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Red Hat, the Linux distributor -- and now, we're told, service provider, to stress the company's got its eye on where the money is in the open source OS market -- yesterday reported that its second quarter as a publicly-traded company saw a 95 per cent increase in revenue over the same period last year. It's just a shame that the same can't be said for Red Hat's profitability: it lost $3.1 million, up from the $2.1 million it lost last quarter. This time last year, for Red Hat's second quarter of fiscal 1999, the company says it had an income of $100,000. Still, you have to spend money to build a business, and that's clearly what Red Hat is now doing. The money is coming in from its Linux distribution as before, but it's also beginning to reap the rewards from selling tech support and other services -- the only snag is that right now, it's costing more to build that services arm than the operation is generating. At the same time, Red Hat has been expanding its geographical reach with the founding of Japanese and European subsidiaries, and that's obviously going to lead to ongoing costs in Q3 as the company fills out each office with sales and support staff. That said, Red Hat needs to work harder at promoting its service offerings. The company admitted that 74 per cent of its Q2 revenue came from product sales. Now, that's great if all you want to do is sell copies of Linux, but it's not the basis for a long-term money-making operation, and Red Hat really needs to work hard at swinging the product:services revenue ratio round the other way. Deals with the big names like IBM, Compaq and... er... Siemens will help here, but primarily financially -- they do little to show there's to Red Hat than a two-CD Linux distribution. ® Related Stories Red Hat CEO lambasts 'feudal' software industry TMing Linux -- Red Hat CEO attacks 'cheap knock-offs' Fear and loathing as TM card played for Red Hat Linux

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