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Red Hat loss narrows
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June 15, 2000: 5:50 p.m. ET
Linux specialist posts smaller-than-expected loss as sales nearly double
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NEW YORK (CNNfn) - Red Hat Inc., a leading distributor of the Linux operating system, reported a smaller-than-expected fiscal first-quarter operating loss on sales that rose 95 percent from the same period last year.
Excluding special items, the Research Triangle Park, N.C.-based company reported a net loss of $2.5 million, or 2 cents per share. Analysts polled by earnings tracker First Call has expected Red Hat to post an operating loss of 4 cents per share during the quarter.
Including acquisition-related and other expenses, the company's net loss was $14.9 million, 10 cents per share, compared with a net loss of $4.1 million, or 8 cents per share during the same period last year.
Revenue for the quarter rose was $16 million, compared with $8.2 million during the same period last year. The company's gross margins increased to 6.6 percentage points to 54 percent.
Executives at Red Hat said they are on track to achieve operating profitability in calendar year 2001 and expect their losses to continue to narrow in the coming quarters.
"We anticipate that the operating loss level will decline throughout the balance of fiscal year 2001 as the company drives for profitability," Harold Covert, Red Hat's chief financial officer, told analysts during a conference call after Thursday's earnings release.
Red Hat (RHAT: Research, Estimates) closed up 7/8, or 3.9 percent, at 23-3/8 ahead of the earnings announcement Thursday. They added another 1-5/32 to 24-17/32 in after-hours trade.
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Red Hat is one of numerous companies that specialize in software and solutions based on the Linux operating system. Linux is an "open-source" operating system, which means that it is in the public domain and open to modifications by independent developers.
 Other companies that compete in this market include VA Linux (LNUX: Research, Estimates) and Caldera Systems (CALD: Research, Estimates).
Linux has been seen by many as an emerging rival to Microsoft's ubiquitous Windows operating system and has been gaining strength in the server market, especially among dot.coms.
Although it is offered for free, most corporate users opt to pay for the operating system and its attendant support through distributors such as Red Hat, which derives the bulk of its revenue from support and services.
Though investors were enthusiastic when Red Hat shares made their debut in August 1999, the market appetite for the company's stock has since waned. At Thursday's close, they stood more than 85.5 percent below their high of 151-5/16. 
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