Red Hat has almost turned the corner in its quest to turn a profit. The company reported a net loss of $600,000 on revenues of $27 million for the past quarter, up 20 per cent from the previous quarter. And despite a trolley-load of acquisitions, Red Hat's cash pile remains substantial: cash and investments added up to almost $150 million.

Red Hat's balance sheet actually showed an operating loss of $5.2 million. But perhaps most significantly, the balance between what Red Hat calls subscriptions - licence revenue - and its services business has reversed in the past year. Services generated $8.2 million in the quarter and 'subscriptions' $3.5 million. That's a mirror image of a year ago. Although services is a lower margin business, executives pledged to maintain the focus on long-term growth and profitability. The past quarter's loss amounts to break-even per share.

So the Red Hat juggernaut rolls on. By contrast Caldera, the other publicly traded Linux distro, last month reported income of $1 million and a net loss of $9.8 million for its most recent quarter. With Red Hat keeping the spoils of service revenue to itself, rather than leaving it to its channel, it looks to have followed the smarter path. But as the Linux market continues to grow by leaps and bounds - one of the few technology areas that isn't stagnant - it's too early to call. ®