Red Hat’s Rough Recovery From CFO Exit

Shares of Linux distributor Red Hat were on the mend Wednesday after a two-day selloff in the wake of CFO Kevin Thompson’s abrupt resignation Monday.

In midday trading, shares were up by over 3 percent to $22.75 after sliding 9 percent Tuesday amid heavy volume. The resignation of the company’s CFO, just days before its earnings release slated for Thursday, had investors heading for the exits Tuesday — even after the company issued a rosy pre-earnings outlook to calm jitters.

“My nearly four years at Red Hat have been personally and professionally rewarding,” said Thompson in a statement. “I am proud to be, and to have been, associated with Red Hat.” Thompson said he would also pursue other interests and spend more time with his family.

By Wednesday, with buyers digesting other solid earnings results, such as Oracle’s, demand for Red Hat was benefiting from a less gloomy tone. Red Hat is expected to release its earnings Thursday after the closing bell.

Red Hat said its profits are expected to double in the quarter, but gave no pre-earnings guidance on its revenue. The company sold 98,000 subscriptions to Red Hat Enterprise Linux, with
over 76 percent going to enterprise IT markets and the remainder going to hosting and high-performance computing environments. As compared to its last sequential quarter, the total number of subscriptions increased by 13 percent with a
23 percent increase for enterprise IT deployments.

Red Hat recently

a new desktop product and is expected to release the next version of Red Hat
Enterprise Linux in 2005.

Novell, Red Hat’s main competitor in the Linux space,
its numbers
a few weeks
back; its second
quarter net income was reported at $10.4 million.

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