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Instead of recognising subscription revenues on a monthly basis from the beginning of the month, it will now recognise them on a daily basis and at the end of the month. It will now restate its earnings for fiscal years ending 29 February, 2004, 28 February, 2003, and 28 February, 2002, and its unaudited financial statements for the fiscal quarter ending 31 May, 2004.

The company insists this will have no effect on the amount of revenues recognised per subscription, simply that the revenues will be recognised at a more granular level and

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deferred to the end of the month.

'The restatement is not expected to reflect any material difference in the meaningful historical trends of our business, nor will it adversely affect our business outlook, which remains strong,' said Matthew Szulik, Chairman and Chief Executive Officer at Red Hat. 'We remain committed to meeting high standards in providing timely, accurate and transparent financial reporting, and our planned restatement reflects this commitment. The restatement will also assure that future comparisons to past periods are made on a consistent basis.'

Even so, investors voted with their feet, and Red Hat shares lost more than a fifth of their value by the close of trading Tuesday, to close at $15.73.

Certainly investors put their exodus down in part to the questions raised by the sudden departure of CFO Kevin Thompson just days before Red Hat's Q1 results being vindicated by this news. Some even pointed to his history with Arthur Andersen LLP, involved in the Enron scandal, as evidence of a 'book cooking' past.

However, prices stabilised towards the end of Wednesday, settling at around $15.