Red Hat 8-K/A Index to Financial Statements of Netscape Security Solutions

Exhibit 99.2

RED HAT, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The Unaudited Pro Forma Consolidated Balance Sheet as of November 30, 2004, and the Unaudited Pro Forma Consolidated Statements of Operations for the year ended February 2004 and the nine months ended November 30, 2004 combine the historical Red Hat and Netscape Security Solutions (“the NSS Unit”) balance sheets and statement of operations as if the acquisition of the NSS Unit, which occurred on December 7, 2004, had been completed on November 30, 2004 for purposes of the presentation of the Unaudited Pro Forma Consolidated Balance Sheet, and as of March 1, 2003 for purposes of the presentation of the Unaudited Pro Forma Consolidated Statements of Operations.

We completed the purchase of the Netscape Security Solutions unit from Netscape Communications Corporation and America Online, Inc. for a purchase price of $20.5 million in cash. An additional $2.5 is payable by Red Hat contingent on certain future customer orders being placed on or before April 30, 2005. The assets acquired are derived from the Netscape Enterprise Suite and include Netscape Directory Server and Netscape Certificate Management System. The Unaudited Pro Forma Consolidated Financial Statements should be read together with Red Hat’s and Netscape’s historical consolidated financial statements including the notes to these statements.

The pro forma adjustments reflecting the consummation of the acquisition are based on the purchase method of accounting, available financial information, and certain estimates and assumptions set forth in the notes to the Unaudited Pro Forma Consolidated Financial Statements. The Unaudited Pro Forma Consolidated Financial Statements reflect our best estimates based on preliminary information. The final purchase price allocation and the actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to various factors, including, without limitation, access to additional financial information and changes in value based on a final purchase price allocation. The valuation resulted in $14.2 million allocated to identifiable intangibles, which will be amortized over an average useful life associated with these assets of between three to five years. The pro forma adjustments do not reflect any operating efficiencies or cost savings that may be achievable with respect to the combined business of Red Hat and the NSS Unit nor do they reflect integration costs that may have been unforeseen at the date of purchase.

The Unaudited Pro Forma Consolidated Financial Statements for the year ended February 29, 2004 and as of and for the nine months ended November 30, 2004, do not purport to represent what the actual financial condition or results of operations of the combined business would have been if the acquisition of the NSS Unit had occurred on the dates indicated in these pro forma combined financial statements nor does this information purport to project our results or financial position for any future periods.

RED HAT, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

November 30, 2004

(in thousands)

	November 30, 2004 Red Hat			September 30, 2004 NSS Unit		Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	234,436		$	—	$	(21,045	)(a)	$	213,391
Investments in debt securities		69,751			—		—			69,751
Accounts receivable, net		43,616			48		(48	)(b)		43,616
Estimated earnings in excess of billings		3,618			—		—			3,618
Inventory		2,085			—		—			2,085
Prepaid expenses and other current assets		8,581			57		(57	)(b)		8,581
Total current assets		362,087			105		(21,150	)		341,042
Property and equipment, net		30,954			326		(326	)(b)		30,954
Goodwill and identifiable intangibles, net		69,810			1,507		20,268	(c)		91,585
Investments in debt securities		674,835			—		—			674,835
Debt issue costs-convertible notes		13,022					—			13,022
Other assets, net		5,905			—		—			5,905
Total assets	$	1,156,613		$	1,938	$	(1,208	)	$	1,157,343
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,445		$	130	$	(130	)(b)	$	6,445
Accrued expenses		19,322			437		(437	)(b)		20,022
							700
Deferred revenue		97,284			280		(250	)(b)		97,314
Current portion of capital lease obligations		459			—		—			459
Total current liabilities		123,510			847		(117	)		124,240
Deferred lease credits		5,227			—		—			5,227
Long term deferred revenue		24,153					—			24,153
Capital lease obligations		154			—		—			154
Commitments and contingencies		—			—		—			—
Series A convertible redeemable preferred stock		600,000			—		—			600,000
Stockholders’ equity:
Noncontrolling interest in subsidiary		537			—		—			537
Preferred stock		—			—		—			—
Common stock		19			—		—			19
Additional paid-in capital		710,554			—		—			710,554
Deferred compensation		(5,786	)		—		—			(5,786	)
Accumulated deficit		(243,638	)		—		—			(243,638	)
Treasury stock		(52,628	)		—		—			(52,628	)
Accumulated other comprehensive income (loss)		(5,489	)		—		—			(5,489	)
Total stockholders’ equity/net assets		403,569			1,091		(1,091	)		403,569
Total liabilities and stockholders’ equity	$	1,156,613		$	1,938	$	(1,208	)	$	1,157,343

RED HAT, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended February 29, 2004

(in thousands)

	February 29, 2004 Red Hat		December 31, 2003 NSS Unit			Combined			Pro Forma Adjustments			Pro Forma Combined
Subscription and services revenue:
Subscription:
Enterprise technologies	$	66,972	$	4,622		$	71,594			—		$	71,594
Retail		13,525		—			13,525			—			13,525
Embedded		1,911		—			1,911			—			1,911
Total subscription revenue		82,408		4,622			87,030			—			87,030
Services:
Enterprise technologies		37,764		2,434			40,198			—			40,198
Embedded development services		4,565		—			4,565			—			4,565
Total services revenue		42,329		2,434			44,763			—			44,763
Total subscription and services revenue		124,737		7,056			131,793			—			131,793
Cost of subscription and services revenue:
Subscription:
Enterprise technologies and retail		9,311		995			10,306			—			10,306
Embedded		357		—			357			—			357
Total cost of subscription revenue		9,668		995			10,663			—			10,663
Services:
Enterprise technologies		20,733		1,376			22,109			—			22,109
Embedded development services		3,535		—			3,535			—			3,535
Stock-based embedded development services		—		—			—			—			—
Total cost of services revenue		24,268		1,376			25,644			—			25,644
Total cost of subscription and services revenue		33,936		2,371			36,307			—			36,307
Gross profit enterprise technologies and retail		88,217		4,685			92,902			—			92,902
Gross profit embedded		2,584		—			2,584			—			2,584
Gross profit on enterprise technologies, retail and embedded revenue		90,801		4,685			95,486			—			95,486
Operating expense:
Sales and marketing		39,715		846			40,561			—			40,561
Stock-based sales and marketing expense		1,043		—			1,043			—			1,043
Research and development		25,562		1,108			26,670			—			26,670
Stock-based research and development expense		921		—			921			—			921
General and administrative		18,502		1,548			20,050			—			20,050
Stock-based general and administrative expense		1,948		—			1,948			—			1,948
Lease buyout costs		—		—			—			—			—
Amortization of intangibles		164		4,234			4,398			(4,234	)(d)		3,666
										3,502	(d)
Restructuring charges		—		—			—			—			—
Total operating expense		87,855		7,736			95,591			(732	)		94,859
Income from operations		2,946		(3,051	)		(105	)		732			627
Other income (expense), net		10,786		—			10,786			(229	)(e)		10,557
Net income	$	13,732	$	(3,051	)	$	10,681		$	503		$	11,184
Pro Forma Earnings Per Share Data Basic and Diluted:
Basic												$	0.06
Diluted												$	0.06
Weighted Average Shares Outstanding:
Basic													174,003
Diluted													182,913

RED HAT, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

Nine Months Ended November 30, 2004

(in thousands)

	November 30, 2004 Red Hat			September 30, 2004 NSS Unit		Combined			Pro Forma Adjustments			Pro Forma Combined
Subscription and services revenue:
Subscription:
Enterprise technologies	$	102,022		$	7,269	$	109,291			—		$	109,291
Retail		1,448			—		1,448			—			1,448
Embedded		1,245			—		1,245			—			1,245
Total subscription revenue		104,715			7,269		111,984			—			111,984
Services:
Enterprise technologies		31,749			908		32,657			—			32,657
Embedded development services		2,549			—		2,549			—			2,549
Total services revenue		34,298			908		35,206			—			35,206
Total subscription and services revenue		139,013			8,177		147,190			—			147,190
Cost of subscription and services revenue:
Subscription:
Enterprise technologies and retail		8,274			708		8,982			—			8,982
Embedded		190			—		190			—			190
Total cost of subscription revenue		8,464			708		9,172			—			9,172
Services:
Enterprise technologies		16,411			452		16,863			—			16,863
Embedded development services		2,405			—		2,405			—			2,405
Total cost of services revenue		18,816			452		19,268			—			19,268
Total cost of subscription and services revenue		27,280			1,160		28,440			—			28,440
Gross profit enterprise technologies and retail		110,534			7,017		117,551			—			117,551
Gross profit embedded		1,199					1,199			—			1,199
Gross profit on enterprise technologies, retail and embedded revenue		111,733			7,017		118,750			—			118,750
Operating expense:
Sales and marketing		43,622			498		44,120			—			44,120
Stock-based sales and marketing expense		108			—		108			—			108
Research and development		23,353			645		23,998			—			23,998
Stock-based research and development expense		288			—		288			—			288
General and administrative		21,006			755		21,761			—			21,761
Stock-based general and administrative expense		3,339			—		3,339			—			3,339
Amortization of intangibles		538			1,044		1,582			(1,044	)(d)		3,163
										2,625	(d)
Restructuring charges		—			—		—			—			—
Total operating expense		92,254			2,942		95,196			1,581			96,777
Income from operations		19,479			4,075		23,554			(1,581	)		21,973
Other income, net		18,715			—		18,715			(222	)(e)		18,493
Interest expense		(4,802	)		—		(4,802	)		—			(4,802	)
Income before provision for income taxes		33,392			4,075		37,467			(1,803	)		35,664
Income tax benefit		194			—		194			—	(f)		194
Net income	$	33,586		$	4,075	$	37,661		$	(1,803	)	$	35,858
Pro Forma Earnings Per Share Data Basic and Diluted:
Basic												$	0.20
Diluted												$	0.18
Weighted Average Shares Outstanding:
Basic													182,750
Diluted													194,283

RED HAT, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Basis of Presentation

The Unaudited Pro Forma Consolidated Balance Sheet as of November 30, 2004, and the Unaudited Pro Forma Consolidated Statements of Operations for the year ended February 2004 and the nine months ended November 30, 2004 combine the historical Red Hat and Netscape Security Solutions (“the NSS Unit”) balance sheets and statement of operations as if the acquisition of the NSS Unit, which occurred on December 7, 2004, had been completed on November 30, 2004 for purposes of the presentation of the Unaudited Pro Forma Consolidated Balance Sheet, and as of March 1, 2003 for purposes of the presentation of the Unaudited Pro Forma Consolidated Statements of Operations. The NSS Unit does not have the same fiscal year end as Red Hat. Therefore, we have combined their results of operations for the year ended December 31, 2003 and the nine months ended September 30, 2004 with our historical annual and interim financial statements. The balance sheet for the NSS Unit as of September 30, 2004 has been combined with Red Hat’s interim balance sheet as of November 30, 2004.

We completed the purchase of the Netscape Security Solutions unit from Netscape Communications Corporation and America Online, Inc. for a purchase price of $20.5 million in cash. An additional $2.5 is payable by Red Hat contingent on certain future customer orders being placed on or before April 30, 2005. The assets acquired are derived from the Netscape Enterprise Suite and include Netscape Directory Server and Netscape Certificate Management System.

Pro Forma Adjustments

(a) Records the preliminary purchase price allocation for our purchase of the NSS Unit assets. The purchase price was composed of the following:

Purchase price to America Online, Inc.	$	20,345
Estimated acquisition costs		700
	$	21,045

(b) Eliminates the historical basis of the net assets acquired and records deferred revenue associated with net assets acquired which relates to our remaining service obligation to the NSS Unit customers. The historical basis is not relevant as all working capital accounts were settled in the intervening period between September 30, 2004 and December 7, 2004.

(c) Includes $14,200 of identifiable intangibles based on a preliminary calculation. Below is a detail of the amount allocated to identifiable intangibles. The allocation is preliminary, pending management’s final review of the calculation and assumptions used in the valuation and the allocation of the earn out, when and if paid to America Online, Inc.

	Value		Useful Life
Acquired Technologies
Netscape Directory Server	$	5,700	5
Certificate Management System		4,200	3
Calendar/Messaging		400	4
Total Acquired Technologies		10,300
Trademark License Agreement		200	3
Reseller Relationship		2,400	5
OEM Relationship		700	5
Customer Relationships - Other		300	3
Non-Compete Agreement		300	4
Total Identifiable Intangible Assets	$	14,200

(d) Reflects the amortization of identifiable intangible assets recorded in the acquisition. Pro forma amortization expense was based on straight-line amortization and estimated useful lives of 3-5 years for the acquired assets. Due to our new carrying value of the NSS Unit assets, historical amortization of the software costs have been eliminated in these pro forma statements.

(e) Reflects the reduction of interest income related to cash used to fund the acquisition.

(f) No additional income tax provision is required for pro forma purposes due to the valuation allowance that is currently recorded against our deferred tax asset which is significantly greater than the income generated by the NSS Unit assets.