Red Hat profit rises but weak euro hurts

NEW YORK (Reuters) - Business software company Red Hat Inc's (RHT.N) quarterly revenue and profit both rose 20 percent from a year earlier, as an improving U.S. economy helped it win more sales, including a major deal in North America.

But with a weaker euro denting its deferred revenue, an indicator of future revenue, and earnings and outlook numbers merely in line with expectations, the company's shares fell slightly in after-hours trading on Tuesday.

Red Hat said its net profit for its fiscal first quarter that ended May 31 rose to $24.1 million, or 12 cents per share, compared with $18.5 million, or 10 cents a share, a year earlier.

Chief Executive Jim Whitehurst said the company won the biggest deal in its history during the quarter, an "eight figure deal" in North America.

"We executed well and achieved a significant increase in the number of large deals booked year-over-year, including several with an initial consulting component which we believe is a positive indicator of new project spending and future subscription billings," he said.

Profit excluding stock compensation and amortization expenses rose to 18 cents a share from 15 cents. That matched the average analyst forecast, according to Thomson Reuters I/B/E/S.

Its second-quarter outlook for profit excluding items, at 18 cents a share, was also in line with Wall Street's forecast.

First-quarter revenue rose 20 percent to $209.1 million, and the company forecast revenue to rise further to a range of $210 million to $212 million in the second quarter, exceeding the market's forecast for $207.5 million.

EURO DECLINE

Red Hat said a sharp drop in the euro at the end of the quarter dented its deferred revenue. Deferred revenue fell around $20 million from the previous quarter, but would have been flat if the euro had not fallen 10 percent over the quarter, it said.

The company left its full-year revenue forecast unchanged, but said that if it were not for a weaker euro, it could have raised the outlook by around $10 million to $15 million.

Whitehurst reassured analysts that actual demand in Europe did not appear to be affected by recent concerns about the region's sovereign debt issues.

"I traveled around the region visiting customers. We see a lot of strength there," he said. The company left its forecast for the full year unchanged.

Red Hat shares eased 0.7 percent after closing down 2.3 percent, or 72 cents, at $30.86 on the New York Stock Exchange.

Broadpoint AmTech analyst Brad Whitt, however, was upbeat on the shares, which he rates a "buy".

"Obviously some investors may be digesting the impact of the weaker euro," he said. "But the underlying message was actually pretty strong."

The company said it bought back 2.5 million, or $74 million, of its shares during the quarter.

(Reporting by Ritsuko Ando; editing by Gary Hill, Andre Grenon and Leslie Gevirtz)