Soaring Linux sales double Red Hat profit for quarter
Thursday, 23 December 2004Net income rose to $10.8 million (U.S.), or 6 cents a share, from $4.26 million, or 2 cents, a year earlier, the Raleigh, North Carolina-based company said in a statement.
Sales for the quarter ended Nov. 30 rose to $50.9 million from $32.9 million, missing the $51.8 million average estimate of 16 analysts polled by Thomson First Call.
Red Hat's sales are rising as Linux gains popularity as an alternative to Microsoft Corp.'s Windows and other companies' versions of the Unix operating system. Red Hat's prices, which are declining amid discounting, worry some analysts. Prices were cut 25 per cent to 50 per cent as competition increased last quarter, said UBS AG analyst Heather Bellini in a client note.
"It's unclear how their business model works with prices falling so rapidly," said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon, who rates the shares "sector perform."
"We really don't have any way of knowing how much the pricing could continue to decline on Linux, and they don't know either."
Red Hat's average price on Linux has fallen to about $400 from $1,200 two years ago, analyst Katherine Egbert at Jefferies & Co. in San Francisco said in September.
The shares fell 50 cents to $14.57 in after-hours trading following the release of the earnings report.
On the Nasdaq Stock Market in New York, the shares declined 6 cents to $15.07 at the close of regular trading.
Source: Toronto Star
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