Red Hat’s cloudy forecast sends shares down 12%

Red Hat’s revenue doubled, to $2 billion, in four years. It could jump to $3 billion by 2018. (Reuters pic)

NEW YORK: Red Hat Inc on Thursday missed Wall Street expectations for current-quarter and full-year revenue due to a strengthening dollar, sending shares of the Linux operating system distributor down nearly 12% in extended trading.

The top provider of open source software has been benefiting from a surge in demand from big companies across the world and earns a large chunk of its revenue on a “pay as you go” subscription basis.

“Given the headwinds that have developed in foreign exchange rates, we are adjusting our full year total revenue guidance by approximately $50 million, solely to account for the change in FX rates,” Red Hat’s Chief Financial Officer Eric Shander said in a statement.

Red Hat expects second-quarter revenue between $822 million and $830 million, and an adjusted profit of about 81 cents per share.

Analysts on average expect revenue of $854.9 million and a profit of 89 cents per share.

Red Hat slashed its full-year revenue forecast to between $3.38 billion and $3.41 billion from its prior guidance of $3.43 billion to $3.46 billion. This too missed estimates of $3.45 billion.

“They lowered their guidance and the foot of the market stomped on RedHat,” Eric Schiffer, chief executive officer of private equity firm Patriarch said.

Earlier this week, software maker Oracle also gave a weak forecast blaming a strong U.S. dollar.

Most of Red Hat’s revenue comes from subscriptions. That revenue, mainly consisting of its Red Hat Enterprise Linux (RHEL) technologies, was up 19.3% at $711.5 million in the first quarter, just below analysts’ estimates of $712.4 million.

The company reported a net income of $113.2 million, or 59 cents per share, in the quarter ended May 31, from $75.3 million, or 41 cents per share, a year earlier.

Total revenue rose 20.2% to $813.5 million(RM3.27 billion), above analysts’ estimates of $807.5 million(RM3.24 billion).

Excluding items, Red Hat earned 72 cents per share, beating the average analyst estimate of 69 cents, according to Thomson Reuters I/B/E/S.

The company also announced a $1 billion(RM4 billion) share buy back program.