RED HAT ANNUAL REPORT 2003: PROOF

REVENUES

GROSS MARGINS

OPERATING EXPENSES

[click graphs to enlarge]

DEAR SHAREHOLDER:
IN FY2003, Red Hat achieved what some said was improbable:

>	We turned an operating system for technical enthusiasts into an enterprise computing platform.
>	We expanded our sources of revenue while delivering consistent positive financial progress through our subscription revenue model.
>	We are emerging from our start up days into a relevant supplier of enterprise-class solutions to the global enterprise marketplace.

Along the way we've shown that open source has the power to change how people build, buy, and use technology. And that an irreverent company with a bold vision can prove itself anywhere -- even in the halls of enterprise computing.

Ten years ago the company that became Red Hat was founded. From that time, Red Hat has grown around the knowledge that development locked within one company cannot compete with development that is freely and openly distributed and enhanced by a worldwide community with a common goal.

It's as true today as it was then.

Now, Red Hat is the leading Linux in the enterprise. We are delivering cost-effective technology in mission-critical environments, and continuing to legitimize open source software development as a means to deliver a sustainable economic model.