Red Hat Reports First Quarter Fiscal 2003 Results

Raleigh

United States, June 18, 2002

Company continues to show strong Enterprise growth

In the first quarter of fiscal 2003, Red Hat achieved revenue of $19.5 million, a sequential increase of 5% compared to $18.6 million in the fourth quarter of fiscal 2002. On a pro-forma basis, for the first quarter of fiscal 2003 the company reported a net loss of $829,000, or break-even per share, compared to pro-forma net income of $291,000 or break-even per share in the prior quarter.

On a generally accepted accounting principles (GAAP) basis, for the first quarter of fiscal 2003 the company reported a net loss of $4.3 million, or $0.03 per share, compared to a net loss of $42.3 million or $0.19 per share in the prior quarter and a net loss of $27.6 million or $0.16 per share a year ago.

The area of growth continues to be large Enterprise revenues, which grew by 8% sequentially to $17.4 million, from $16.1 million in the prior quarter. Gross margins remained strong at 66% on Enterprise revenues and 63% on total revenues during the first quarter of fiscal 2003.

The primary differences between the company's pro forma net income and GAAP net income, in the first quarter of fiscal 2003, are non-cash charges related to amortization of stock based compensation and intangible assets, non-cash charges related to consolidation of facilities and cash severance costs related to the completion of the restructuring of our Embedded business.

"Red Hat continues to execute financially, technically, and operationally to build a sustainable, global business", stated Kevin Thompson, Executive Vice President and Chief Financial Officer.

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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