Red Hat Inc. said its fourth-quarter profit rose 7 percent as the software distributor worked to expand the footprint of its open source products with costly internal investments.

New CEO James Whitehurst believes Red Hat is now ready to continue rapid growth through an economic downturn as the Raleigh-based company pitches its free software to organizations looking to cut their tech budgets.

“It’s my speculation for why we continue to see robust demand while others seem to be having issues,” Whitehurst said in an interview. “We’re known for value, and when you’re looking to cut budgets, we’re a logical name that comes to mind.”

Unlike Microsoft Corp., Red Hat makes money from its Linux operating system and other software by selling subscriptions for service.

Red Hat said Thursday it earned $22 million, or 10 cents per share, in its first quarter under new CEO James Whitehurst, compared to $20.5 million, plus 10 cents per share, a year earlier.

Red Hat said its revenue rose 27 percent to $141.5 million

in the quarter ending Feb. 29.

The earnings report was in line with expectations of analysts polled by Thomson Financial, who on average predicted the company earned 10 cents per share on revenue of $141.1 million. Excluding one-time items, Red Hat said it earned $42.7 million, or 20 cents per share, while analysts expected earnings per share of 19 cents on the same basis.

In after-hours trading Thursday, Red Hat shares rose $1.29, or 7.4 percent, after closing the regular session at $17.53.

Rising subscriptions and revenue came at the expense of costly internal investments in engineering, sales and marketing. Sales and marketing expenses rose 31 percent to $52 million while research and development costs rose 32 percent to $26.3 million, Red Hat said.

Charlie Peters, Red Hat’s executive vice president and chief financial officer, said the return on investments…

Original post by Chris Davies

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