Red Hat Falls as Fourth-Quarter Sales Miss Estimates

Red Hat Inc. (RHT), the largest seller of Linux operating-system software, fell after reporting fiscal fourth-quarter sales that missed estimates as some customers -- concerned about sluggish economic growth -- put off purchases.

Profit excluding some items was 36 cents a share on sales of $347.9 million, the Raleigh, North Carolina-based company said yesterday in a statement. That compares with analysts’ average prediction of earnings of 30 cents on revenue of $349.3 million, according to data compiled by Bloomberg. Sales and profit forecasts for the current period also missed projections.

Tax increases in the U.S. and a worsening recession in Europe are causing businesses to delay upgrading to Red Hat’s Linux software from older Unix systems, according to Richard Williams, an analyst at Cross Research.

“The channel checks showed that activity just stopped after the first week of December,” said Williams, who has a hold rating on the stock, with $51 price target.

The shares decreased 1.2 percent to $49.35 at 9:46 a.m. in New York. Through yesterday, the stock had dropped 5.6 percent this year.

Per-share earnings, excluding certain items, will be 30 cents to 31 cents in the fiscal first quarter, Red Hat said on a conference call with analysts. That’s shy of the 32 cents analysts were projecting, according to data compiled by Bloomberg. Sales will be $358 million to $361 million, missing the $366.4 million estimate.

Investors were also disappointed by Red Hat’s fourth- quarter billings, an indication of future sales, said Steven Ashley, an analyst at Robert W Baird & Co. Billings, calculated as sales plus deferred revenue, were $454 million, compared with analysts’ estimate of $471 million, he said.

Net income for the period, which ended Feb. 28, rose 19 percent to $43 million, or 22 cents a share, from $36 million, or 18 cents, a year earlier.

To contact the reporter on this story: Karl Baker in New York at kbaker30@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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