Red Hat shares trip over analyst's downgrade

Tag : movement hat

Shares of software company Red Hat fell in morning trading Thursday after an analyst downgraded thestock, saying that there are few short-term catalysts that couldboost the share price.
The move came a day after Raleigh-based Red Hat (NYSE: RHT) postedincreased profits and grew sales by 32 percent in the quarter endedMay 31.
After the results came out, Oppenheimer & Co. analyst BrianDenyeau cut his rating on Red Hat's stock to "perform"from "outperform."
Red Hat's operations are solid, Denyeau wrote, and have plenty ofroom to grow. But shares closed June 25 at $22.30, just belowDenyeau's 52-week price range of $23, and the analyst said hedidn't see any near-term factors that would boost the stock muchhigher.
Shares were down 5.25 percent, to $21.13, in morning tradingThursday. Including Thursday's movement, they are up about 2percent on the year, compared to an 11 percent decline in theS&P 500.
Red Hat said June 25 that net income for the quarter ended May 31was $17.3 million, or 8 cents per diluted share. A year earlier,net income was $16.2 million, again 8 cents per share. Salesincreased 32 percent, to $156.6 million.
Excluding one-time items related to stock compensation and taxexpense, Red Hat says it earned 18 cents per share in the quarter.That was in line with the average expectation of analysts polled byThomson Financial. Sales topped Thomson analysts' consensus of $153million.
"The first quarter was a solid start to the fiscal year,"CEO Jim Whitehurst said in a statement. "With our recognizedvalue advantage and award winning technology solutions, wecontinued to see top enterprise customers expand Red Hatdeployments and new customers migrate to our solutions."
Deferred revenue increased 36 percent, to $491.8 million, Red Hatsays. Sales and marketing expenses, which have grown as Red Hat haspushed its JBoss line of "middleware" business software,increased 28 percent, to $59.2 million.
Research and development costs jumped 33 percent, to $28.9 million.
Red Hat sells subscriptions and performs services for open-sourcesoftware, including its Linux operating system and the JBossmiddleware.