Red Hat Revenues Increase by 6% to $28.8 Million

9/22/2003 - Red Hat, Inc. (Nasdaq:RHAT), the world's premier open source and Linux provider, reported financial results for its second quarter of fiscal year 2004. These results are provided in full GAAP format.

In the second quarter of fiscal 2004, Red Hat reported revenue of $28.8 million, a sequential increase of 6% compared to $27.2 million in the first quarter of fiscal 2004, and a year-over-year increase of 36%.

The company also reported net income of $3.3 million, or $0.02 per share. This compares to a net income of $1.5 million, or $0.01 per share, in the prior quarter, and a net loss of $1.9 million, or $0.01 per share, in the same quarter a year ago.

The company generated $10.4 million, or $0.06 per share, in positive cash flow from operations during the second quarter, which represents a 89% sequential increase from the first quarter and its fifth consecutive quarter of positive cash flow from operations. The company ended the second quarter with a cash and investments balance of $307 million, a sequential increase of $7 million and a year-over-year increase of $18 million.

The company reported a net operating profit of $240,000, compared to a net operating loss of $1.1 million in the prior quarter and a net operating loss of $4.7 million in the second quarter of the prior year.

Highlights for the second quarter include:

"Our strong quarterly operating results reflect the strong demand for standards-based Red Hat Enterprise Linux Solutions in the enterprise," said Kevin Thomspon, Executive Vice President and Chief Financial Officer at Red Hat. "The consistent improvement in our gross margins over the last three quarters to 72% for the second quarter shows the significant scalability of our subscription business model."

About Red Hat, Inc.
Red Hat is the world's premier open source and Linux provider. Red Hat is headquartered in Raleigh, N.C. and has offices worldwide. For investor inquiries, contact Gabriel Szulik at Red Hat, (919) 754-3700, x44439. More information about Red Hat is available at www.redhat.com.

Forward-Looking Statements
Forward-looking statements in this press release are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that statements in this press release that are not strictly historical statements, including, without limitation, management's plans and objectives for future operations and management's assessment of market factors, constitute forward-looking statements which involve risks and uncertainties. These risks and uncertainties include, without limitation, reliance upon strategic relationships, management of growth, the possibility of undetected software errors, the risks of economic downturns generally, and in Red Hat's industry specifically, the risks associated with competition and competitive pricing pressures, the viability of the Internet, and other risks detailed in Red Hat's filings with the Securities and Exchange Commission, copies of which may be accessed through the SEC's Web site at http://www.sec.gov.

LINUX is a trademark of Linus Torvalds. RED HAT is a registered trademark of Red Hat, Inc.

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