Red Hat Rises After New Linux Products Fuel Sales

By Dina Bass

Red Hat Inc., the world's biggest seller of Linux operating-system programs, rose 5.3 percent in New York trading after sales topped analysts' estimates.

Red Hat shares climbed $1 to $19.89 at 4 p.m. in New York Stock Exchange composite trading, the most in more than a month. The stock has fallen 14 percent this year.

Red Hat's Enterprise Linux 5 software, released in March, sold faster than expected last quarter, increasing cash flow. The Raleigh, North Carolina-based company also persuaded existing customers to use Red Hat software on more of their computers.

"Cash flow from operations was very solid compared to last quarter, and the revenue beat expectations," said Denny Fish, an analyst at JMP Securities in San Francisco. He has a "market perform" rating on the stock.

Cash flow from operations rose 43 percent to $63.7 million last quarter from a year earlier. In the previous quarter, it declined 4 percent.

Net income climbed to $18.2 million, or 9 cents a share, from $11 million, or 5 cents, a year earlier, Red Hat said yesterday in a statement. Sales rose 28 percent to $127.3 million for the quarter ended Aug. 31, beating analysts' estimates in a Bloomberg survey. The company's profit forecast matched estimates.

The company expects profit in the current quarter, excluding some costs, to rise to 18 cents a share, Chief Financial Officer Charlie Peters said on a conference call. Sales will climb to $131 million to $133 million, Red Hat said. Analysts surveyed by Bloomberg had estimated earnings of 18 cents and sales of $132.8 million.

Company Forecast

Earnings last quarter were 17 cents, excluding some costs, matching the average estimate of analysts surveyed by Bloomberg. The results compare with a slower period a year earlier, when Red Hat's salespeople were retrained to market products from JBoss Inc., which the company acquired.

Linux is an open-source operating system, meaning its underlying code is shared freely. Red Hat sells its own version of Linux, as well as service and support.

Red Hat's customers are loading its software onto more of their server computers, Chief Executive Officer Matthew Szulik said in an interview.

``The customers who deployed 10 Red Hat servers a few years ago are now starting to deploy thousands,'' he said.