Red Hat Loses $3.6m on Revenues of $5.4m; Splits Stock

Sally Khudairi (sk@zotgroup.com)
Tue, 21 Dec 1999 00:43:04 -0500


Red Hat Loses $3.6m on Revenues of $5.4m; Splits Stock

Section: 03. Financial News

Linux pioneer and stock market darling Red Hat Inc has reported a net loss
of $3.6m, or $0.05 per share, on revenues of $5.4m for the third quarter
ended November 30 1999. Revenues for the nine months ended November 30 came
to $12.6m, for a net loss of $8.8m, or $0.21 per share. The results came in
short of Wall Street expectations by one cent and executives attributed the
shortfall to the company's aggressive expansion of its activities outside
the USA. Loss aside, revenues are rising. According to CEO Matthew Szulik,
those revenues are being driven by increasing demand for Red Hat Linux, for
services and for the content and customers of the company's Linux portal
site, Redhat.com.

Red Hat's third quarter has been a busy one. The company signed a definitive
agreement to acquire development toolmaker Cygnus Solutions, expanded the
scope of its service offerings to include other open source packages like
Apache and Sendmail and increased the number of its enterprise customers
from 34 to 60. It struck deals with Intel Corp, Dell Computer Corp and
Compaq Computer Corp, appointed Mark White as general manager for
Asia-Pacific operations and opened two training facilities in California and
three in Europe. A new certification program was introduced and Red Hat also
hired Russ Mitchell, formerly of the US News and World Report and Wired
News, to run an open source news service, Wide Open.

Investors expressed their approval of the quarterly report by driving the
company's share price up $15 over the day's trading. Shares in RHAT closed
just under $268, giving the company a market capitalization of $18.4bn. Red
Hat also announced a two- for-one split of its common shares, and noted that
it was considering a second public offering. The stock split will take place
on or around January 7. Every stockholder of record at close of business on
December 27 will receive an additional share for every share they hold. Red
Hat's 68.8 million outstanding shares will number around 137.6 million after
the split goes through. If the secondary offering does take place,
executives hope to have the registration statement filed during the week of
January 7.