Red Hat Inc.’s quarterly profit and forecast beat analysts’ estimates after the company’s Linux software attracted budget-conscious buyers, sending the shares up 6.5 percent in late trading.

Third-quarter net income rose 20 percent to $24.3 million, or 12 cents a share, from $20.3 million, or 10 cents, a year earlier, Red Hat said today in a statement. Excluding stock-based compensation and tax expenses, profit was 24 cents a share in the period ended Nov. 30, compared with the 16-cent average estimate of analysts in a Bloomberg survey.

Red Hat, the world’s biggest distributor of Linux software, is touting its open-source programs as a way to cut costs in a shrinking economy. The underlying code of Red Hat’s software is developed freely by programmers worldwide, lowering the company’s expenses. Red Hat expanded its software in September by buying Qumranet Inc., a maker of virtualization software, which lets server computers run several operating systems at once.

“A down economic time is relatively good for our business,” Chief Executive Officer James Whitehurst said today in an interview.

Red Hat, based in Raleigh, North Carolina, gained 78 cents to $12.75 in extended trading after closing at $11.97 on the New York Stock Exchange. The shares have lost 43 percent this year.

Profit Forecast

The company forecast profit of 19 cents to 20 cents a share, excluding some costs, topping an average estimate of 17 cents. Sales will be $166 million to $167.5 million, Red Hat said. The operating margin, operating income as a percentage of sales, will be between 21 percent and 23 percent in the period. That compares with 23 percent in the third quarter.

Red Hat is taking advantage of the recession by urging chief information officers to adopt its software. The U.S., roiled by the collapse of home prices and the failure of financial-services firms this year, may have lost 488,000 jobs this month, according to a Bloomberg poll of economists.

“We are about four months into the new economic reality, and I’ve been talking to a lot of CIOs who weren’t interested before,” Whitehurst told analysts today on a conference call. “We need to turn some of that newfound interest into new orders and cash.”

Sales rose 22 percent to $165.3 million last quarter, compared with an average estimate of $166.6 million. The company makes most of its money by selling annual subscriptions to its software.

Revenue from those subscriptions rose 17 percent to $135.5 million from a year earlier. Deferred revenue, an indicator of future growth, climbed 20 percent to $505.1 million, the company said.

“Because we sell a subscription, all of our revenue is recurring,” Whitehurst said. “We don’t start from zero -- we start from last year’s base.”

Source:Bloomberg