Red Hat makes loss as it grows

Red Hat today reported a huge leap in revenue for its third quarter results - mirrored by a big jump in losses.

The Linux distributor reported revenue of $5.4 million for the quarter ended 30 November 1999, an increase of $2.1 million on the same quarter in 1998 and a 24 per cent increase on its second quarter revenue of $4.4 million.

However, its net loss soared to $3.6 million, or $0.05 per share for the quarter just ended, compared with a net income of $0.1 million, or $0.00 per share in the previous year's third quarter.

Clive Longbottom, analyst at Strategy Partners, said: "As a .com company revenues are far more important than profit. They are looking at the future rather than the present and concentrating on building up critical mass. However, losses will become an issue if they are throwing money away and have a poor business plan. It becomes a worrying issue for investors."

He added: "There will come a time when it has to start making a profit. I believe Red Hat is on the cusp with Wall Street a the moment and is likely to fall out."

Colin Tenwick, vice president, and general manager European operations for Red Hat, said, "We are on track. We have been investing in the expansion of international global coverage, and agreed to acquire Cygnus. The infrastructure has to be there to be able to scale and that's where the investment goes."

Red Hat also announced a two for one stock split to take place around 7 January.

Meanwhile Red Hat announced an alliance with HP intended to boost sales of HP's Openmail system and Red Hat's Linux distribution.

The messaging and collaboration system for Linux-based operating systems will be made available for direct purchase through Red Hat's portal at www.redhat.com/store.

Red Hat plans to recruit several of HP's US Openmail resellers into its Channels Programme.

"Messaging, collaboration and email systems are a fast-growing vital part of today's Internet-enabled business," commented Tenwick.