Double-Digit Sequential Revenue Growth, Positive Cash Flows from Operations Highlight Red Hat's Third Quarter Results

In the third quarter of fiscal 2003, Red Hat achieved revenue of $24.3 million, a sequential increase of 14% compared to $21.2 million in the second quarter of fiscal 2003, and a year-over-year increase of 21%.

For the third quarter of fiscal 2003 the company reported a net income of $305,000, or break-even per share. This compares to a net loss of $2.0 million, or $0.01 per share, in the prior quarter, and a net loss of $15.1 million, or $0.09 per share in the same quarter a year ago.

• Enterprise revenues, which account for 93% of Red Hat's total revenues, grew 15% to $22.5 million.
• Enterprise subscription revenues jumped 29% and generated gross margins of 82%.
• Blended gross margins remained strong improving to 66%, while Enterprise gross margins grew to a record 68%.
• Cash flow from operations jumped 74% to $1.0 million.
• Sales of Advanced Server increased to 12,000 subscriptions, a 50% increase compared to the prior quarter.
• Days Sales Outstanding decreased to a record 46 days.

"By continuing to deliver strong operating performance, Red Hat continues to show solid execution of its business strategy", stated Kevin Thompson, Executive Vice President and Chief Financial Officer. "Accelerating growth of our enterprise subscription revenues and positive operating cash flows are evidence of Red Hat's scalable business model".

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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

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