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Red Hat Q1 profit grows 15%, but shares drop before the bell

Published: 09:05 21 Jun 2012 EDT

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Business software provider Red Hat (NYSE:RHT) reported late Wednesday that fiscal first-quarter profit grew 15.4 per cent amid higher sales and margins, despite sharply higher operating costs.

The North Carolina-based company offers Linux operating systems and open-source technology.

For the period that ended May 31, net income popped to $37.4 million, or 19 cents per share, versus a year-ago profit of $32.4 million, or 17 cents per share.

Removing one-time items such as share-based compensation, amortization costs and some plant exit expenses, the company reported an adjusted profit of 30 cents per share.

Revenue rose by 19 per cent to $314.7 million from $264.7 million a year earlier.

Analysts polled by Bloomberg had expected a per-share profit of 30 cents, on $315 million in sales.

The company in March projected earnings of 25 to 27 cents on revenue of $307 million to $311 million.

"Our first quarter results represented a strong start to our fiscal 2013. Red Hat’s compelling value proposition and innovative, open source technologies continued to drive our financial success and market share gains," chief executive Jim Whitehurst said in a statement.

Subscription revenue jumped 21 per cent to $272.6 million. Training and services revenue also rose to $42.1 million from $39.2 million a year earlier.

Gross margin widened to 85.3 per cent from 83.9 per cent in the same quarter a year ago.

Operating costs, however, rose 23 per cent as sales and marketing expenses and research-and-development costs each increased 24 per cent.

In pre-market trade, Red Hat lost 9.88 per cent at $50.92 per share on the New York Stock Exchange.

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