Red Hat Thrives In Second QuarterRed Hat Thrives In Second Quarter

The specter of SCO Group's legal effort to dismiss Red Hat Inc.'s lawsuit cast a bit of a shadow over Red Hat's financial success for its second quarter ended Aug. 31. The Linux vendor on Thursday reported net income of $3.3 million, or 2 cents per share, on revenue of $28.8 million--a vast improvement over the year-ago quarter, when Red Hat reported a loss of $1.9 million, or 1 cent per share, on revenue of $21.2 million.

Red Hat's operating system and application subscription revenue for the quarter was $18.5 million, up from $10.4 million in the same quarter a year ago. The rest of the company's second-quarter revenue, $10.3 million, came from services--down a bit from $10.8 million for the same quarter last year.

Red Hat filed a suit against SCO Group in Delaware's U.S. District Court last month, seeking a "declaratory judgment that Red Hat Linux does not infringe any copyright owned by SCO, and does not utilize any trade secret owned by SCO." Red Hat is seeking damages as well as injunctive relief, attorneys' fees, and costs, for harm caused by "SCO's unfair competition and false advertising." SCO Group has filed a motion to have Red Hat's suit dismissed.

The effort that Red Hat has had to exert over the past quarter to defend Linux and its lack of a policy for indemnifying customers against any intellectual property illegally contributed to Linux have worn on the company. "We continue to have to take time with our customers to take them through this issue," executive VP and CFO Kevin Thompson said during a conference call. "This is giving some customers an excuse to sit on the fence."

Thompson said Red Hat will continue to pursue its case against SCO Group.