'Solid start': Red Hat’s earnings match Street expectations

Raleigh, N.C. — Red Hat delivered earnings to meet Wall Street expectations for its first full quarter under new Chief Executive Officer Jim Whitehurst.

Boosted by a 27 percent increase in subscription services, Red Hat (NYSE: RHT) reported earnings for the quarter ending May 31 of 18 cents per share on revenues of $156.6 million. The earnings matched those of Wall Street analysts when one-time expenses were excluded. Otherwise, earnings were 8 cents on profits of $17.3 million.

Red Hat shares traded up more than 3 percent on Wednesday at $22.25 just before the markets closed. The earnings announcement came after trading ended. Shares ended the day up 3.8 percent at $22.30.

"The first quarter was a solid start to the fiscal year," Whitehurst said in a statement. “With our recognized value advantage and award-winning technology solutions, we continued to see top enterprise customers expand Red Hat deployments and new customers migrate to our solutions."

Whitehurst replaced longtime CEO Matthew Szulik, who remains chairman, in January.

Red Hat is working to expand the footprint of its open-source products with costly internal investments, Whitehurst added.

"A good indicator of our health in our business is a reflection of the value we deliver to our customer," Whitehurst said in an interview with The Associated Press. "Our entire business model is built around serving the customer."

During a call with analysts, Whitehurst said all the company's top 25 customers renewed subscriptions in the quarter.

"We are off to a good start and on pace to deliver more major product releases this year than in any other period in Red Hat's history," Whitehurst said.

For the quarter, Red Hat revenues increased 11 percent from the previous three months to $156.6 million. That total was 32 percent more than the same time frame in 2007.

Subscription revenues soared to $130.7 million, up 7 percent from three months earlier and 27 percent higher than 2007’s first quarter.

The earnings of 8 cents were 2 cents higher than in 2007.

Helping boost sales in the most recent quarter were the launch of new releases for Red Hat’s network, enterprise and JBoss product lines.

"Our execution this quarter enabled us to deliver a combination of strong revenue, operating income and cash flow growth," said Red Hat Chief Financial Officer Charlie Peters. "We achieved these results while continuing to invest in our infrastructure and technologies to enable future growth."

For its second quarter, Peters said Red Hat estimates it will earn 18 cents a share, excluding one-time items, on revenue of $162 million to $164 million. Analysts polled by Thomson Financial had forecast comparable earnings: 19 cents per share on revenue of $163.4 million.