Exhibit 99.1

                                  RISK FACTORS

       Investing in our common stock involves a high degree of risk. You should
carefully consider the risks and uncertainties described below before purchasing
our common stock. The risks and uncertainties described below are not the only
ones facing our company. Additional risks and uncertainties may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations would likely suffer. In that case,
the trading price of our common stock could fall, and you may lose all or part
of the money you paid to buy our common stock.

RISKS RELATED TO OUR BUSINESS

We depend on the support of Linux developers not employed by us for improvements
and advancement of our Red Hat Enterprise Linux technologies.

       We may not be able to release major product releases and upgrades of Red
Hat Enterprise Linux on a timely basis because the heart of Red Hat Enterprise
Linux, the Linux kernel, is maintained by third parties. Linus Torvalds, the
original developer of the Linux kernel, and a small group of engineers, many of
whom are not employed by us, are primarily responsible for the development and
evolution of the Linux kernel. If this group of developers fails to further
develop the Linux kernel or if Mr. Torvalds or prominent Linux developers who
are members of this group and are currently employed by us were to join one of
our competitors, no longer be employed by us or no longer work on the Linux
kernel, we would have to either rely on another party to further develop the
kernel or develop it ourselves. We cannot predict whether enhancements to the
kernel would be available from reliable alternative sources. We could be forced
to rely to a greater extent on our own development efforts, which would increase
our development expenses and may delay our product release and upgrade
schedules. In addition, any failure on the part of the kernel developers to
further develop and enhance the kernel could stifle the development of
additional Linux-based applications.

If we fail to continue to establish and maintain strategic distribution and
other collaborative relationships with industry-leading companies, we may not be
able to attract and retain a larger customer base.

       Our success depends in part on our ability to continue to establish and
maintain strategic distribution and other collaborative relationships with
industry-leading hardware manufacturers (such as Hewlett-Packard, Dell, IBM,
Fujitsu and others), distributors, software vendors (such as Oracle) and
enterprise solutions providers. These relationships allow us to offer our
products and services to a much larger customer base than we would otherwise be
able to through our direct sales and marketing efforts. We may not be able to
maintain these relationships or replace them on attractive terms. In addition,
our existing strategic relationships do not, and any future strategic
relationships may not, afford us any exclusive marketing or distribution rights.
As a result, many of the companies with which we have strategic alliances pursue
alternative technologies and develop alternative products and services in
addition to or in lieu of our products and services, either on their own or in
collaboration with others, including our competitors. Moreover, we cannot
guarantee that the companies with which we have strategic relationships will
market our products effectively or continue to devote the resources necessary to
provide us with effective sales, marketing, and technical support.

If third-party enterprise software application providers do not continue to make
their new applications compatible with our Linux-based operating systems, our
software will cease to be competitive.

       Our products will not be competitive unless new enterprise software
applications continue to be compatible with our Linux-based operating systems.
We intend to encourage the development of additional applications that operate
on Linux-based operating systems by attracting third-party developers to the
Linux platform, providing open source tools to create these applications and
maintaining our existing developer relationships through marketing and technical
support for third-party developers. If we are not successful in achieving these
goals, however, our products will not be competitive and our sales growth will
be adversely affected.

We may be unable to predict the future course of open source technology
development, which could reduce the market appeal of our products and damage our
reputation.

       We do not exercise control over many aspects of the development of open
source technology. Different groups of open source software programmers compete
with one another to develop new technology. Typically, the technology developed
by one group will become more widely used than that developed by others. If we
adopt new technology and incorporate it into our products and competing
technology becomes more widely used or accepted, the market appeal of our
products may be reduced and that could harm our reputation, diminish the Red Hat
brand and result in decreased revenue.

There are few technology barriers to entry in the open source market.

       One of the characteristics of open source software is that anyone can
modify the existing software or develop new software that competes with existing



open source software. Such competition can develop without the degree of
overhead and lead time required by traditional proprietary software companies.
It is possible for a competitor with greater resources than ours to develop its
own open source operating system solution, potentially reducing the demand for
our solutions.

       We have entered into and may continue to enter into or seek to enter into
business combinations and acquisitions, which may be difficult to integrate,
disrupt our business, dilute stockholder value or divert management attention.

       We have acquired several businesses, including, most recently, Sistina
Software, Inc. on December 23, 2003. As part of our business strategy, we may
enter into additional business combinations and acquisitions in the future. We
have limited experience in making acquisitions. In addition, acquisitions are
typically accompanied by a number of risks, including:

     the difficulty of integrating the operations and personnel of the acquired
     companies;

     the maintenance of acceptable standards, controls, procedures and policies;

     the potential disruption of our ongoing business and distraction of
     management;

     the impairment of relationships with employees and clients as a result of
     any integration of new management and other personnel;

     the inability to maintain a relationship with clients of the acquired
     business;

     the difficulty of incorporating acquired technology and rights into our
     products and services;

     the potential failure to achieve the expected benefits of the combination
     or acquisition;

     expenses related to the acquisition;

     potential unknown liabilities associated with acquired businesses; and

     unanticipated expenses related to acquired technology and its integration
     into existing technology.

       If we are not successful in completing acquisitions that we may pursue in
the future, we would be required to reevaluate our growth strategy and we may
have incurred substantial expenses and devoted significant management time and
resources in seeking to complete the acquisitions. In addition, with future
acquisitions, we could use substantial portions of our available cash as all or
a portion of the purchase price. We could also issue additional securities as
consideration for these acquisitions, which could cause our stockholders to
suffer significant dilution, or incur substantial debt. Any future acquisitions
may not generate additional revenue for us.

If we fail to effectively manage our growth, our operations and financial
results could be adversely affected.

       We have expanded our operations rapidly in recent years. For example, our
aggregate revenues increased from approximately $65.0 million for the nine
months ended November 30, 2002 to approximately $89.1 million for the nine
months ended November 30, 2003. As of November 30, 2003, we had 602 employees,
up from 569 as of November 30, 2002. In addition, we continue to explore ways to
extend our product and service offerings, and geographic reach. Our growth has
placed and may continue to place a strain on our management systems, information
systems, resources and internal controls. Our ability to successfully offer
products and services and implement our business plan requires adequate
information systems and resources and oversight from our senior management. We
have, with our audit committee, undertaken to review and improve our financial
and managerial controls, reporting systems and procedures. We will need to
continue to modify and improve these controls, systems and procedures and other
internal controls and compliance procedures as we continue to grow and expand
our business. As we grow, we must also continue to hire, train, supervise and
manage new employees. We may not be able to hire, train, supervise and manage
sufficient personnel or develop management and operating systems to manage our
expansion effectively. If we are unable to manage our growth and improve our
controls, systems and procedures, our operations and financial results could be
adversely affected.

RISKS RELATED TO OUR FINANCIAL RESULTS AND CONDITION

We have incurred substantial net losses on a GAAP basis in the past and may not
be able to maintain profitability.

       We have incurred net losses in seven of our previous eight fiscal years,
including our most recent fiscal year ended February 28, 2003. As of November
30, 2003, we had an accumulated deficit of $281.4 million. While we have
achieved profitability in the first nine months of the last fiscal year, we
cannot be certain that we will be able to sustain profitability. Failure to
remain profitable may adversely affect the market price of our common stock and
our ability to raise capital and continue operations.

You should not rely on our quarterly results of operations as an indication of
our future results.



       Due to the unpredictability of the technology spending environment, our
revenue and operating results have fluctuated and may continue to fluctuate from
quarter to quarter. We base our current and projected future expense levels in
part on our estimates of future revenue. Our expenses are, to a large extent,
fixed in the short term. We may not be able to adjust our spending quickly
enough to protect our projected operating results for a quarter if our revenue
in that quarter falls short of our expectations. If our future operating results
fall below expectations of securities analysts or investors, the market price of
our common stock may decline.

We may not be able to effectively attract additional enterprise customers and
preserve relationships with current enterprise customers, which could adversely
affect revenue.

       Historically, we focused our sales and marketing efforts on product sales
to individuals. In late fiscal 2002, we began to focus the predominant portion
of our sales and marketing efforts on expanding our enterprise customer base. To
this end, we have invested extensively to attract enterprise customers. While we
have been successful to date in acquiring large enterprise customers, if we are
unsuccessful in gaining additional large enterprise customers in the future or
in securing subscription renewals from existing enterprise customers, it will
adversely affect our future revenue. In addition, while our subscription
agreements generally provide for renewals at prices that are the same as those
in effect during the initial term or at then current list prices, there can be
no assurance that customers will renew their subscription agreements at the end
of the initial or any renewal term or that customers will not seek to condition
any renewal on reduced prices. Any failure to obtain customer renewals, or
reduction in prices upon renewal, could reduce future revenues.

We may not be able to continue to attract capable management personnel.

       Over the past three years we have built our management team during a time
of significant unemployment and downturn in the technology sector. This has
given us the opportunity to attract highly capable management personnel.
However, our ability to retain key management personnel or hire capable new
management personnel as we grow may be challenged if the technology sector
rebounds and/or if companies with more generous compensation packages or greater
perceived growth opportunities compete for the same personnel.

We depend on our key personnel.

       Our future success depends on the continued services of a number of key
officers, including our Chief Executive Officer and President, Matthew J.
Szulik, our Executive Vice President-Engineering, Paul Cormier, our Chief
Financial Officer, Kevin B. Thompson and our Executive Vice President--Worldwide
Sales, Alex Pinchev. The loss of the technical knowledge and industry expertise
of any of these individuals could seriously impede our success. Moreover, the
loss of one or a group of our key employees, particularly to a competitor, and
any resulting loss of customers could reduce our market share and diminish the
Red Hat brand.

We may lack the financial and operational resources needed to increase our
market share and compete effectively with Unix operating systems providers,
Microsoft, other established operating systems developers, software development
tools developers, and certain infrastructure service providers.

       In the market for operating systems, we face significant competition from
larger companies with greater financial resources and name recognition than we
have. These competitors, which offer hardware-independent multi-user operating
systems for Intel platforms and/or UNIX-based operating systems, include
Microsoft, Novell, IBM, Sun Microsystems, Hewlett-Packard and Unisys. In the
future, these competitors may develop and market a competing open source
operating system.

       As we increase our services offerings, we may face competition from
larger companies that currently provide service and training related to the
Linux operating system as well as other operating systems, particularly
UNIX-based operating systems, due to the fact that Linux-and UNIX-based
operating systems share many common features. These companies, including IBM and
Hewlett-Packard, may be able to leverage their existing service organizations
and provide higher levels of consulting and training on a more cost-effective
basis than we can. We may not be able to compete successfully with current or
potential competitors.

We may not be able to meet the operational and financial challenges that we will
encounter as our international operations continue to expand.

       As we expand our international operations, we will face a number of
additional challenges associated with the conduct of business overseas. For
example:

          o we may have difficulty managing and administering a
          globally-dispersed business;

          o fluctuations in exchange rates may negatively affect our operating
          results;

          o we have to comply with a wide variety of foreign laws;



          o we may not be able to adequately protect our intellectual property
          rights overseas due to the uncertainty of laws and enforcement in
          certain countries relating to the protection of intellectual property
          rights;

          o export controls and times of crisis could prevent us from shipping
          our products into and out of certain markets;

          o changes in import/export duties and quotas could affect the
          competitive pricing of our products and services and reduce our market
          share in some countries; and

          o economic or political instability in some international markets
          could result in the forfeiture of some foreign assets and the loss of
          sums spent developing and marketing those assets.

       Any failure by us to effectively manage the challenges associated with
the international expansion of our operations could adversely affect our
business, operating results and financial condition.

RISKS RELATED TO LEGAL UNCERTAINTY

We could be prevented from selling or developing our software if the GNU General
Public License and similar licenses under which our products are developed and
licensed are not enforceable.

       The Linux kernel and the Red Hat Linux operating system have been
developed and licensed under the GNU General Public License and similar open
source licenses. These licenses state that any program licensed under them may
be liberally copied, modified and distributed. The GNU General Public license is
a subject of litigation in the case of The SCO Group, Inc. v. International
Business Machines Corp., pending in the United States District Court for the
District of Utah. It is possible that a court would hold these licenses to be
unenforceable in that litigation or that someone could assert a claim for
proprietary rights in a program developed and distributed under them. Any ruling
by a court that these licenses are not enforceable, or that Linux-based
operating systems, or significant portions of them, may not be liberally copied,
modified or distributed, would have the effect of preventing us from selling or
developing our products.

Our subscription-based contract model may encounter customer resistance.

       The subscription agreement for Red Hat Enterprise Linux requires
customers to agree to a subscription for our systems management services for
each machine on which they deploy Red Hat Enterprise Linux. At the same time,
the subscription agreement places no restriction on the customer's right to
redistribute Red Hat Enterprise Linux. While we believe this practice fully
complies with the requirements of the GNU General Public License, and while we
have reviewed this practice with the Free Software Foundation, the organization
that maintains and provides interpretations of the GNU General Public license,
we may still encounter customer resistance to this distribution model. To the
extent we are unsuccessful in promoting or defending this distribution model,
our business and operating results could be materially and adversely affected.

We have agreed to protect our customers if our products are found to infringe
third-party intellectual property rights.

       We have committed to all of our customers with valid, registered Red Hat
Enterprise subscriptions that if any portion of our Red Hat Enterprise Linux
product is found to infringe any third party intellectual property rights we
will, at our expense and option: (i) obtain the right for the customer to
continue to use the product consistent with their subscription agreement with
us; (ii) modify the product so that it is non-infringing; or (iii) replace the
infringing component with a non-infringing component. Although we cannot predict
whether we will need to satisfy this commitment, and although our subscription
agreements typically state that our liability thereunder shall not exceed the
amount a customer paid to us during the previous 12 months, satisfying the
commitment could be costly and time consuming and could materially and adversely
affect our financial results. In addition, our insurance policies may not
adequately cover our exposure to this type of claim.

We are vulnerable to claims that our products infringe third-party intellectual
property rights because our products are comprised of distinct software
components, many of which are developed by numerous independent parties, and an
adverse legal decision affecting our intellectual property could materially harm
our business.

       We are vulnerable to claims that our products infringe third-party
intellectual property rights because our products are comprised of distinct
software components, many of which are developed by numerous independent
parties. Claims for infringement of intellectual property rights may be filed
and may seek damages and injunctive relief. In particular, third parties may
assert claims for infringement or claims based on trade secret theories. The
risk of infringement claims is exacerbated by the fact that much of the code in
our products is developed by numerous independent parties over whom we exercise
no supervision or control. It is further exacerbated by our lack of access to
unpublished software patent applications. Claims of infringement could require
us to seek to obtain licenses from third parties in order to continue offering
our products, reengineer our products, or discontinue the sale of our products
in the event reengineering could not be accomplished on a timely basis.



       SCO Group, Inc., or SCO, has publicly alleged that certain Linux kernels
contain unauthorized UNIX code or derivative works. On August 4, 2003, we filed
a complaint against SCO in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that we are not
infringing any of SCO's intellectual property rights. SCO moved to dismiss the
complaint and, to date, has not asserted a claim of infringement against us.
Uncertainty concerning SCO's allegations, regardless of their merit, could
adversely affect sales of our products. If SCO were to prevail in this or other
actions related to their claims regarding Linux, our business could be
materially and adversely affected.

       Defending patent infringement, copyright infringement and/or trade secret
claims, even claims without significant merit, can be expensive. An adverse
legal decision affecting our intellectual property could materially harm our
business.

Our products may contain defects that may be costly to correct, delay market
acceptance of our products and expose us to litigation.

       Despite testing by ourselves and our customers, errors have been and may
continue to be found in our products after commencement of commercial shipments.
This risk is exacerbated by the fact that much of the code in our products is
developed by independent parties over whom we exercise no supervision or
control. If errors are discovered, we may have to make significant expenditures
of capital to eliminate them and may not be able to successfully correct them in
a timely manner or at all. Errors and failures in our products could result in a
loss of, or delay in, market acceptance of our products and could damage our
reputation and our ability to convince commercial users of the benefits of
Linux-based operating systems and other open source software products.

       In addition, failures in our products could cause system failures for our
customers who may assert warranty and other claims for substantial damages
against us. Although our license agreements with our customers typically contain
provisions designed to limit our exposure to potential product liability claims,
it is possible that these provisions may not be effective or enforceable under
the laws of some jurisdictions. In addition, our insurance policies may not
adequately limit our exposure to this type of claim. These claims, even if
unsuccessful, could be costly and time consuming to defend.

Our efforts to protect our trademarks may not be adequate to prevent third
parties from misappropriating our intellectual property rights.

       Our most valuable intellectual property is our collection of trademarks.
The protective steps we have taken in the past have been, and may in the future
continue to be, inadequate to deter misappropriation of our trademark rights.
Although we do not believe that we have suffered any material harm from
misappropriation to date, we may be unable to detect the unauthorized use of, or
take appropriate steps to enforce, our trademark rights in a timely manner. We
have registered some of our trademarks in the Americas, Europe, Asia and
Australia and have other trademark applications pending in each of those
regions. Effective trademark protection may not be available in every country in
which we offer or intend to offer our products and services. Failure to
adequately protect our trademark rights could damage or even destroy the Red Hat
brand and impair our ability to compete effectively. Furthermore, defending or
enforcing our trademark rights could result in the expenditure of significant
financial and managerial resources.