Local Tech Wire

RALEIGH, N.C. – Red Hat (NYSE: RHT) matched Wall Street profit expectations Tuesday, reporting an 18-cent per share profit for the quarter ending May 31.

Revenues increased 20 percent from a year ago to $209.1 million.

Subscription revenues – Red Hat’s principle source of income – climbed 20 percent to $179.1 million.

Analysts at Jefferies & Co., who follow Red Hat closely, reiterated their “buy” rating on Red Hat after the earnings report and conference call.

“Despite significant currency headwinds, Red Hat delivered upside in revenue, a 2nd quarter in a row of 18% billings growth, inline [earnings per share expectations], and up sequential [order] backlog,” they wrote in a research note.

The analysts noted “8-figure middleware deals and good expense management” as two reasons for sticking with the “buy."

"Maintain buy," they said.

They also praised a strong quarterly performance by Jboss, a Red Hat subsidiary.

Analysts had projected $202.9 million in revenue, Marketwatch reported, citing FactSet Research.

The news, however, didn’t seem to excite Red Hat investors. Shares fell immediately by more than 3 percent, or $1, in after-hours trading to $29.86.

However, after listing to a post-earnings release conference call with Red Hat execs, investors rallied shares to a 9-cent gain from Tuesday’s close.

Red Hat stock hit a 52-week high of $32.48 on Monday but closed at $30.86 Tuesday.

(In other news Tuesday, Red Hat cracked the stock list.)

“We had a strong start to our fiscal year with 20% organic revenue growth and 28% non-GAAP [generally accepted accounting principles] operating income growth,” said Red Hat Chief Executive Officer Jim Whitehurst in a statement.

“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 added.

Profits before one-time expenses and chargers were $35.6 million, up from $28.7 million or 15 cents a share compared to the opening quarter of 2009.

Red Hat reported $967.8 million in cash, cash equivalents and investments as of May 31.

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“Our business was strong with healthy subscription renewals, large deals, continued progress in our “free to paid” initiative and strong growth in our services business,” said Chief Financial Officer Charlie Peters.

“We continued to invest in our growth, in both engineering and sales, and it is paying off,” he added. “Despite significant foreign currency volatility, both revenue and deferred revenue experienced double digit growth in U.S. dollars year-over-year.”

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