UPDATE 3-Red Hat revenue outlook tops forecasts

(Adds comments from CEO, background, byline)

By Jim Finkle

BOSTON, March 27 (Reuters) - Red Hat Inc (RHT.N: Quote, Profile, Research, Stock Buzz) issued a revenue outlook on Thursday that topped Wall Street forecasts, saying that its business software is poised for strong growth in a weak economy because it costs less than rival products.

The company also announced earnings, which sent its shares up more than 7 percent, a sharp contrast with the results issued on Wednesday by larger rival Oracle Corp (ORCL.O: Quote, Profile, Research, Stock Buzz). Software sales at Oracle, the world's third-biggest software maker, fell short of Wall Street's expectations and the company blamed its woes on a weakening U.S. economy.

Red Hat estimated that revenue will rise to between $665 million and $680 million in its current fiscal year, up at least 27 percent from $523 million in the fiscal year ended Feb. 29. That was was higher than the $637 million average analyst forecast, according to Reuters Estimates.

The company's best-selling product is its version of Linux for server computers, a rival to Windows Server software from Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) , and Unix software from Hewlett-Packard Co (HPQ.N: Quote, Profile, Research, Stock Buzz) and IBM (IBM.N: Quote, Profile, Research, Stock Buzz).

Red Hat distributes its software at no cost, but charges customers for upgrades, bug fixes and help desk support through subscription agreements. Customers of Microsoft, HP and IBM need to pay separately for software on top of those services.

"Often we are viewed as 'budgets are tight, Red Hat helps you take costs out,'" Red Hat Chief Executive Jim Whitehurst said in an interview.

Microsoft and other rivals dispute Red Hat's claim that its products are cheaper.