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

Apr 25, 2003, 08:30 (1 Talkback[s])

"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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