April 21, 2019

Red Hat Settles Five-Year-Old Shareholder Lawsuit

Settled At Last

  • December 15, 2009
  • By Sean Michael Kerner
Sean Michael Kerner

Some lawsuits take longer than others to settle -- just ask Linux vendor Red Hat.

Today, Red Hat (NYSE: RHT) announced that it had reached an agreement to settle a class-action lawsuit from some of its shareholders that started back in July 2004.


Settling the lawsuit will cost Red Hat $8.8 million, which the company said it would take as a one-time charge when it reports earnings later this month for the quarter ending Nov. 30.

The lawsuit stemmed from Red Hat's earnings restatement in 2004 that followed the resignation of then-CFO Kevin Thompson.

At the time, Red Hat restated three years' worth of earnings as it changed the way it recognized revenues from software subscriptions. The move led to a decline in the value of Red Hat's share price, which dropped by as much as 22 percent after it first announced the restatement.


The class-action lawsuits alleged that Red Hat misled investors in the events leading up to its restatement, which in turn resulted in a price drop for the company's shares.

A lot has changed at Red Hat over the last five years since that restatement. The company has moved from the NASDAQ to the NYSE, where it also provides the software that helps to run the exchange itself.

Red Hat has also grown its revenue and income substantially. For the second quarter of Red Hat's fiscal 2010 year, ending Aug. 31, company revenues hit $183.6 million. That's a 12 percent increase over the second quarter of fiscal 2009 -- and almost four times the $46.3 million it brought in during the same quarter five years ago.

Red Hat is set to report third-quarter fiscal 2010 earnings next week.

Sean Michael Kerner is a senior editor at InternetNews.com, covering Linux and open source, application development and networking.

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