Open Source Software Maker Red Hat Inc.’s Stock Buyback, Deal To Buy 3scale API Manager Sends Shares Plunging

Red Hat Inc.’s share price plunged in after-hours trading Wednesday following the open source software developer’s announcements it was acquiring internet technology company 3scale for an undisclosed amount and buying back $1 billion worth of stock.

In also delivering its fiscal first-quarter financial report after the market close Wednesday, Red Hat beat the FactSet estimate on revenue and met it on earnings per share (EPS). Meanwhile, the Raleigh, North Carolina, maker of Linux-based enterprise software forecast its fiscal second-quarter EPS would come in below expectations.

Red Hat’s share price dropped more than 6 percent to $79.70 in after-hours trading. The price is down almost 4 percent for the year.

In its last fiscal year, Red Hat became the first open source company to generate more than $2 billion in sales.

In its latest quarter, Red Hat reported $61.2 million in profit for the three months ended May 31, up from $48.1 million in the comparable period last year. EPS rose to 33 cents from 26 cents on the same basis. Excluding certain items, the company’s adjusted EPS in the first quarter rose to 50 cents this year from 44 cents last year. Meanwhile, its revenue increased 18 percent to $567.9 million. Analysts polled by FactSet had anticipated the EPS of 50 cents, but the firm exceeded the $563 million expected in revenue.

But Red Hat also forecast it would post in the second quarter lower-than-expected EPS of 54 cents, below the analysts’ estimate of 55 cents.