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Red Hat Q2 adjusted profit falls short, revenues rise 15%

Published: 16:25 24 Sep 2012 EDT

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Business software provider Red Hat (NYSE:RHT) reported after the closing bell Monday that it saw “double-digit growth” in revenues for its second quarter, driven by demand for its open source technologies, while per share earnings fell due to acquisition costs.

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

For the period that ended August 31, net income slipped to $35.0 million, or 18 cents per diluted share, compared with $40.0 million, or 20 cents per diluted share, in the year ago quarter. 

Adjusted net income for the quarter was $54.9 million, or 28 cents per diluted share, as compared to $56.5 million, or 29 cents per diluted share, a year earlier. 

Revenue rose by 15 per cent to $322.6 million as subscription revenue for the quarter grew 17 per cent to $278.8 million.

Analysts polled by Thomson Reuters had expected a per-share profit of 29 cents, on $322.12 million in sales.

“Our double-digit growth was driven by demand for Red Hat's open source technologies that are key to creating innovation, scale and flexibility in our customers' data centers and their businesses,” said president and CEO Jim Whitehurst in a statement.

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

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

“Our business model and offerings continue to appeal to customers despite the global economic malaise," stated VP and CFO Charlie Peters.

“This quarter marked a significant ramp-up in investments in our nascent storage business, with the launch in late June of Red Hat Storage Server 2.0. 

“Furthermore, we announced two small technology acquisitions in the middleware space to further round out our offerings.”

Operating cash flow was $103.9 million for the second quarter, as compared to $77.1 million in the year ago quarter. 

Red Hat said its total deferred revenue balance at the end of the quarter was $944.4 million, an increase of 16 per cent over the year-ago quarter.

In after-market trade, Red Hat lost 0.17 per cent at $57.54 per share on the New York Stock Exchange.

 

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