Red Hat Tops EPS Estimates, Drops on Revenue

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Red Hat (NYSE: RHT ) is down on Thursday after topping EPS estimates, but falling short of revenue expectations.

The Raleigh, North Carolina firm posted earnings of $0.36 per share, up 24 percent from Q4 fiscal 2012. This figure comfortably topped the Wall Street consensus of $0.30.

Fourth quarter revenue climbed 17 percent to $348 million, but fell short of the $349.64 million analysts hoped for.

Fiscal 2013 earnings grew around 12 percent to $1.23 per share, beating estimates of $1.17.

Full-year revenue closed up 17 percent and finished in line with expectations at $1.33 billion.

Subscription Revenue Drives Growth

Subscription revenue rose 18.7 percent year-over-year during the fourth quarter and finished at $302.8 million, accounting for 87 percent of Red Hat's revenue.

Meanwhile, this segment climbed 19 percent in fiscal 2013 and rounded out at $1.15 billion. It accounted for 86.5 percent of the company's revenue.

Smart Move?

Red Hat acquired ManageIQ, a company that provides enterprise cloud management and automation solutions, during the fourth quarter. The company expected the deal to "expand the reach of its hybrid cloud management solutions for enterprises."

Ultimately, the open source software firm paid a bit over $104 million for the acquisition.

Lawsuit Dismissed

Red Hat reported Thursday that a patent lawsuit brought against it and Rackspace Hosting (NYSE: RAX ) has been dismissed.

The lawsuit, filed by patent assertion entity Uniloc USA, Inc., was filed in federal court in the Eastern District of Texas. It alleged that the processing of floating point numbers by the Linux operating system violated US Patent 5,892,697. However, Chief Judge Leonard Davis ruled that the claim was not patent-able under Supreme Court case law, which bans the patenting of mathematical algorithms.

Customer Base and Revenue to Grow?

According to a Technology Business Research (TBR) story via WRAL Tech Wire , TBR expects Red Hat to grow over 15 percent across CY 2013 by "expanding current cross-selling of cloud, virtualization and big data to its core Linux and middleware install bases."

Also, TBR believes the company will make "targeted acquisitions in CY2013 to bridge its core portfolio products to its new addressable markets that will help the vendor drive enterprise penetration…"

The article goes on to mention that Red Hat "is positioned for revenue gains in CY13, courtesy of a perfect storm of portfolio growth and proven technology expertise."

Market Reaction

Investors do not seem to agree with TBR's assessment of Red Hat thus far. After two consecutive days of gains pushed it near $50 on Wednesday, the stock has dropped below $48 in the morning hours on Thursday.

Red Hat is down over four percent.

(c) 2013 Benzinga does not provide investment advice. All rights reserved.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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