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Press release

RED HAT ACHIEVES POSITIVE CASH FLOWS FROM OPERATIONS AND SHOWS A PROFIT FOR THE FIRST TIME IN FIRST QUARTER

Revenues of $25.6 million, adjusted net income of $600,000, and major customer wins are highlights in first quarter of fiscal year 2002

Raleigh, NC

Red Hat, Inc. (Nasdaq:RHAT), the leader in developing, deploying and managing open source solutions, today reported revenue of$25.6 million for the first quarter ended May 31, 2001, an increase of 18% versus the $21.7 million

reported for the first quarter of fiscal 2001 and a decrease of 5% over the fourth quarter of fiscal 2001.



The company reported an adjusted net income of $600,000, or break even per share, for the first quarter of fiscal 2002, compared to an adjusted net loss of $3.7 million, or $0.02 per share, for the first quarter of fiscal 2001. On a reported basis, the net loss was $27.6 million, or $0.16 per share, compared with a net loss of $17.4 million, or $0.11 per share in the first quarter of fiscal 2001.



"In an increasingly difficult IT environment, Red Hat delivered a profit and generated positive cash flows for the first time," commented Matthew Szulik, President and CEO of Red Hat. "Companies continue to migrate their platforms to Red Hat Linux and to adopt Open Source solutions for

mission critical applications."



Highlights for the first quarter include:



Customer Wins/Major Deals

 

  • Red Hat is providing technical support and Native GNUPro tools across multiple OS platforms to Adobe.

     

  • Red Hat is providing support for Lucent deployment of applications using GNUPro tool suite on many embedded platforms used extensively throughout Lucent's Wide Area Network Switching Products.

     

  • A contract with Vitesse Semiconductor provides Open Source assembler for next generation Denali chip.

     

  • Closed contract with Scan Logic to provide Linux platform solutions for Cypress' newest USB chip used extensively in MP3, PDA, peripherals, and telecom devices.

     

  • Completed contract with NEC that provides optimization of GNUPro technology and ultimately Linux for NEC high performance embedded MIPS processor devices. Red Hat is providing Horizon P.C.S. with network and workflow assessment for Network Engineering Operations.

     

  • Red Hat signed an agreement with Nortel to provide support and services for their technical workstations used to develop the software that runs their switches and routers. Formerly Nortel relied on proprietary Unix systems. Now Linux combined with Red Hat services provides the same performance and service level at a lower total cost.

     

  • Red Hat successfully handed off final production version of the Ericsson Webscreen, Ericsson's first mobile Internet Appliance designed in collaboration with Red Hat and using Red Hat Linux.
  • Contract signed with BP Oil for support renewal for POS rollout to 2,500 petrol stations across Europe.

     

  • Bauhaus AG, a big DIY retail chain in Europe, set up an Oracle database server environment based on Red Hat Linux in their 125 stores.

     

  • Thrifty Car Rentals has chosen Red Hat Linux to run a mission critical system, including a database configuration and reporting systems.

     

  • Red Hat will port GNUPro Development Tools to Altera's Excalibur Products.

     

  • NHL.com has enhanced its infrastructure by using IBM Linux Systems running Red Hat Linux 7.

     

  • In May, Red Hat signed a significant development agreement with ETRI, the national technology research institute of Korea, to cooperatively develop reference platforms for several classes of Post-PC consumer electronics device. ETRI selected Red Hat because of their leadership in Linux and GNU development tools and especially their leadership in technology and standards for embedded Linux. Through this relationship, Red Hat will further advance the capabilities of Linux as a superior alternative to proprietary embedded offerings and will reenforce our vision of delivering embedded-to-enterprise capabilities.

     

  • Acxiom has selected Red Hat as a one of its strategic technology suppliers for IA-32, IA-64, and IBM zSeries platforms. Acxiom is using Red Hat Linux as a means to decrease cost and improve performance of some of their most important enterprise applications.

     

     

  • Joint account wins with Dell include:



    BEA Systems



    Thomson Financial



    AT&T



    Duke Energy



    SAIC



    Avery Dennison



    Veritas Software



    Columbia University



    Cornell University



    UCLA University



    George Washington University



    Rutgers University



    Management

     

    • Hired Paul Cormier, as the Vice President of Engineering. Paul comes to Red Hat with extensive experience delivering technology to enterprise organizations, including vast knowledge relating to the development of scalable, mission-critical security solutions. Prior to Red Hat, Paul served as senior vice president of research and development at BindView. Educated in Massachusetts, Paul received his Bachelor of Science degree from Fitchburg State College, majoring in Business Management and Computer Science. He also holds a Master of Science in Software Development and Management from Rochester Institute of Technology.



    Tables are attached.

     



    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 that provides the only common, globally available, and award-winning Linux operating system from mainframes to embedded devices, in addition to an e-Commerce platform, Database, Secure Web Server, High Availability Server, embedded Linux, eCos, and GNU-based developer toolkit for embedded devices. Red Hat backs up their open source offerings with end-to-end Red Hat Professional Services that include Professional Consulting, Engineering services, Enterprise Support services and Learning services. This is all brought together with Red Hat Network as the Internet-based

    backbone for deployment and management of products and services for Linux-based infrastructures.



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



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



    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



    LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red Hat, Inc. All other names and trademarks are the property of their respective owners.

About Red Hat

Red Hat is the world’s leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, and open source communities, Red Hat helps create relevant, innovative technologies that liberate resources for growth and prepare customers for the future of IT. Learn more at http://www.redhat.com.

Forward-looking statements

Certain statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: risks related to delays or reductions in information technology spending; the effects of industry consolidation; the ability of the Company to compete effectively; the integration of acquisitions and the ability to market successfully acquired technologies and products; uncertainty and adverse results in litigation and related settlements; the inability to adequately protect Company intellectual property and the potential for infringement or breach of license claims of or relating to third party intellectual property; the ability to deliver and stimulate demand for new products and technological innovations on a timely basis; risks related to data and information security vulnerabilities; ineffective management of, and control over, the Company’s growth and international operations; fluctuations in exchange rates; and changes in and a dependence on key personnel, as well as other factors contained in our most recent Quarterly Report on Form 10-Q (copies of which may be accessed through the Securities and Exchange Commission’s website at http://www.sec.gov), including those found therein under the captions "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations". In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic and political conditions, governmental and public policy changes and the impact of natural disasters such as earthquakes and floods. The forward-looking statements included in this press release represent the Company’s views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this press release.