The Wharton School: Linux Promoter Red Hat Remains Upbeat in a Downbeat Industry

“Michael Tiemann, chief technical officer of Red Hat, used the
2003 Wharton Technology Conference as a chance to crow. In his
keynote speech, he boasted that Red Hat is the ‘first successful,
publicly traded open-source company.’

“‘Last quarter, we reported our first full [Generally Accepted
Accounting Principle] profit,’ he said at last
month’s conference, whose theme was ‘Expanding
Business Horizons.’ ‘We are very proud of our financial
performance. Where this performance comes from is our ability to
deliver an incredible amount of value.’ What he neglected to
mention was how small that profit was. Red Hat earned $214,000 on
sales of $24.3 million in the quarter that ended Nov. 30, 2002. And
the modest profit–the company’s profit margin was less than
1%–came from investments, not sales of software and support
service; $3.1 million in investment income offset a $2.9 million
loss from operations. For its 2002 fiscal year, Red Hat reported a
net loss of $140.2 million, or 83 cents a share, on sales of $78.9
million…”

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