Red Hat shares rise on Q1 earnings gain

Open-source software and services provider's profits rise 42%

Enterprise open-source software and services market leader Red Hat (NYSE: RHT) on Wednesday reported a 42 percent increase in fiscal first-quarter profits.

Shares rose as high as 5.6 percent to 46.15 in extended trading. Red Hat closed Wednesday's regular session at 43.72, down 3 cents from Tuesday.

Red Hat's Q1 net income was $32.5 million, or 17 cents a share, up from $24.1 million, or 12 cents a share in the year-ago quarter ended May 31. Revenue was $264.7 million, a gain of 27 percent over last year's $209.1 million.

The company's non-GAAP earnings, which exclude one-time items such as stock compensation and amortization expenses, was $47.0 million, or 24 cents per diluted share, up 33 percent from last year's $35.6 million, or 18 cents per diluted share.

Consensus estimates called for EPS of 22 cents on revenue of $253.7 million.

In a statement accompanying the earnings report, Red Hat CEO Jim Whitehurst said, "We believe there is a fundamental shift in IT spending, in which cloud computing and virtualization have become key strategic priorities. We believe that Red Hat is well positioned to capitalize on this growing demand as enterprise customers look to Red Hat when upgrading and modernizing their IT infrastructure."

Red Hat's subscription revenue for Q1 was $225.5 million, or 85 percent of total sales, up 26 percent over a year ago. Training and services accounted for the rest.

GAAP operating income for Q1 was $45.4 million, a 17.1% operating margin. Operating cash flow was $90.2 million, up 49 percent from last year's $60.6 million.

Red Hat has a market capitalization of $8.44 billion. Shares are down 4.3 percent so far in 2011. The company's stock hit an all-time high of $40 per share last Dec. 7.

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