Red Hat Third Quarter Revenue Leaps 112% to $22.4 Million

Research Triangle Park

United States, December 14, 2000

Global adoption being driven by Red Hat solutions On track to achieve profitability


Gross margin was 60% for the third quarter fiscal 2001, versus 58% reported in the second quarter fiscal 2001and 41.5% in the third quarter fiscal 2000.

The Company reported an adjusted net loss of $900,000, or $0.01 per share, for the third quarter of fiscal 2001, compared to an adjusted net loss of $5.4 million, or $0.04 per share, for the third quarter of fiscal 2000. On a reported basis, the net loss was $21.4 million, or $0.13 per share, compared with a net loss of $6.3 million, or $0.05 per share.

"We are seeing increasingly strong demand for Red Hat leadership solutions," commented Matthew Szulik, President and CEO of Red Hat. "Solid results are being driven by customers consolidating their UNIX technologies to Red Hat Linux, increased demand from device manufacturers, and continued execution of a solid business model."

Highlights for the third quarter include:

Products and Services

  • Launched Red Hat Network, a powerful Internet-based service to develop, deploy, and manage multiple software platforms. Red Hat Network can significantly reduce costs, and allow for real time, rapid innovation and faster time to market. With the combination of Red Hat Network services and the ability to design and deploy complete embedded Linux platforms, Red Hat has become the first Open Source total solution provider for internet appliances.


  • Launched Red Hat Linux 7, which provides enhanced security, new ease-of-use features, optimized software for higher-end Intel chips and increased 3D support. Fast adoption and dozens of new enterprise-ready applications, have enabled Linux to extend its lead as the most powerful and widely used open source server environment.


  • Implemented advanced training programs for Embedded Systems, IA-64, and Apache/Stronghold.


  • Unveiled two new technical advances, RedBoot and EL/IX, which improve productivity and time-to-market for developers and manufacturers of solutions for devices and appliances.


Customer Wins

  • Won a $1 million contract to port development tools to the Samsung Calm RISC line of low-power processors.


  • Square D Company chose Red Hat to design next generation, Internet-based power management solutions built on Red Hat Embedded Linux.


  • Delphi Automotive is working with Red Hat to deploy Red Hat operating system technologies in Delphi automotive applications.


  • Altera is working with Red Hat to deploy GNUPro tools and Red Hat software technologies for Altera's Nios, PPC, MIPS, and ARM platforms.


  • EMC is expanding its product line to support Red Hat Linux.


  • IBM continues to grow its relationship with Red Hat, through back end support for IBM Personal Systems Group and porting Red Hat Linux to the re-branded line of eServer platforms.


  • NEC and Red Hat are working to provide Red Hat software technologies to strategic customers.


Alliances

  • Formed a partnership with NetSilicon to deliver open source products and services that accelerate time-to-market of Ethernet and Internet-attached devices. The two companies have already developed the first product from the partnership, the Net+Lxä, a development platform for Internet Appliances.


  • Created an alliance with Interactive Objects, Inc. to enable the development of a family of new digital audio playback devices based on the Radio digital audio OS and platform. This alliance is an important part of Red Hat's strategy to extend its services to new verticals.


  • Formed a partnership with North Carolina State University, a continuation of the Red Hat University Program announced in June, to standardize their College of Engineering academic computing environment on open source technologies.


  • Compaq announced the availability of its ProLiant servers pre installed with Red Hat Linux.


International

  • Entered into an alliance with Clover Technologies Pvt Limited, an established Indian software house, to open Red Hat India Pvt Limited, giving Red Hat entry into another leading software development country.


  • Formed a strategic alliance with Australian e-security specialist eSec Limited whereby Red Hat will provide engineering and technical support services to back eSec's proven security expertise, creating an enterprise ready solution.


  • Red Hat Linux 7 represents 40% of all Linux sales in Japan, gaining the largest share, according to BCN market survey report "BCN Market View."


Management

  • Named Kevin Thompson Chief Financial Officer. Thompson has more than 13 years experience managing operations, financial transactions such as debt and equity offerings, and mergers and acquisitions through his position as a partner at PricewaterhouseCoopers LLP.

Aquisitions

  • Closed acquisition of C2Net Software, Inc., developer of the popular Apache-based Stronghold secure web server, for approximately $42.8 million in common stock, providing additional security to Red Hat's expanding product offering.

About Red Hat, Inc.

Red Hat, the world's leading open source and Linux provider, is headquartered in Raleigh, NC with satellite offices spanning the globe. Red Hat is leading Linux and open source solutions into the mainstream by making high quality, low cost technology accessible. Red Hat provides operating system software along with middleware, applications and management solutions. Red Hat also offers support, training and consulting services to its customers worldwide and through top-tier partnerships. Red Hat's open source strategy offers customers a long term plan for building infrastructures that are based on and leverage open source technologies with focus on security and ease of management. Learn more: http://www.redhat.com

Forward-Looking Statements

Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations, and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, reliance upon strategic relationships, management of growth, the possibility of undetected software errors, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov.

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