Red Hat posts 36% increase in revenue

Linux supplier Red Hat announced second-quarter 2004 revenue of $28.8m (£17.5m), up 36% from a year ago, when it posted revenue...

Linux supplier Red Hat announced second-quarter 2004 revenue of $28.8m (£17.5m), up 36% from a year ago, when it posted revenue of $21.2m.  Revenue for the quarter, which ended 31 August, was up 6% from the $27.2m posted in the first quarter. 

Net income for the second quarter was $3.3m, more than double the net income of $1.5m it reported in the previous quarter. The figures also reflected a turnaround from a year ago, when the company posted a net loss of $1.9m. 

For the second quarter, Red Hat reported a net operating profit of $240,000, compared with a net operating loss of $1.1m in the previous quarter and a net operating loss of $4.7m in the second quarter of 2002. 

"Our strong quarterly operating results reflect the strong demand for standards-based Red Hat Enterprise Linux Solutions in the enterprise," said Kevin Thompson, vice-president and chief financial officer of the company.

"The consistent improvement in our gross margins over the last three quarters to 72% for the second quarter shows the significant scalability of our subscription business model." 

Dan Kusnetzky, an analyst at IDC, said the positive numbers for Red Hat can be attributed to the strategy the company began taking in the past year on developing products for the enterprise market. 

Both Red Hat and competitor SuSE Linux came out with enterprise server versions of their core Linux operating systems and have been selling them at prices far higher than their desktop versions, Kusnetzky said.

"Both companies are now showing their revenues are up," he said. "I think that the enterprise products are starting to get some traction" because they are more stable and have fewer update cycles. 

"All of those things are important as Linux moves into the mainstream in more and more companies and more and more markets," Kusnetzky said. "Those two companies are largely driving the revenue stream of the Linux market." 

Todd R Weiss writes for Computerworld

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