Linux vendor Red Hat suffers Q2 loss of $55.3 million

The red ink continues for Linux market leader Red Hat Inc., which yesterday reported net losses of US$55.3 million for the second fiscal quarter ended Aug. 31.

That compares with a net loss of $27.6 million for the first fiscal quarter of 2002, which ended May 31.

The Research Triangle Park, N.C.-based company said in a statement that the losses were reduced on paper to just $100,000 after taking a restructuring charge of $37.2 million and other adjustments.

That $100,000 adjusted net loss compares with an adjusted net loss of $4 million for the same period one year ago.

The restructuring charge of $37.2 million includes $33.8 million in goodwill and intangibles related to acquisitions made in prior periods and $3.4 million in severance-related expenses.

Red Hat reported revenue of $21.1 million for the quarter, which is down 15 percent from revenue of $25 million one year ago. It's also down by 17 percent from the first quarter of fiscal 2002, when revenue was $25.6 million (see story).

Yesterday's news comes after Red Hat reported a $600,000 profit for its first quarter on an adjusted basis for the first time in its history.

Matthew Szulik, Red Hat's CEO, said the company is shifting its focus from retail box sales of its open-source operating system to developing closer ties with its business customers. "It's a transition from sales and marketing to a more integrated relationship with customers," he said.

Red Hat will now direct its sales and support efforts at business customers that are looking at Unix to Linux migration opportunities and toward a promising and developing market in embedded systems, he said.

The company will also have announcements in the next 60 days for new products sought by enterprise customers, including entries in the security market and the high-availability market, said Szulik Red Hat is taking the right approach by emphasizing its opportunities in the embedded systems market, said Bill Claybrook, an analyst at Aberdeen Group Inc. in Boston.

"They really have acknowledged that they hadn't done a good job with their embedded systems," he said. The company has the tools to do that and is finally building a marketing team that will be able to showcase its abilities, Claybrook added.

"They had sort of been lagging behind," he said.

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Todd R. Weiss

Computerworld
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