UPDATE 2-Red Hat profit tops Street forecast

* Q3 adj EPS 24 cents beats Street view 17 cents

* Q3 revenue $165.5 mln, versus Street forecast $166.4 mln

* Sees Q4 adj EPS 19-20c, revenue $166-$167.5 mln

* Shares up more than 6 pct after-hours (Adds CEO, analyst’s comments, outlook, byline)

By Gabriel Madway

SAN FRANCISCO, Dec 22 (Reuters) - Linux software provider Red Hat Inc RHT.N reported a quarterly profit on Monday that topped Wall Street's forecast and also issued a strong outlook, sending shares up more than 6 percent in extended trading.

Chief Executive Jim Whitehurst said he expected the poor economy to help Red Hat attract new customers.

Businesses can no longer afford the “status quo of proprietary solutions. They must search for low-cost, more flexible alternatives, which favors open source and Red Hat,” he said during a conference call with analysts.

Jefferies & Co analyst Katherine Egbert called it a “solid quarter,” and said she expected companies on tighter budgets to consider Red Hat as a cheaper alternative.

The company said its net profit in the fiscal third quarter ended Nov. 30 rose to $24.3 million, or 12 cents a share, from $20.3 million, or 10 cents a share, in the year-ago period.

Excluding certain items, profit was 24 cents a share, beating the average analyst estimate of 17 cents a share, according to Reuters Estimates.

Revenue rose 22 percent to $165.3 million, versus the $166.4 million average forecast. Red Hat said devaluations in most foreign currencies hurt reported revenue.

The company said 82 percent of its revenue is recurring in its subscription base.

The company also said it took advantage of “unusual market conditions” and repurchased some of its convertible bonds and stock, reducing its outstanding diluted shares by around 6 percent, and generating a gain of $4.1 million.

For the fiscal fourth quarter, Red Hat forecast adjusted earnings of 19 cents to 20 cents a share. Analysts’ estimates for the period range from 11 cents to 22 cents a share.

Red Hat expects revenue of $166 million to $167.5 million for the February quarter, versus the average Wall Street forecast of $171.6 million.

Red Hat is the world's top seller of open source Linux software, ahead of Novell Inc NOVL.O. The company distributes its software for free, and then charges subscribers for bug fixes, upgrades and support.

Red Hat's version of Linux for server computers, its best-selling product, competes with Microsoft Corp's MSFT.O Windows software and Unix software from Hewlett-Packard Co HPQ.N and International Business Machines Corp IBM.N.

Shares of Raleigh, North Carolina-based Red Hat rose to $12.70 in after-hours trading, from their close on the New York Stock Exchange of $11.97. (Reporting by Gabriel Madway, editing by Leslie Gevirtz)