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Thu, Mar 21, 2002 - Page 21 News List

Red Hat's revenue results disappointing to analysts

BLOOMBERG , DURHAM, NORTH CAROLINA

Red Hat Inc, the biggest US distributor of the Linux computer-operating system, had a wider fiscal fourth-quarter loss as sales fell, sending the shares down as much as 6.9 percent.

The loss for the period ended Feb. 28 was US$41.9 million, or US$0.25 a share, compared with a loss of US$24.2 million, or US$0.14, a year earlier. Sales fell 16 percent to US$18.6 million from US$22 million as the company failed to close some contracts, Chief Executive Matthew Szulik said in an interview.

Red Hat software sales have dropped as the company faces competition from Microsoft Corp and Sun Microsystems Inc.

Excluding costs related to acquisitions and stock-based compensation, the company said it would have earned US$1 million, or US$0.01 a share, matching the estimate of five analysts polled by Thomson Financial/First Call. Sales fell short of the US$22.3 million average estimate of analysts.

"I am a little puzzled they didn't show better results," said John McPeake, an analyst at Prudential Securities, who rates the stock "hold" and had expected sales of US$22.1 million.

Red Hat will earn US$0.04 to US$0.05, excluding costs related to acquisitions, on sales of US$100 million to US$101 million for the current year, Szulik said. The company expects to break even, excluding costs, in the current quarter, on sales of US$19 million to US$19.5 million. The loss from continuing operations last quarter was US$28.9 million, or US$0.16, a share.

Red Hat also said it added 10 large business customers in the quarter, including AOL Time Warner Inc, Dell Computer Corp and Morgan Stanley Dean Witter & Co. Linux is popular for running the server computers that anchor Web sites and corporate networks.

Still, the Linux operating system for servers is having a tougher time competing with Microsoft's Windows operating system than in past years. Linux failed to gain market share last year after being the fastest-growing server operating system in unit shipments in 2000, according to data from market researcher IDC.

Unit shipments of Linux remained at about 28 percent of all server operating system shipments last year, while Windows shipments grew from about 41 percent to about 46 percent, said IDC Analyst Dan Kusnetzky.

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