Red Hat Earnings Preview: Still Up?

Red Hat (NYSE: RHT) is set to report its third-quarter fiscal 2010 earnings at the close of market today — capping off an active quarter of new releases and business activities for the enterprise Linux vendor.

For the quarter ended Nov. 30, Wall Street analysts project revenues of $188 million and earnings of $0.16 per share, according to Thomson Reuters. That’s in line with Red Hat executives’ own earlier guidance during the company’s second-quarter fiscal 2010 analyst call, during which they provided revenue projections in the $187-$189 million range.

Both Red Hat’s own guidance and the analyst estimates represent a gain over the $165 million in revenue that Red Hat reported for the same quarter last year. But Wall Street earnings per share (EPS) forecasts come in below fiscal Q309’s earnings of $0.24 per share before charges.

If Red Hat can make its numbers, third-quarter growth will continue the positive revenue growth that the company has been experiencing for much of this year despite the recession. In Red Hat’s second quarter of its fiscal 2010 year, ending Aug. 31, revenues hit $183.6 million. That represented a 12 percent increase over the second quarter of fiscal 2009 and ahead of Wall Street forecasts of $179.1 million, according to Reuters Estimates.

Among the items that are expected to impact income for Red Hat this quarter is a one-time charge related to a five-year-old class-action lawsuit settlement. Earlier this month, Red Hat reported that it would be taking an $8.8 million charge against its third-quarter 2010 earnings to settle the lawsuit.

The lawsuit stemmed from Red Hat’s earnings restatement in 2004 that followed the resignation of then-CFO Kevin Thompson.

During its third quarter, Red Hat also rolled out several new virtualization releases. In November, the company released Red Hat Enterprise Virtualization for Servers, which includes a standalone hypervisor (RHEF-H) as well as a management platform (RHEV-M).

Red Hat also released a new update to its flagship software release with Red Hat Enterprise Linux 5.4 (RHEL) in September, which also had a focus on virtualization.

The company also ramped up its real-time Linux efforts during the quarter with the release of Red Hat MRG (Messaging, Real-Time, Grid) 1.2. The MRG platform is used by Red Hat’s government, military and financial services customers for mission-critical real-time operations platforms.

While Red Hat has been busy rolling out releases, rivals haven’t been sitting idle. Novell (NASDAQ: NOVL) announced a new intelligent workload strategy that pulls in its various business lines, including Linux, security and virtualization.

Novell itself has not weathered the recession as well as Red Hat, however. During Novell’s most recent quarter, the company reported a revenue decline of 12 percent.

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