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

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

  
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