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Open Source Blog
Red Hat's shares take a slap despite revenue up 52%
September 27, 2006
Red Hat's share price took a kicking over night as its shares fell 10% despite it announcing revenue for the second quarter up 52% from the same quarter last year to just shy of $100m.
The problem was that tax and compensation charges pushed net income to $11m from $16.7m a year ago. Not to mention the fact that the company's share price seems to be extremely volatile at the moment.
From a revenue perspective the news was rosy. Red Hat announced revenue up 52% year-on-year to $99.7m with subscription revenue of $84.9m, up 56% and JBoss revenue of $7m, at the top of the company's previous guidance.
However net income of just $0.05 per share was well below the $0.09 per share earned last year and enough to prompt a share price slump from $26.25 to just over $24.00 in after hours trading.
This was despite Red Hat's announcement that the two net income figures were not directly comparable due to differences in the accounting for taxes and stock compensation. Without these differences, the company's non-GAAP net income would have been $23.7m, or $0.11 per share.
There was also some positive news looking forward, with the company predicting that it will break the $100m quarterly revenue barrier in the third quarter with revenue of between $103.5m and $105m.
That was not enough to prevent the share price slide, which BusinessWeek indicated is the result of volatility caused by suggestions Oracle might enter the Linux market.
Whether that is what is responsible or not is hard to say, but it certainly appears that Red Hat is the focus of attention on Wall Street. Once false move could prove costly.
UPDATE
The share price continues to take a mauling, dipping below $20 for the first time since October 2005. The company was also downgraded by Prudential, Credit Suisse, UBS and Jeffries.
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