Enterprise Successes, Break-Even adjusted EPSHighlight Quarter for Red Hat , INC.

Research Triangle Park

United States, September 18, 2001

- Positive cash flows from recurring operations and strong balance sheet evidence financial stability -

RESEARCH TRIANGLE PARK, North Carolina, September 18, 2001. Red Hat, Inc. (Nasdaq:RHAT), the leader in developing, deploying and managing open source solutions, today reported revenue of $21.1 million for the second quarter ended August 31, 2001, a decrease of 15% versus the $25.0 million reported for the second quarter of fiscal 2001 and a decrease of 17% over the first quarter of fiscal 2002.


The company reported an adjusted net loss of $100,000, or break even per share, for the second quarter of fiscal 2002, compared to an adjusted net loss of $4.0 million, or $0.02 per share, for the second quarter of fiscal 2001. On a reported basis, the net loss was $55.3 million, or $0.33 per share, compared with a net loss of $20.0 million, or $0.12 per share in fiscal 2001.


During the quarter, the company restructured its operations to focus on two primary areas, UNIX to Linux migration opportunities in enterprises and delivering complete solutions for the embedded system market. This restructuring resulted in the company incurring a charge of $37.2 million, which was comprised of the impairment of $33.8 million in the carrying value of goodwill and intangibles related to acquisitions made in prior periods and $3.4 million in severance related expenses.


"Our continued emphasis on improving the quarter to quarter operating performance of Red Hat is evident even as we faced a shortfall in sales", stated Kevin Thompson, Executive Vice President and Chief Financial Officer.


Highlights for the second quarter include:


CUSTOMER WINS / MAJOR DEALS


  • Red Hat is assisting a major financial institution with migration of its network infrastructure from Sun Solaris to Red Hat Linux
  • Amazon is expanding the use of Red Hat Linux and Stronghold for secure eCommerce transaction capabilities for online customers
  • Intel signed a comprehensive multi-year agreement where Red Hat will update and enhance GNU/Linux technologies for the Intel Xscale microprocessor family
  • Red Hat signed an Embedded Technology agreement for NEC's MIPS embedded processor devices
  • Juniper Networks has engaged Red Hat for the development and deployment of Juniper Equipment using Red Hat GNU/Linux technology
  • Nintendo is using Red Hat technologies in the development of Nintendo gaming technology
  • Red Hat is working with Motorola to enhance the GNU/Linux technology for Motorola's PowerPC architecture
  • Red Hat is providing advanced GNUPro technology for Sandcraft's 64-bit MIPS processor family
  • Red Hat has provided GE Transportation with Internetworking, Enterprise Systems Management, and Telco Design review in GE's moving of a server farm from Florida to Cincinnati
  • Red Hat has provided Verisign with Checkpoint Firewall Administration for Verisign's Solaris machines
  • Compagnie Generale de Geophysique, the worldwide supplier of products and services to oil/gas industry, has upgraded Houston processing center with hundreds of Dell servers running Red Hat Linux



    OTHER ANNOUNCEMENTS


    • Red Hat announced the Red Hat Database, an open source database solution based on PostgreSQL 7.1 and optimized with RH Linux 7.1
    • Red Hat launched its Open Source Consulting Practice, which is a suite of consulting services to help companies plan and migrate key elements of their computing infrastructure to Linux and other open source solutions




    About Red Hat, Inc.


    Red Hat is the leader in developing, deploying and managing solutions built on the benefits of an open source platform. The open source platform includes the Red Hat Linux operating system for mainframes, servers, workstations and embedded devices, GNUPro tools for developers, database, e-Commerce, secure Web server, high availability server and run-time solutions like eCos and RedBoot. For this platform, Red Hat provides end-to-end professional services including Professional Consulting, Engineering services, Enterprise Support services, and Global Learning services. Red Hat Network is the premier Internet based service that simplifies and integrates the deployment and management of these offers. More information about Red Hat is available at http://www.europe.redhat.com


    Red Hat is headquartered in Research Triangle Park, N.C. and has offices worldwide. For investor enquiries, contact Gabriel Szulik at Red Hat, +1-919-547-0012, x439.


    Red Hat Europe was established in July 1999 with its European headquarters based in Surrey, United Kingdom and offices throughout Europe. Red Hat is sold and supported through a number of major distribution and industry partners throughout Europe and from /shop


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    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