RED HAT CONTINUES TO ACCELERATE REVENUE, TO $27 MILLION, ACHIEVING BREAK EVEN PER SHARE IN FOURTH QUARTER

Research Triangle Park

United States, March 22, 2001

- Fiscal Year completed with 100% revenue growth, gross margin of 57%, and cash and investments balance of $303 million -

Red Hat, Inc. (Nasdaq:RHAT), the leader in developing, deploying and managing open source solutions, today reported revenue of $27 million for the fourth quarter ended February 28, 2001, an increase of 106% versus the $13.1 million reported for the fourth quarter of fiscal 2000 and an increase of 20% over the third quarter of fiscal 2001.


The company reported an adjusted net loss of $600,000, or break even per share, for the fourth quarter of fiscal 2001, compared to an adjusted net loss of $5.6 million, or $0.04 per share, for the fourth quarter of fiscal 2000. On a reported basis, the net loss was $24.2 million, or $0.14 per share, compared with a net loss of $24.6 million, or $0.17 per share in fiscal 2000.


The company also completed its fiscal year 2001, with revenues of $84 million, compared to $42 million in fiscal 2000, a 100% increase. The adjusted net loss for fiscal 2001 was $5.9 million or $0.03 per share, compared to $19 million or $0.19 per share for fiscal 2000.


"Red Hat expanded its sources of revenue by introducing strategic solutions to our global customers, which contributed to our strong operating results", commented Matthew Szulik, President and CEO of Red Hat. "Our management team has continued to accomplish the operational and financial goals stated a year ago".



Highlights for the fourth quarter include:


CUSTOMER WINS / MAJOR DEALS


Nortel is implementing Open Source Java solutions for the Power PC architecture for deployment in Nortel products.


Deutsche Telekom is focusing Red Hat Linux on web-based applications


Lufthansa Airplus is using Red Hat Linux in business travel management and ePayment and customer care solutions


Dresdner Bank is implementing Red Hat Linux on web servers for internal use, in its department servers, and as a development platform


Symbol Technologies, which has more than 50% world market share in key and pen-based mobile computing, is working with Red Hat to deploy wireless devices based on Red Hat Embedded Linux


Mentor Graphics is using the Red Hat GNUPro tools across multiple operation systems for the development and deployment of their software products


Morpho Technologies is working with Red Hat to deploy GNUPro tools and Red Hat software technologies for Morpho's semiconductor processor platforms


Hitachi continues to work with Red Hat to deploy Red Hat GNUPro and Embedded Linux for Hitachi SH processors that are used in all types of embedded applications


GE Corporate Research is migrating their development workstations to Linux, replacing Sun Solaris platforms


LSI Logic is porting its SCSI products to Red Hat Linux, and working with Red Hat to allow LSI a faster time to market for Linux-based products


Ubicom Joined forces with Red Hat to support Device Networking Designers;


Red Hat GNUPro Development Environment will run on Ubicom IP2000 internet
processors.


Red Hat announced that Daiei Information Systems of Japan has chosen Red Hat to provide a comprehensive system of end-to-end open source solutions for the company and its subsidiaries and customers.


Announced that Rymic Systems has chosen Red Hat's uClinux as the operating system for a prototypical vehicle monitoring device soon to be tested by the United States Army. The embedded device will be incorporated in the Bradley fighting vehicles, heavy expanded mobility tactical trucks and humvees.


Keio University will build a large-scale campus network server system using Red Hat Linux 7 and IBM Netfinity 4500R server, from Japan IBM Corporation. This server network system will also adopt the new IBM eServer xSeries network servers from IBM Japan.


ACQUISITIONS


Acquired Planning Technologies Inc, and Atlanta professional consulting service company, for $47 million in stock, adding to Red Hat's global capabilities for end-to-end open source solutions.
Acquired Akopia of Reston, Virginia, integrating Akopia's popular Interchange e-commerce platform into Red Hat's solutions portfolio, which now includes Interchange, the Stronghold Secure Web Server, and CCVS e-commerce payment system for a comprehensive e-commerce solution stack.


MANAGEMENT


Hired James Neiser, Ph. D, as the Chief Marketing Officer. Most recently Neiser was the VP of WW Channel and Customer Set Marketing in IBM Software, and also served in a variety of executive marketing positions while at IBM. Dr. Neiser brings over 19 years of marketing experience from a variety of software companies.


Red Hat appointed Selby Wellman to board of directors. Wellman brings to Red Hat more than 30 years of experience in management, marketing and engineering at leading technology corporations. He joined the board from Cisco Systems, where he served most recently as senior vice president and general manager of the InterWorks Business Division. Wellman also served as senior vice president of business units in San Jose, Calif, and senior executive for corporate marketing while at Cisco.


About Red Hat, Inc.


Red Hat is the leader in developing, deploying and managing solutions built on the benefits of an open source platform. These solutions include an open source product platform for devices to mainframes, a complete end to end set of Professional Services, and the Red Hat Network as the Internet-based backbone for deployment and management of the products and services. Red Hat's open source platform includes the award-winning Red Hat Linux operating system platform, the Interchange e-Commerce platform, Stronghold Secure Web Server, Credit Card
Verification software, High Availability Server, GNU-based developer toolkit for embedded development, and embedded run-time Linux, eCOS, and RedBoot solutions.


Red Hat backs up their open source offerings with end-to-end services that include Red Hat Professional Consulting focused on multiplatfom infrastructure and engineering services, Red Hat Engineering services for software development and porting of the operating system and for
embedded platforms and devices, Red Hat Enterprise support services for installation services and web and telephone support, and Red Hat Learning services for Linux certification (RHCE) and courses for Apache, Embedded systems, Advanced Developer, and e-Commerce. Red Hat Network provides Red Hat's unique managed services capability to deploy and manage open source products, services, support and management information on-line in real-time to more cost effectively and reliably maintain open source based solutions.


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, Red Hat's ability to effectively integrate
the operations of Planning Technologies; Red Hat's ability to retain Planning Technologies' traditional customers; Planning Technologies' inexperience in offering professional consulting services to Linux customers; Red Hat's lack of experience in managing a large, geographically dispersed, professional services organization; 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