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Red Hat Had a Profitable Fourth Quarter, But Earnings Were Down

Red Hat reported its fourth quarter earnings today, and the news was mixed. Its earnings fell 27 percent compared to the previous year's fourth quarter, from $22 million to $16 million. However, full-year sales were $652.6 million, up 25 percent from $523 million over the previous full year. There were several other bright spots, and the company beat analyst's estimates. Overall, Red Hat continues to defy the economic gloom with stronger results than many other companies are reporting.

The company cited its strong focus on curbing costs during its earnings call, but it does look from the lower earnings like Red Hat is having to spend more to get its profits. Red Hat also cited the cost advantages of its free software offerings as having an advantage over proprietary offerings in this economic environment.

Among the highlights from the Red Hat report:

Sales grew 17 percent to $166.2 million, which was below the $167 million projected by analysts. Earnings, at $16 million, were 22 cents per share, while analysts had predicted 20 cents. Full-year earnings were $78.7 million, or 39 cents per share, compared with $76.7 million, at 36 cents per share, in 2007.

Matt Asay also notes that Red Hat's billings exceeded $200 million, that "the company ended its fiscal 2009 with cash and cash equivalents and investments of $846 million and essentially no debt," and that all of Red Hat's top 25 customers renewed their contracts for support and services in each quarter for the fiscal year.

Respondents to this recent survey on open source cited subscription-based technical support as the best strategy for commercial open source companies, while professional services and consulting were rated second. It looks like Red Hat continues to do well with these strategies, although I'm betting the lower earnings will result in more cost controls at the company.
 

• linux
• Red Hat
• Earnings

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