better than expected revenue, with Matthew Szulik, Red Hat pres. & CEO and CNBC's Joe Kernen

The company posted profit of 16 cents a share, excluding items. On that basis, analysts expected profit of 15 cents on revenue of $116.8 million.

The software developer's biggest rival is Novell , which last year enlisted the world's No. 1 software maker, Microsoft as a partner in its battle to woo customers away from Red Hat. The two are working together on product development and sales.

Red Hat , based in Raleigh, N.C., and Novell offer similar but not necessarily compatible software packages, based on a set of basic computer code known as the Linux kernel.

Companies use the Red Hat and Novell versions of the Linux operating system to run their business computers and data centers.

The companies make money by selling help-desk support, software upgrades, bug fixes, consulting and other services to their customers.

They can't rely on revenue from software sales as programs based on the Linux kernel must be distributed under so-called open-source licenses, which allow anybody to copy, revise and redistribute them.

Red Hat Enterprise Linux, the software maker's flagship product, competes with cloned products from Oracle, the world's No. 2 software maker, and CentOS, a nonprofit collaborative that gives its product away.

They also compete with rival business software, most notably Microsoft's Windows operating system.

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