Linux provider Red Hat yesterday reported a 25% profit decline and lower-than-expected revenue, but its shares gained 4.5% in AH trading on the company's strong guidance for next year. Red Hat posted a Q4 profit of $20.5 million ($0.10/share) against $27.3 million ($0.13/share) a year earlier. Without expenses, the company earned quarterly EPS of $0.15, in line with expectations. For full-year 2006, Red Hat earned $59.9 million ($0.29/share) against $79.7 million ($0.41) a year ago, in part on higher sales and marketing expenses. Q4 revenue gained 41% to $111.1 million, missing Street expectations of $112.5 million. Red Hat EVP and CFO Charlie Peters forecasts 2008 EPS at $0.67-0.72 on revenue of $510-520 million versus analyst projections of $0.68 EPS on revenue of $517.2 million. He also forecasts 15-20% growth in cash flow, ahead of analyst expectations of 12-13%. Red Hat has had to contend with the recent wading into the open-source market of behemoths Microsoft and Oracle, but CEO Matthew Szulik is unfazed. "Since 1998, competition with the big boys has been a fact of life for Red Hat," he said.
Sources: Conference call transcripts: F4Q07 (Qtr End 2/28/07). Press release, Chron.com, Reuters, News.com, TheStreet.com, MarketWatch
Commentary: Red Hat Fiscal Year Looks Rosy • Is Red Hat Ready to Be the Next Microsoft? • Red Hat: Surviving Competition, Displaying Growth
Stocks/ETFs to watch: Red Hat, Inc. (RHT). Competitors: Microsoft Inc. (MSFT), Novell (NOVL), Oracle (ORCL), VA Software (LNUX). ETFs: iShares Goldman Sachs Software Index (IGV), PowerShares Dynamic Software (PSJ)
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