Ahead Of Red Hat's Q3 Results

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Red Hat Inc. (RHT), the world's largest seller of Linux software, continues "to drive and benefit from the adoption of open, hybrid cloud technology as companies look to modernize the data center and on-ramp to the cloud." Also, the company believes it is well positioned for the second half of the fiscal year as it continues to benefit from delivering innovation to customers.

The company is scheduled to release its third-quarter numbers after the bell on Thursday December 17, with analysts polled by Thomson Reuters estimating earnings of $0.47 per share on revenue of $524.34 million.

For the third quarter, the company forecasts revenue in the range of $519 million - $523 million and adjusted earnings of $0.47 per share. Non-GAAP guidance excludes the estimated third quarter impact of non-cash share-based compensation expense of about $42 million and amortization of intangible assets of about $6 million, and non-cash interest expense from accretion of debt discount of about $5 million.

For the fiscal year 2016, Red Hat now projects revenue of $2.034 billion - $2.044 billion and adjusted earnings of $1.85 - $1.87 per share. Previously, the company forecast revenue of $1.99 billion - $2.02 billion and adjusted earnings of $1.81 - $1.84 per share. Analysts currently expect earnings of $1.85 per share on revenue of $2.04 billion for the fiscal year 2016.

Recent Happenings

Last month, Red Hat and Microsoft announced a partnership that will help customers embrace hybrid cloud computing by providing greater choice and flexibility deploying Red Hat solutions on Microsoft Azure. Microsoft offers Red Hat Enterprise Linux as the preferred choice for enterprise Linux workloads on Microsoft Azure. In addition, Microsoft and Red Hat also works together to address common enterprise, ISV and developer needs for building, deploying and managing applications on Red Hat software across private and public clouds.

Earlier this month, Red Hat said Cox Automotive, a leader in vehicle remarketing services and digital marketing solutions for car dealers and consumers, has deployed Red Hat CloudForms, Red Hat Gluster Storage and Red Hat Enterprise Virtualization to scale its internal cloud infrastructure to meet the increasing requests from its customer base.

October 16, Red Hat signed a definitive agreement to acquire Ansible Inc., a provider of powerful IT automation solutions designed to help enterprises move toward frictionless IT. Red Hat said this acquisition expands its leadership in hybrid cloud management, OpenStack and containers.

The acquisition is expected to have no material impact to Red Hat's revenue for the third and fourth quarters of its fiscal 2016. Management expects that non-GAAP operating expenses for fiscal 2016 will increase by about $2.0 million or ($0.01) per share, in the third quarter and about $4.0 million or ($0.02) per share, in the fourth quarter as a result of the transaction.

In the previous quarter...

"We exceeded guidance across a number of financial metrics. Our growth in revenue led to strong growth of non-GAAP operating income and non-GAAP EPS of 13% and 15%, respectively. We also continued to invest in our initiatives to deliver open, hybrid cloud solutions which support our long-term growth opportunities," said Frank Calderoni, Executive Vice President, Operations and Chief Financial Officer of Red Hat.

For the second quarter ended August 31, 2015, the company reported net income of $51.4 million or $0.28 per share, compared to $46.8 million or $0.25 per share for the year-ago quarter.

Excluding items, adjusted net income for the second quarter was $87.8 million or $0.47 per share, compared to $78.5 million or $0.41 per share in the prior year quarter. On average, 29 analysts polled by Thomson Reuters expected earnings of $0.44 per share. Analysts' estimates typically exclude certain special items.

Total revenue rose 13% to $504.15 million from $445.90 million last year. Twenty-six analysts had a consensus revenue estimate of $494.55 million.

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