PHILADELPHIA, July 15, 2004 – LAWFUEL – On July 15, 20…

PHILADELPHIA, July 15, 2004 – LAWFUEL – On July 15, 2004, the law firm of
Berger & Montague, P.C. filed a class action suit against Red Hat, Inc. (“Red
Hat” or the “Company”) (Nasdaq: RHAT) and certain of its officers in the
United States District Court for the Eastern District of North Carolina on
behalf of all purchasers of Red Hat securities from December 18, 2003 through
July 12, 2004, inclusive (the “Class Period”).

The complaint charges Red Hat, Matthew J. Szulik (CEO), and Kevin B.
Thompson (CFO) with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the SEC as a
result of the issuance of materially false and misleading financial results
throughout the Class Period that had the effect of artificially inflating the
market price of the Company’s securities.

Throughout the Class Period, in filings with the United States Securities
and Exchange Commission (“SEC”), defendants materially inflated Red Hat’s
revenues, net income, and operating profits by reporting that the Company had
earned a greater amount of revenue from its Linux software subscription
contracts (its main revenue source) in the period in which contracts were
received than the actually was earned. Defendants recognized revenue from
subscriptions on a monthly basis, rather than on a daily basis. For example,
if a subscription contract was signed on the last day of a month, a full
month’s revenue would have been recognized on that day, rather than a day’s
worth of revenue. As a result of defendants’ alleged fraudulent scheme, Red
Hat securities traded at artificially inflated prices, causing plaintiff and
other class members to suffer damages. During the Class Period, defendants
Szulik and Thompson obtained more than $37 million through personal sales of
Red Hat common stock at artificially inflated prices.

On June 16, 2004, Red Hat’s auditor, PricewaterhouseCoopers, advised the
Company to correct the method it used to recognize revenue from subscription
contracts so as to come into compliance with Generally Accepted Accounting
Principles (“GAAP”). Defendants’ financial statement fraud was revealed to
the public on July 13, 2004 in a press release in which the Company admitted
that revenue had been incorrectly reported during the Class Period and that it
would have to restate its financial results for fiscal years 2002, 2003, 2004
and the first quarter of fiscal year 2005. In conjunction, with its
announcement of the restatement, Red Hat also revealed that the SEC was
investigating the accuracy of one of the Company’s fiscal year 10-K reports.

Not even a full month before the stunning July 13, 2004 restatement and
SEC inquiry announcements, following the announcement that Red Hat’s CFO was
resigning, defendant Szulik assured investors that the Company was not being
investigated by the SEC and that it would not be restating its financial

After the market became aware that Szulik’s assurances were false, that
Red Hat’s financial results dating as far back as fiscal year 2002 had been
materially inflated, could not be relied upon, and would be restated, and that
the SEC was investigating the accuracy of the Company’s financial statements,
the price of Red Hat common stock plunged more than 22% on July 13, 2004 to
close at $15.73 on extremely heavy trading volume.

A copy of the complaint can be obtained from our website
If you purchased Red Hat securities during the period from December 18,
2003 through July 12, 2004, inclusive, you may, no later than September 13,
2004, move to be appointed as a Lead Plaintiff. A Lead Plaintiff is a
representative party that acts on behalf of other class members in directing
the litigation. If you have sustained substantial losses in Red Hat
securities during the Class Period, would like a more thorough explanation of
the Lead Plaintiff selection process, or have any questions concerning this
notice or your rights with respect to this matter, please contact:

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