June 26, 2008 / 4:57 AM / 11 years ago

Red Hat expects steady growth

LOS ANGELES (Reuters) - Red Hat Inc RHT.N, the world’s largest publicly traded provider of Linux software, reported on Wednesday a quarterly profit that met Wall Street expectations as its revenue grew 32 percent.

Net income rose 7 percent to $17.3 million, or 8 cents per share, in its fiscal first quarter, from $16.2 million, or 8 cents per share, in the same period a year ago.

Excluding one-time items, it earned 18 cents per share, up from 16 cents per share last year, matching the average Wall Street analyst estimate, according to Reuters Estimates.

Revenue of $156.6 million was ahead of analysts’ average expectation of $153.1 million.

“We see strength across the board internationally and across the country,” Chief Executive Jim Whitehurst told Reuters. “There’s so much opportunity in the developing world for us. We are fighting a bit of an upward battle in the developed world, where there are established players.”

Red Hat said on a conference call with analysts that it expected continued revenue growth, to between $162 million and $164 million, and flat earnings in the second quarter.

Red Hat’s most lucrative product is its version of Linux for server computers, which rivals Microsoft Corp’s (MSFT.O) Windows software and Unix software from Hewlett-Packard Co (HPQ.N) and International Business Machines Corp (IBM.N).

The Raleigh, North Carolina-based company distributes its software for free, but charges subscribers for bug fixes, upgrades and help desk support. Microsoft, HP and IBM consumers pay separately for software, in addition to those services.

Whitehurst speculated that Red Hat’s subscription-based business model was a major factor behind its financial strength in a sluggish economy, as consumers aiming to cut costs may be more attracted to its free products than paying for rivals.

“We sell service and support, I think it’s one of the things that’s serving us now in a tougher economic environment,” Whitehurst said. “(Our) costs are below proprietary alternatives.”

Red Hat shares slipped in extended trade to $22.11 after closing at $22.30 on the New York Stock Exchange.

Reporting by Jennifer Martinez; editing by Richard Chang and Braden Reddall

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