Linux seller Red Hat reported on Wednesday that it had outpaced analysts' revenue and profit expectations for its most recent quarter, suggesting they raise future financial projections and boasting of gains against competitors.
The company's revenue increased 42 percent to US$65.7 million for its fiscal second quarter of 2006, which ended Aug. 31. Net income increased 35 percent to US$16.7 million, or 9 cents per share.
Analysts surveyed by First Call had expected the Raleigh, N.C.-based company to report net income of 7 cents per share on revenue of US$64.9 million for the quarter.
In a conference call, Chief Executive Matthew Szulik said the company's financial results "were strong across all key metrics," including billing, revenue growth, profit margin expansion, net income and cash flow.
The company also offered guidance for the current quarter, which ends in November, that exceeds analysts' current forecasts. Red Hat projects earnings of 9 to 10 cents per share on revenue of US$70.5 million to US$71.5 million; analysts surveyed by First Call expected 8 cents per share and US$69.4 million.
Some of Red Hat's gains come from increasing revenue through computer manufacturer partners, Szulik said. Unit sales of Red Hat's subscriptions are growing faster than unit shipments of Hewlett-Packard and Dell servers.
"We believe these share gains are coming at the expense of non-Linux operating systems, unsupported Linux and other Linux vendors," Szulik said.
Operating income rose 90 percent to US$12.8 million for the quarter, and operating cash flow increased 48 percent to US$45.8 million. After repurchasing US$11.6 million of its shares and US$20 million of its convertible bonds, the company has cash and investments worth US$966 million, Red Hat said.
At the same time, Red Hat's chief rival, Suse Linux Enterprise Server seller Novell, has been under some investor pressure to buy back stock, increase its open-source emphasis and sell off businesses. It agreed on Sept. 22 to repurchase some of its stock.
Red Hat sells annual support subscriptions for its flagship Red Hat Enterprise Linux operating system product, but it also is expanding into higher-level software and funds development of the free Fedora version for hobbyists.
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