10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended February 28, 2014

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                     .

Commission File Number: 001-33162

RED HAT, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State of Incorporation)

06-1364380

(I.R.S. Employer Identification No.)

100 East Davie Street, Raleigh, North Carolina 27601

(Address of principal executive offices, including zip code)

(919) 754-3700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.0001 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:        None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes x    No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ¨    No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x    No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    x	Accelerated filer    ¨
Non-accelerated filer    ¨ (Do not check if a smaller reporting company)	Smaller reporting company    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ¨    No x

The aggregate market value of the common equity held by non-affiliates of the registrant as of August 30, 2013 was approximately $8.0 billion based on the closing price of $50.52 of our common stock as reported by the New York Stock Exchange on August 30, 2013. For purposes of the immediately preceding sentence, the term “affiliate” consists of each director, executive officer and greater than 10% stockholder of the registrant. There were 189,344,281 shares of common stock outstanding as of April 16, 2014.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Red Hat, Inc.’s Definitive Proxy Statement to be filed with the Securities and Exchange Commission and delivered to stockholders in connection with its annual meeting of stockholders to be held on August 7, 2014 are incorporated by reference into Part III of this Form 10-K. With the exception of the portions of the Proxy Statement expressly incorporated into this Annual Report on Form 10-K by reference, such document shall not be deemed filed as part of this Annual Report on Form 10-K.

TABLE OF CONTENTS

		Page No.
	PART I
Item 1.	Business		3
Item 1A.	Risk Factors		17
Item 1B.	Unresolved Staff Comments		35
Item 2.	Properties		35
Item 3.	Legal Proceedings		35
Item 4.	Mine Safety Disclosures		35
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		36
Item 6.	Selected Financial Data		39
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		61
Item 8.	Financial Statements and Supplementary Data		63
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		106
Item 9A.	Controls and Procedures		106
Item 9B.	Other Information		106
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance		107
Item 11.	Executive Compensation		107
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		107
Item 13.	Certain Relationships and Related Transactions, and Director Independence		107
Item 14.	Principal Accountant Fees and Services		107
	PART IV
Item 15.	Exhibits and Financial Statement Schedules		108

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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements contained in this report and the documents incorporated by reference in this report, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions, and any statement that is not strictly a historical statement could be deemed to be a forward-looking statement (for example, statements regarding current or future financial performance, management’s plans and objectives for future operations, product plans and performance, management’s expectations regarding market risk and market penetration, management’s assessment of market factors or strategies, objectives and plans of Red Hat, Inc. together with its subsidiaries (“Red Hat”) and its partners). Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “will,” and similar expressions, may also identify such forward-looking statements. Red Hat may also make forward-looking statements in other filings made with the Securities and Exchange Commission (“SEC”), press releases, materials delivered to stockholders and oral statements made by management. Investors are cautioned that these forward-looking statements are inherently uncertain, are not guarantees of Red Hat’s future performance and are subject to a number of risks and uncertainties that could cause Red Hat’s actual results to differ materially from those found in the forward-looking statements and from historical trends. These risks and uncertainties include the risks and cautionary statements detailed in Item 1A, “Risk Factors” and elsewhere in this report as well as in Red Hat’s other filings with the SEC, copies of which may be accessed through the SEC’s web site at http://www.sec.gov. Readers are urged to carefully review these risks and cautionary statements. Moreover, Red Hat operates in a rapidly changing and highly competitive environment. It is impossible to predict all risks and uncertainties or assess the impact of any new risk or uncertainty on our business or any forward-looking statement. The forward-looking statements included in this report represent our views as of the date of this report. We specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this report. 

ITEM 1. BUSINESS

OVERVIEW

Red Hat is a leading global provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, virtualization, middleware, storage and cloud technologies.

Our business model

Development. Red Hat employs an open source software development model that uses the collective input, resources and knowledge of a global community of contributors who collaborate to develop, maintain and enhance software. We believe this model offers advantages to Red Hat because we are able to offer our software more quickly and with lower development cost than is typical of many software vendors who use a proprietary model to develop their products. Our open source development model also benefits our customers, who are able to take advantage of the quality and value of open source software that we help to develop, aggregate, integrate, test, certify, deliver, maintain, enhance and support.

Licensing. We typically distribute our software offerings under open source licenses that permit access to the software’s human-readable source code. These licenses also provide relatively broad rights for recipients of the software to use, copy, modify and redistribute the software. These broad rights afford significant latitude for our customers to inspect, suggest changes, customize and enhance the software if they so choose.

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Subscriptions. We provide our software offerings primarily under annual or multi-year subscriptions. A subscription generally entitles a customer to, among other things, a specified level of support, as well as new versions of the software, security updates, fixes, functionality enhancements and upgrades to the technology, if and when available, and compatibility with an ecosystem of certified hardware and software.

Our offerings

Our software offerings are designed to provide customers with high-performing, scalable, flexible, reliable, secure and stable technologies that meet the information technology (“IT”) infrastructure needs of enterprises. These offerings include:

· Red Hat Enterprise Linux—an operating system that runs on a broad range of hardware, including mainframes, servers and work stations.

· Red Hat Enterprise Virtualization—software that allows customers to manage a common hardware infrastructure to run multiple operating systems and applications. Our virtualization offerings are designed to permit customers to optimize resource allocation and operational flexibility in their IT environments.

· Red Hat JBoss Middleware—a family of offerings and technologies used for developing, deploying and managing enterprise applications.

· Red Hat Storage Server—software that enables enterprises to treat physical storage as a scalable, standardized, centrally managed pool of virtual storage.

· Red Hat cloud offerings—enterprise technologies that enable customers to take advantage of the benefits of cloud computing. Cloud computing is a term used to refer to an IT infrastructure that allows multiple users to access a shared pool of computing resources (such as networks, processors, storage platforms, operating systems and applications). In a cloud environment, computing resources may be deployed more rapidly and efficiently, and usage may be increased or decreased as needed.

We also offer a wide range of services that are designed to help customers derive additional value from Red Hat enterprise technologies. Our consulting services assist customers to enable infrastructure, application integration, middleware and cloud solutions. Our support services provide customers with technical support to assist with implementing, configuring and using Red Hat enterprise technologies. Our training services help populate customers and partners with skilled Red Hat certified professionals.

Red Hat, Inc. was incorporated in Connecticut in March 1993 as ACC Corp., Inc., which subsequently changed its name to Red Hat Software, Inc. Red Hat Software, Inc. reincorporated in Delaware in September 1998 and changed its name to Red Hat, Inc. in June 1999. Except as otherwise indicated, all references in this report to “we”, “us”, “our”, the “Company”, the “registrant”, or “Red Hat” refer to Red Hat, Inc. and its subsidiaries. Our fiscal year ends on the last day of February, and we identify our fiscal years by the calendar years in which they end. For example, we refer to the fiscal year ended February 28, 2014 as “fiscal 2014.”

OUR BUSINESS

We use the open source software development and licensing model to provide our enterprise offerings to customers primarily on a subscription basis. Subscriptions for our offerings are marketed and sold to customers directly and through channel partners.

Development and licensing of Red Hat’s open source offerings

The open source software development model allows us to use the collective input, resources and knowledge of global communities of contributors who collaborate to develop, maintain and enhance software.

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We develop our enterprise offerings by working with these open source development communities, often in a leadership role. Red Hat sponsors a number of open source communities, including the Fedora Project, GlusterFS, the JBoss community projects and OpenShift Origin. We are also an active participant in other communities such as OpenStack. Our role helps us to benefit from the efforts of these communities, which we believe allows us to reduce both development cost and time and enhance acceptance and support of our offerings and technologies. Additionally, the open and transparent nature of these communities provides our customers and potential customers with access and insights into, and the ability to influence, the future direction of our enterprise offerings.

Under the open source licensing model, a software developer distributes the human-readable source code version of the software under an open source license, such as the GNU General Public License (“GPL”) or GNU Lesser General Public License. Open source licenses provide relatively broad rights for recipients of the software to use, copy, modify and redistribute the software. These rights afford significant latitude for recipients to inspect, suggest changes, customize or enhance the software.

The open source model provides an inherent level of transparency and choice that contrasts with the proprietary software model. Under the proprietary software model, a software vendor generally develops the software itself or acquires components from other vendors, without the input from a wider community of participants. The vendor generally licenses to the user only the machine-readable binary (or object) code version of the software, with no or limited rights to copy, modify or redistribute the software, and does not make the underlying source code available to the user or other developers. Moreover, peer review and collaborative enhancements are more difficult because of the lack of access to the source code.

The growth of the Internet has greatly increased the scale and efficiency of open source software development through the availability of collaborative technologies, such as email lists, code repositories and websites. These technologies have enabled a global community of developers to collaborate on more complex open source projects, many of which are commercially funded.

We believe that open source software is a viable and arguably superior alternative to traditional proprietary software for the enterprise customer. Open source software, as compared to proprietary software, offers a number of benefits, including:

· enabling an enterprise customer’s in-house development team to collaborate and innovate with a global community of independent developers and testers;

· providing an enterprise customer’s in-house development team access to both binary and source code, and broader rights to copy, modify and redistribute the software;

· offering an enterprise customer greater flexibility through open rather than proprietary protocols and formats;

· permitting an enterprise customer ongoing access to improvements made to the software that are distributed by others; and

· allowing an enterprise customer to inspect and help diagnose problems more easily and customize the software to suit its particular needs.

Subscription business model

We provide our software offerings to our customers primarily under annual or multi-year subscriptions. Our subscription business model is designed to provide customers with a comprehensive technology solution for the duration of their subscription. A subscription generally entitles a customer to, among other things, a specified level of support, as well as new versions of the software, security updates, fixes, functionality enhancements and upgrades to the technology, if and when available, and compatibility with an ecosystem of certified hardware and

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software applications. We offer customers subscription options that have varying levels of customer support to which the customer is entitled. In addition, our customers are eligible to participate in Red Hat’s Open Source Assurance program, which provides certain protections in the event there is an intellectual property infringement issue with our enterprise offerings.

Our subscription business model contrasts with the typical proprietary software license model from a revenue recognition perspective. Under a proprietary software license model, the vendor typically recognizes license revenue in the period that the software is initially licensed. In contrast, under our subscription model, we generally defer revenue when we bill the customer and recognize revenue over the life of the subscription term.

Distribution of Red Hat enterprise offerings

We make Red Hat enterprise offerings available directly to customers and indirectly through various channels of distribution. Our direct sales channels include our sales force and our web store. Our indirect sales channels include cloud computing providers, distributors, independent software vendors (“ISVs”), systems integrators (“SIs”), and value added resellers (“VARs”). In addition, hardware original equipment manufacturers (“OEMs”) pre-load and support Red Hat enterprise offerings on their hardware products and also sell their hardware together with Red Hat enterprise offerings as part of pre-configured solutions. Red Hat Enterprise Linux and Red Hat JBoss Middleware enterprise offerings also have gained widespread support from leading ISVs, independent hardware vendors (“IHVs”), and SIs. With the support and tools we make available, many of these companies have engineered and certified that their technologies run on or with Red Hat enterprise offerings, and, in some cases, IHVs and ISVs have built their products and solutions using our enterprise offerings. We believe widespread support from these companies helps to increase the level of market acceptance and adoption of our enterprise offerings.

Support by leading technology providers

To facilitate the widespread deployment of Red Hat offerings, we have focused on gaining broad support for our offerings from technology providers that are critical to enterprises. For example, leading ISVs with applications that run on, or with, our enterprise technologies include BMC Software, Inc. (“BMC”), CA, Inc. (“CA”), EMC Corporation (“EMC”), Hewlett-Packard Company (“HP”), International Business Machines Corporation (“IBM”), Microsoft Corporation (“Microsoft”), Oracle Corporation (“Oracle”), SAP AG (“SAP”), SAS Institute Inc. (“SAS”), Symantec Corporation (“Symantec”) and VMware, Inc. (“VMware”). In addition, we have certification and pre-load arrangements with leading hardware vendors including Cisco Systems, Inc. (“Cisco”), Dell Inc. (“Dell”), Fujitsu Limited (“Fujitsu”), HP, Hitachi, Ltd (“Hitachi”), IBM, Lenovo Group Limited (“Lenovo”), and NEC Corporation (“NEC”). We also have certification agreements with leading networking and storage companies including Cisco, EMC, Ericsson Inc., HP, NetApp, Inc. (“NetApp”), Nokia Corporation, and Nokia Siemens Networks. We also have strategic relationships with leading semiconductor and technology companies, such as Advanced Micro Devices, Inc., ARM Holdings plc, and Intel Corporation, and cloud providers, such as Amazon.com, Inc. (“Amazon”), Fujitsu, Google Inc. (“Google”), IBM and Rackspace Hosting, Inc. (“Rackspace”).

Factors influencing our success

We believe our success is influenced by:

· the extent to which we can expand the breadth and depth of our enterprise offerings;

· our ability to enhance the value of Red Hat enterprise offerings through frequent and continuing innovation while maintaining stable platforms over multi-year periods;

· our ability to generate increasing revenue from channel partner and other strategic relationships, including cloud computing providers, distributors, IHVs, ISVs, OEMs, SIs, and VARs;

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· our ability to generate new and recurring revenue for Red Hat enterprise offerings;

· the widespread and increasing deployment of open source technologies by enterprises and similar institutions, such as government agencies and universities; and

· our ability to provide customers with consulting and training services that generate additional revenue.

Geographic areas and segment reporting

As of February 28, 2014, Red Hat had more than 80 locations around the world, including offices in North America, South America, Europe, Asia and Australia. Red Hat has three geographic operating segments: the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and Asia Pacific. These segments are aggregated into one reportable segment due to the similarity in the nature of offerings, financial performance, economic characteristics (e.g., revenue growth and gross margin), methods of production and distribution and customer classes (e.g., distributors, resellers and enterprise). See NOTE 2—Summary of Significant Accounting Policies and NOTE 20—Segment Reporting to our Consolidated Financial Statements for further discussion of our operating segments. See Item 1A, “Risk Factors”, for a discussion of some of the risks attendant to our operations, including foreign operations.

Subscription revenue by product group

Subscription revenue for our Infrastructure-related offerings (Red Hat Enterprise Linux, Red Hat Enterprise Virtualization and related offerings) as a percentage of our total revenue were 76.3%, 77.4% and 76.8% for fiscal 2014, fiscal 2013 and fiscal 2012, respectively. Subscription revenue for our Application Development-related offerings (Red Hat JBoss Middleware) and other emerging technology offerings (including Red Hat Storage Server and our cloud offerings) as a percentage of our total revenue were 10.8%, 9.1% and 8.4% for fiscal 2014, fiscal 2013 and fiscal 2012, respectively. For additional financial information about our products and services, see NOTE 20—Segment Reporting to our Consolidated Financial Statements.

Backlog

The total value of all non-cancellable subscription and service agreements at February 28, 2014 included deferred revenue classified as a current liability of $966.8 million, long-term deferred revenue of $322.4 million and backlog (the value of customer contracts to be billed in the future) not reflected in our financial statements in excess of $270.0 million. The total value of all non-cancellable subscription and service agreements at February 28, 2013 included deferred revenue classified as a current liability of $830.5 million, long-term deferred revenue of $259.5 million and backlog not reflected in our financial statements in excess of $280.0 million. The amount of backlog at February 28, 2014 that we expect to be billed during the fiscal year ending February 28, 2015 is in excess of $190.0 million.

We report our off-balance sheet backlog as a conservative approximation, often describing the amount as “in excess of”, primarily because the value of underlying contracts is derived from data not yet subjected to the complete application of our revenue recognition policies. We endeavor to derive the value of our off-balance sheet backlog in a consistent manner year over year and therefore believe the amounts are comparable.

Seasonality

Our fourth fiscal quarter has historically been our strongest quarter for billing both new business and renewals. For a more detailed discussion, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We also have historically experienced a seasonal decline in our services revenue during our fiscal fourth quarter as compared to our fiscal third quarter.

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BUSINESS STRATEGY

Our business strategy is to (i) promote the widespread adoption of Red Hat enterprise offerings by enterprise customers globally, (ii) expand our virtualization, storage, cloud and other enterprise offerings, (iii) invest in the development of open source technologies, (iv) increase revenue from our existing customer base, (v) increase revenue by promoting a range of services to help our customers derive additional value, (vi) expand routes to market, (vii) grow our presence in international markets and (viii) pursue strategic acquisitions and alliances.

Promote the widespread adoption of Red Hat enterprise offerings by enterprise customers globally

Many of our customers use Red Hat Enterprise Linux and Red Hat JBoss Middleware for mission-critical areas of their IT infrastructure. In addition, we see increasing interest and usage among customers for our virtualization, storage and cloud offerings. We seek to promote further adoption of our enterprise offerings by enhancing the value of our offerings through frequent and continuing innovations to these offerings while maintaining stable platforms over multi-year periods. We believe that our low-cost, high-value offerings are a catalyst for change in the IT industry, enabling new deployments and migrations, which encourage a larger ecosystem of compatible hardware and software solutions. We also seek to encourage users of free versions of our enterprise technologies to become paying customers by helping these users understand the value of our subscription offerings.

Expand our virtualization, storage, cloud and other enterprise offerings

We intend to continue to expand our enterprise virtualization suite of server, client and management offerings to enable customers to increase their deployments of virtualization in enterprise environments. We also expect to continue to invest resources to further develop and market our storage and high-performance distributed computing offerings. Moreover, we intend to continue to leverage and build upon our technologies that seek to optimize resource allocation and enhance performance and flexibility in cloud computing environments.

Invest in the development of open source technologies

We intend to continue to invest significant resources in the development of open source technologies, capitalizing on our substantial experience working with open source development communities. We expect this continued investment to take the form of expenditures on internal development efforts, as well as continued funding of third-party open source projects and the expansion of our developer services.

Increase revenue from our existing customer base

We seek to build upon the relationships we have with our current customers in an effort to generate additional revenue by renewing and increasing existing subscriptions and promoting our other enterprise technology offerings.

Increase revenue by promoting a range of services to help our customers derive additional value

We seek to increase revenue by providing additional consulting and other targeted services. We also enable our partners to provide services that promote growth in our subscription revenue. These services are designed to help customers derive additional value from Red Hat enterprise offerings.

Expand routes to market

We intend to continue to grow our direct sales channel as well as our cloud computing providers, distributors, IHVs, ISVs, OEMs, VARs and other channel partner networks on a global basis. In addition, we are

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enhancing our relationships with SIs in order to expand our reach to customers who traditionally rely on SIs for advice and recommendations regarding their technology purchases.

Grow our presence in international markets

We have operations in a number of countries in the Americas, EMEA and Asia Pacific, with over 80 locations worldwide. We expect to continue to expand our operations geographically. See NOTE 20—Segment Reporting to our Consolidated Financial Statements for a discussion of our revenue by geographic area.

Pursue strategic acquisitions and alliances

We expect to continue to pursue a selective acquisition strategy as opportunities arise to complement and expand our enterprise technology offerings and service capabilities. We also intend to create and extend our strategic alliances where it is beneficial to our business. To facilitate the widespread deployment of Red Hat offerings, we will continue efforts to build broader and deeper relationships with providers of hardware, software, cloud computing and SI services critical to enterprises.

PRODUCTS AND SERVICES

Red Hat’s software offerings are designed to provide enterprises with high-performing, scalable, flexible, reliable, secure and stable technologies that meet customers’ IT needs, both on-premise (i.e., running on computers located within an enterprise’s premises) and in a cloud. Our service offerings, principally directed toward our enterprise customers and the leading hardware providers with whom we have strategic or channel partner relationships, include consulting, support, and training.

Infrastructure-related offerings

Red Hat Enterprise Linux technologies. Red Hat Enterprise Linux is an operating system built with various open source software components, including the Linux kernel, and is designed expressly for enterprise computing. An operating system is the software that allows a computer and its various hardware and software components to interact. A worldwide community of developers collaborates to improve Linux software components, and we believe we are able to integrate the best of those improvements into our stable, yet innovative and high-performing Red Hat Enterprise Linux platform. Moreover, Red Hat Enterprise Linux enjoys the support of major OEMs, IHVs, ISVs and other technology partners, increasing the interest of developers in adding further enhancements to the Linux kernel.

Red Hat Enterprise Linux delivers features required for enterprise deployments, including support for a wide range of ISV applications from vendors, such as BMC, CA, EMC, HP, IBM, Microsoft, Oracle, SAP, SAS, Symantec, and VMware; certification on multiple architectures and leading OEM platforms, including platforms offered by Cisco, Dell, Fujitsu, HP, Hitachi, IBM, Lenovo, and NEC; and comprehensive technical support, with up to 24x7, one-hour response, available from both Red Hat and selected ISV and OEM partners.

In addition, Red Hat offers a portfolio of add-ons that extends the features of Red Hat Enterprise Linux. These add-ons, which are designed to tailor a customer’s computing environment to suit its specific requirements, include:

· High Availability—provides failover services between nodes within a cluster intended to make applications more resistant to downtime.

· Resilient Storage—enables a shared storage or clustered file system to access the same storage device over a network.

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· Network Load Balancer—provides redundancy for web servers, databases, networking and storage, intended to maximize throughput, decrease response time, and increase reliability and uptime.

· Smart Management—includes Red Hat Network Satellite management and provisioning modules that allow a customer to provision, patch, configure and control Red Hat Enterprise Linux development, test and production systems.

· Extended Lifecycle Support—provides software security updates, fixes and support after Red Hat’s published end of life date for certain versions of Red Hat Enterprise Linux.

· Extended Update Support—extends the support period of a Red Hat Enterprise Linux update for up to 24 months to give enterprise customers more flexibility with their resource and deployment cycles.

We believe that these add-ons provide customers with increased features, flexibility and choice.

Red Hat Enterprise Virtualization. Red Hat Enterprise Virtualization includes standalone virtualization functionality and management tools for both server and desktop deployments. Virtualization allows a single computer system to function as multiple virtual systems by abstracting operating systems and application software from the underlying hardware infrastructure, thereby allowing customers to use a common hardware infrastructure to run multiple operating systems and applications. Virtualization is intended to enhance the capital and operational efficiencies of enterprises by increasing server utilization and deployment flexibility.

Red Hat Enterprise Virtualization combines the Kernel-based Virtual Machine (KVM) hypervisor included in the Linux kernel with the oVirt open source virtualization management system to offer enterprises a platform for large-scale virtualization initiatives and private cloud deployments. Red Hat Enterprise Virtualization is designed to support virtual machines running Red Hat Enterprise Linux and its wide ecosystem of certified hardware systems and software applications, as well as Microsoft Windows operating systems and application servers supported under Microsoft Windows Server Virtualization Validation Program (SVVP).

Application Development-related and other emerging technology offerings

Red Hat JBoss Middleware. Red Hat JBoss Middleware is a family of middleware offerings for developing, deploying, and managing applications that are accessible via the Internet, enterprise intranets, extranets, clouds and virtual private networks. Middleware generally refers to the software that enables the development, operation and integration of applications and other software. Red Hat JBoss Middleware integrates, tests, and refines enterprise-ready features from JBoss and other community projects into supported, stable, enterprise-class middleware distributions.

Red Hat JBoss Middleware offerings consist of a number of deployment platforms and tools, including:

· Red Hat JBoss Enterprise Application Platform—provides an environment for building, hosting and deploying applications and services. It includes Red Hat JBoss Application Server, Red Hat JBoss Cache, Red Hat JBoss Transactions, Red Hat JBoss Messaging and Red Hat JBoss Web Services.

· Red Hat JBoss Web Server—provides an enterprise-class web server solution for large-scale websites and lightweight web applications that utilize Apache Tomcat and Apache Web Server.

· Red Hat JBoss Fuse Service Works—provides an environment for deploying and integrating service-oriented architecture services and business processes.

· Red Hat JBoss Portal—provides a platform for deploying standards-based portals.

· Red Hat JBoss BRMS—provides a platform for business rules management and complex event processing.

· Red Hat JBoss BPM Suite—provides a business process management platform that combines business rules management and complex event processing with a business process management system to help

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customers model and encode business processes, policies and rules and measure the results of business activities.

· Red Hat JBoss Developer Studio—provides an integrated development environment for developing, testing and deploying rich web applications, enterprise applications and service-oriented architecture services.

· Red Hat JBoss Data Virtualization—provides a solution for integration of distributed data sources.

· Red Hat JBoss Data Grid—provides a scalable, distributed in-memory data grid that permits cost-effective scaling of big data tiers.

· Red Hat JBoss Fuse and Red Hat JBoss A-MQ—provide customers messaging and integration tools for distributed applications.

· Red Hat JBoss Operations Network—provides built-in management and monitoring capabilities to administer JBoss application environments.

Red Hat Storage Server. Red Hat Storage Server is a software-defined storage platform that enables users to treat storage as a virtualized resource, and is available for deployment on-premise, in cloud computing environments or in hybrid environments. Red Hat Storage Server aggregates disk and memory resources of multiple physical storage resources into a unified storage pool and abstracts physical hardware from users and applications, offering enterprises the ability to treat physical storage as a scalable, standardized, centrally-managed pool of virtual storage.

Red Hat cloud offerings. Cloud computing is a term used to refer to an IT infrastructure that enables the use of a shared pool of computing resources (such as networks, processors, storage platforms, operating systems, and applications) by multiple users. In a cloud environment, computing resources may be deployed rapidly and efficiently, and usage may be increased or decreased as needed.

Cloud computing can be implemented in different ways. In a public cloud, computing resources are made available to the general public by an entity that controls and operates these resources. In a private cloud, computing resources are operated solely for the benefit of a particular entity. A hybrid cloud blends the public and private cloud models and enables interoperability between public and private cloud computing environments.

Red Hat provides a number of offerings to assist users in creating cloud computing environments:

· Red Hat CloudForms—an open hybrid cloud management solution that allows users to deploy, monitor and manage services across cloud providers and virtualization solutions.

· Red Hat Enterprise Linux OpenStack Platform—an infrastructure-as-a-service offering that provides an enterprise-ready cloud foundation built on OpenStack technologies optimized for and integrated with Red Hat Enterprise Linux.

· Red Hat Cloud Infrastructure—an offering that combines and integrates Red Hat Enterprise Virtualization, Red Hat CloudForms and Red Hat Enterprise Linux OpenStack Platform. Red Hat Cloud Infrastructure allows users to build and manage a private or hybrid infrastructure-as-a-service cloud.

· OpenShift by Red Hat—a cloud application platform (also called “platform-as-a-service”) that automates the hosting, configuration, deployment and administration of application stacks in an elastic cloud environment. OpenShift gives application developers self-service access so they can more easily deploy applications on demand. Customers can use OpenShift Enterprise in a private cloud environment or OpenShift Online, a public version of OpenShift hosted by Red Hat. Customers can also use Red Hat JBoss Enterprise Application Platform for OpenShift to enable enterprise application development and capability with OpenShift.

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Red Hat’s standalone offerings, such as Red Hat Enterprise Linux, Red Hat Enterprise Virtualization, Red Hat JBoss Middleware, and Red Hat Storage Server, can also be combined to enable public, private and hybrid cloud deployments.

Additional Red Hat enterprise offerings. Red Hat enterprise offerings also include other technologies, such as for high-performance distributed computing, directory services and user authentication. These offerings broaden customer choice and are components of our open source architecture vision for the enterprise.

Red Hat consulting, support, and training services

Red Hat offers a range of services that are designed to help our customers derive additional value from Red Hat enterprise offerings.

Consulting. We offer the services of experienced consultants focused on our offerings to assist with the technology and strategic infrastructure needs of our customers. Our offerings include assessments, implementations, upgrade planning, platform migrations, solution integration and application development.

Support. Our Red Hat subscriptions generally include varying levels of technical support to assist customers with implementing, configuring and using Red Hat enterprise technologies. In addition, Red Hat’s Customer Portal provides an online method for customers to obtain certified software, access a knowledge base and software update alerts and advisories, as well as interact with our technical support engineers. We also offer a technical account management service for customers who require a more personalized support relationship. The technical account management service is designed to offer a highly skilled, proactive support engineer who understands a customer’s IT infrastructure and serves as a primary point of contact for technical support that is tailored to the customer’s business.

Training. Our training services consist of an array of interactive courses designed to meet the diverse needs of our customers. We deliver courses worldwide in classroom, corporate on-site and online settings. These courses span topics such as system administration, deployment, management and security, and enterprise application development and integration. Certifications include Red Hat Certified Architect, Red Hat Certified Engineer, Red Hat Certified Datacenter Specialist, Red Hat Certified JBoss Administrator, Red Hat Certified JBoss Developer, Red Hat Certified Security Specialist, Red Hat Certified System Administrator, Red Hat Certified System Administrator in Red Hat OpenStack, Red Hat Certified Virtualization Administrator and Red Hat Certificates of Expertise in a variety of specialties.

By providing consulting and support services that help to enable infrastructure, application integration and middleware solutions both on-premise or in a cloud, we facilitate further adoption and use of our technologies in the enterprise. In addition, our training services help populate customers and partners with skilled Red Hat certified professionals who often serve as internal open source advocates, increasing opportunities for successful adoption and use of our enterprise technologies. Our service capabilities promote and reinforce the use of open source technologies as well as our Red Hat brands.

COMPETITION

We compete with a number of large and well-established companies that have significantly greater financial resources, larger development staffs and more extensive marketing and distribution capabilities. No assurance can be given that our efforts to compete effectively will be sufficient.

We believe that the major factors affecting the competitive landscape for our offerings include:

· the name and reputation of the vendor or competitive offering;

· the product price, performance, reliability, security and functionality;

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· the alliances of the vendor with major industry hardware and/or software providers;

· the ability to adapt development, sales, marketing and support to the open source software model;

· the financial and value relationship of subscription services;

· the channel strength and number of channel partners of the vendor;

· the quality of consulting and support services;

· the number of Global 2000 company reference accounts;

· the number of cloud computing partners and reference accounts;

· the availability of third-party enterprise applications that are compatible with the technology;

· the breadth of hardware and software ecosystem compatibility;

· the management framework for administering the software technologies;

· the ability of the vendor to quickly diagnose software issues and provide patches and other solutions; and

· the strength of the vendor’s relationships and reputation in the open source community.

With respect to our operating system offerings, our competitors include Microsoft, which offers a hardware-independent, multi-user operating system that competes with Red Hat’s offerings. Moreover, we also compete with HP, IBM, Oracle and Unisys Corporation, each of which offer the UNIX operating system. Many of these competitors bundle competitive operating systems, such as UNIX, with their own hardware and additional software offerings, thereby making it more difficult for us to penetrate their customer bases. With respect to Linux operating systems, our competitors include The Attachmate Group, Inc. (“Attachmate”), with its SUSE brand of Linux, and Oracle’s Linux offering. We also compete with freely available Linux distributions, such as CentOS, Debian, Fedora, openSUSE, and Ubuntu.

With respect to our virtualization offerings, our competitors include Attachmate, Citrix Systems, Inc. (“Citrix”), Microsoft, Oracle and VMware. Microsoft and VMware offer virtualization technologies that are certified and supported with Red Hat Enterprise Linux operating system offerings, and Microsoft supports its server operating systems and application servers running on our virtualization offerings.

With respect to our middleware offerings, our competitors include IBM, Microsoft, Oracle and Pivotal Software, Inc. (“Pivotal”). All of these vendors offer the majority of their middleware products under a typical proprietary software license model. IBM and Oracle often bundle hardware and software for their customers, making it more difficult for us to penetrate their customer bases. Our middleware offering is heavily dependent on the Java programming language, which is controlled by Oracle.

With respect to our storage offerings, we compete with companies that provide software-based storage products, such as EMC and NetApp. Public cloud providers, such as Amazon and Rackspace, also offer storage capabilities.

With respect to our cloud technologies, we compete with companies that provide tools for enterprises to create private clouds, such as Citrix, Microsoft, Pivotal, and VMware, as well as with companies that provide public clouds and that allow users to consume computing resources as a service without the need to purchase equipment or software, such as Amazon, Google, Microsoft and Rackspace.

With respect to our service offerings, we face competition in the markets for services related to the development, deployment and integration of enterprise technologies. Our competitors in these markets include Accenture plc, HP, IBM, and Tata Consultancy Services Limited, as well as other technology consulting companies.

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Due to the nature of open source technology, the open source software model is not characterized by the traditional barriers to entry that are found in the proprietary software model. For example, the financial and legal barriers to creating a new Linux distribution are relatively low because the software components typically included in Linux distributions are publicly available under open source licenses that permit copying, modification and redistribution. Anyone can use, copy, modify and redistribute Red Hat Enterprise Linux, Red Hat JBoss Middleware and our other open source offerings. However, they are not permitted to refer to these products as “Red Hat” or “Red Hat JBoss” products unless they have a formal business relationship with us that allows for such references. Moreover, our customers agree that during their support relationship with Red Hat, they will purchase a support subscription for each computer system, core, socket or other unit on which they deploy Red Hat’s software. In addition, the primary means by which customers can receive a certified version of Red Hat enterprise software, as well as new versions of the software, security updates, fixes, functionality enhancements and upgrades to the technology, if and when available, is to purchase and maintain a current subscription directly from us or our partners with whom we have agreements.

Although we believe that we generally compete on par or favorably with many of our competitors in a number of respects, we believe that a number of our key competitors currently have superior marketing and distribution capabilities. In addition, there are significantly more enterprise infrastructure applications available for competing operating systems technologies, such as Windows, than there are for Red Hat Enterprise Linux. An integral part of our strategy has been to help address these shortcomings by, among other methods, strengthening our existing strategic and channel partner relationships and entering into new ones to expand our marketing and distribution capabilities and by attracting more attention to the open source movement. Also, increasing the adoption of Red Hat enterprise technologies should create additional opportunities and incentives for software developers to write more applications that are compatible with Red Hat enterprise technologies.

SOFTWARE ENGINEERING AND DEVELOPMENT

We have invested, and intend to continue to invest, significant resources in research and development. We expended $317.3 million, $263.2 million and $208.7 million, in our fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively, in research and development costs. We focus and modify our research and development efforts based on the needs of users and changes in the marketplace. Our development efforts are currently focused on adding new or improved functionality to our offerings that is needed by enterprise customers or that supports the expansion of our third-party hardware and software ecosystem. However, any upgrades and enhancements are offered on an when-and-if-available basis. Our software engineers collaborate with open source software development teams working through open source communities, such as the Fedora Project, GlusterFS, JBoss community projects, OpenShift Origin and OpenStack. This involvement enables us to remain abreast of, and in some instances lead, certain technical advances, plans for development of new features and timing of releases, as well as other information related to the management of open source projects.

Our software engineers make development contributions to many components comprising Red Hat software offerings, such as Red Hat Enterprise Linux, Red Hat Enterprise Virtualization, Red Hat JBoss Middleware, Red Hat Storage Server, Red Hat Cloud Infrastructure and Red Hat OpenShift, and provide leadership within the various open source communities across many of the core components. Our software engineers also perform extensive testing of Red Hat enterprise technologies. We use various industry methods of quality assurance testing to help ensure that our enterprise technologies are ready for use by our customers when delivered. We also work closely with leading hardware and software vendors to help ensure that their hardware and applications will operate effectively with Red Hat enterprise platforms.

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INTELLECTUAL PROPERTY

Most of our offerings, such as Red Hat Enterprise Linux and Red Hat JBoss Middleware, are built primarily from software components licensed to the general public under various open source licenses. While some components are developed by our own employees, Red Hat obtains many components from software developed and released by contributors to independent open source software development projects. Open source licenses grant licensees broad permissions to use, copy, modify and redistribute the software. Certain open source licenses, such as the GPL, impose significant limits on a distributor’s ability to license derivative works under more restrictive terms and generally require the distributor to disclose the source code of such works. The inclusion of software components governed by such licenses in our offerings limits our ability to use traditional proprietary software licensing models for those offerings. As a result, while we have substantial copyright interests in our software technologies, open source development and licensing practices may have the effect of limiting the value of our software copyright assets. Consequently, our trademarks may represent our most valuable intellectual property.

We pursue registration of some of our trademarks in the U.S. and in other countries. We have registered the “Red Hat” and “JBoss” trademarks and the Red Hat Shadowman logo in countries in North America, South America, Europe, Asia and Africa as well as in Australia.

Despite our efforts to protect our trademark rights, unauthorized third parties have, in the past, attempted and, in the future, may attempt, to misappropriate our trademark rights. We cannot be certain that we will succeed in preventing such misappropriation of our trade names and trademarks. The laws of some foreign countries do not protect or deter misappropriation of our trademark rights to the same extent as do the laws of the U.S. In addition, while we engage in certain enforcement activity, policing unauthorized use of our trademark rights is difficult, expensive and time consuming, and our efforts may be inadequate. The loss of any material trademark or trade name could have a material adverse effect on our business, operating results and financial condition.

Red Hat also seeks patent protection of some of the innovative ideas of our software developers and other employees. Some of these inventions are applicable to our current technologies, while others provide protection to new and other technologies. Moreover, our principal objectives in seeking patent protection are to provide a measure of deterrence against the potential patent infringement claims of third parties and to a more limited extent to help ensure that new technologies and innovations covered by our patents remain open. As part of Red Hat’s commitment to the open source community, we provide our Patent Promise, an undertaking, subject to certain limitations, not to enforce our patent rights against users of open source software covered by certain open source licenses. This permits the development and distribution of open source applications by third parties that could otherwise infringe on our patents. For these reasons, it is unlikely that our patents will, of themselves, provide us substantial revenue. We are also a founding member and active participant, along with other industry leaders (including IBM, Philips, Sony and Google) in the Open Invention Network, LLC, which acquires patents with the goal of promoting innovation in open source for the Linux platform. For discussion of our investment in Open Invention Network, LLC, see NOTE 7—Other Assets, Net to our Consolidated Financial Statements.

Third parties have, in the past, asserted and, in the future, may assert, infringement claims against us which may result in costly litigation or require us to obtain a license to third-party intellectual property rights. See Item 3, “Legal Proceedings”. There can be no assurance that such licenses will be available on reasonable terms or at all, which could have a material adverse effect on our business, operating results and financial condition. Red Hat regularly commits to its subscription customers that if portions of our enterprise offerings are found to infringe third-party intellectual property rights we will, at our expense and option: (i) obtain the right for the customer to continue to use the offering consistent with their subscription agreement with us; (ii) modify the offering so that its use is non-infringing; or (iii) replace the infringing component with a non-infringing component, and indemnify them against specific types of infringement claims. Although we cannot predict whether we will need to satisfy these commitments and often have limitations on these commitments, satisfying these commitments could be costly and time-consuming and could materially and adversely affect our business, operating results, financial condition and cash flows.

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We also generally enter into confidentiality and nondisclosure agreements with our employees and consultants and seek to control access to and distribution of our confidential documentation and other proprietary information.

EMPLOYEES

As of February 28, 2014, Red Hat had approximately 6,300 employees.

AVAILABLE INFORMATION

We maintain a website at www.redhat.com. We make available, free of charge on our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the Securities and Exchange Commission (the “SEC”). We also similarly make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Securities Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. We are not including the information contained at www.redhat.com, or at any other Internet address, as part of, or incorporating it by reference into, this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS

Set forth below are certain risks and cautionary statements, which supplement other disclosures in this report. Please carefully consider the following risks and cautionary statements. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

RISKS RELATED TO BUSINESS UNCERTAINTY

We face intense competition.

The enterprise software industry is rapidly evolving and intensely competitive, and is subject to changing technologies, shifting customer needs, and frequent introductions of new products and services. We compete based on our ability to provide our customers with enterprise software offerings that best meet their needs at a compelling price. We expect that competition will continue to be intense, and there is a risk that our competitors’ products may provide better performance or include additional features when compared to our offerings. Competitive pressures could also affect the prices we may charge or the demand for our offerings, resulting in reduced profit margins and loss of market share.

Our current and potential competitors range from large and well-established companies to emerging start-ups. Some of our competitors have significantly greater financial resources and name recognition, larger development and sales staffs and more extensive marketing and distribution capabilities. Certain competitors also bundle hardware and software offerings, making it more difficult for us to penetrate their customer bases. As the enterprise software industry evolves, the competitive pressure for the Company to innovate encompasses a wider range of products and services, including new offerings, that require different expertise than our current offerings. Some competitors may be able to innovate and provide products and services faster than we can.

Industry consolidation may affect competition by creating larger and potentially stronger competitors in the markets in which we compete. We also compete in certain areas with our partners and potential partners, and this may adversely impact our relationship with an individual partner or a number of partners.

Our efforts to compete effectively may not be sufficient, which may adversely affect our business, financial condition, operating results and cash flows.

Our continued success depends on our ability to adapt to a rapidly changing industry. Investment in new offerings, business strategies and initiatives could disrupt our ongoing business and may present risks not originally contemplated.

We operate in highly competitive markets that are characterized by rapid technological change and frequent new product and service announcements. Our continued success will depend on our ability to adapt to rapidly changing technologies, to adapt our offerings to evolving industry standards, to predict user preferences and industry changes and to improve the performance and reliability of our offerings. Our failure to adapt to such changes could harm our business. In addition, the widespread adoption of other technological changes could require substantial expenditures on our part to modify or adapt our offerings or infrastructure. Delays in developing, completing or delivering new or enhanced offerings and technologies could result in delayed or reduced revenue for those offerings and could also adversely affect customer acceptance of those offerings and technologies. The success of new and enhanced offering introductions depends on several factors, including our ability to invest significant resources in research and development in order to enhance our existing offerings and introduce new offerings in a timely manner, successfully promote the offerings, manage the risks associated with the offerings, make sufficient resources available to support the offerings and address any quality or other defects in the early stages of introduction.

Moreover, we believe that our continued success depends on our investing in new business strategies or initiatives that complement our strategic direction and technology road map. Such endeavors may involve

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significant risks and uncertainties, including distraction of management’s attention away from other business operations, and insufficient revenue generation to offset liabilities and expenses undertaken with such strategies and initiatives. Because these endeavors may be inherently risky, no assurance can be given that such endeavors will not adversely affect our business, financial condition, operating results and cash flows.

If we fail to continue to establish and maintain strategic 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 relationships with industry-leading cloud providers, enterprise solution providers, hardware manufacturers, and software vendors, such as Amazon.com, Inc., Cisco Systems, Inc., Dell Inc., Fujitsu Limited, Hewlett-Packard Co., International Business Machines Corporation, NEC Corporation, Oracle Corporation, SAP AG and others. Many of these strategic partners have engineered and certified that their products and services run on or with our offerings, and in some cases have built their products using our offerings. We may not be able to maintain these relationships or replace them on attractive terms in the future. Some of our strategic partners offer competing products and services. As a result of these factors, many of the companies with which we have strategic alliances may choose to pursue alternative technologies and develop alternative products and services in addition to or in lieu of our offerings, 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 offerings effectively or continue to devote the resources necessary to provide us with effective sales, marketing and technical support. As our agreements with strategic partners terminate or expire, we may be unable to renew or replace these agreements on comparable terms, or at all.

We rely, to a significant degree, on indirect sales channels for the distribution of our offerings, and disruption within these channels could adversely affect our business, financial condition, operating results and cash flows.

We use a variety of different indirect distribution methods for our offerings, including channel partners, such as certified cloud providers, distributors, hardware original equipment manufacturers (“OEMs”), and resellers. A number of these partners in turn distribute via their own networks of channel partners with whom we have no direct relationship. These relationships allow us to offer our technologies to a much larger customer base than we would otherwise be able through our direct sales and marketing efforts.

We rely, to a significant degree, on each of our channel partners to select, screen and maintain relationships with its distribution network and to distribute our offerings in a manner that is consistent with applicable regulatory requirements and Red Hat’s quality standards. Our channel partners may offer their own products and services that are competitive with our offerings or may not distribute and market our offerings effectively. Moreover, our existing channel partner relationships do not, and any future channel partner relationships may not, afford us any exclusive marketing or distribution rights. In addition, if a channel partner is acquired by a competitor or its business units are reorganized or divested, our revenue derived from that partner may be adversely impacted.

Recruiting and retaining qualified channel partners and training them in the use of our enterprise technologies requires significant time and resources. If we fail to devote sufficient resources to support and expand our network of channel partners, our business may be adversely affected. In addition, because we rely on channel partners for the indirect distribution of our enterprise technologies, we may have little or no contact with the ultimate end-users of our technologies, thereby making it more difficult for us to establish brand awareness, ensure proper delivery and installation of our software, support ongoing customer requirements, estimate end-user demand, respond to evolving customer needs and obtain subscription renewals from end-users.

If our indirect distribution channel is disrupted, we may be required to devote more resources to distribute our offerings directly and support our customers, which may not be as effective and could lead to higher costs, reduced revenue and growth that is slower than expected.

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The duration and extent of economic downturns, regional financial instability, and economic and market conditions generally could adversely affect our business, financial condition, operating results and cash flows.

Economic weakness and uncertainty, tightened credit markets and constrained IT spending from time to time contribute to slowdowns in the technology industry, as well as in the customer segments and geographic regions in which we operate, which may result in reduced demand and increased price competition for our offerings. Our operating results in one or more geographic regions or customer segments may also be affected by uncertain or changing economic conditions within that region or segment. Continuing uncertainty about future economic conditions may, among other things, negatively impact our current and prospective customers and result in delays or reductions in technology purchases or lengthen our sales cycle. Adverse economic conditions also may negatively impact our ability to obtain payment for outstanding debts owed to us by our customers or other parties with whom we do business. In addition, these conditions may impact our investment portfolio, and we could determine that some of our investments have experienced an other-than-temporary decline in fair value, requiring an impairment charge that could adversely impact our financial condition and operating results. Also, these conditions may make it more difficult to forecast operating results. If global economic conditions, or economic conditions in the U.S., Europe, Asia or in other key geographic regions or customer segments, remain uncertain or persist, spread or deteriorate further, current and prospective customers may delay or reduce their IT spending, which could adversely affect our business, financial condition, operating results and cash flows.

We have entered into and may continue to enter into or seek to enter into business combinations and acquisitions, which may be difficult to complete and integrate, disrupt our business, divert management’s attention, adversely affect our business, financial condition, operating results and cash flows and dilute stockholder value.

As part of our business strategy, we have in the past entered into business combinations and acquisitions, and we may continue to do so in the future. These types of transactions can increase the expense of running our business and present significant challenges and risks, including:

· Integrating the acquired business’ accounting, financial reporting, management, information and information security, human resource and other administrative systems to permit effective management and reporting, and the lack of control if such integration is delayed or not implemented;

· Gathering full information regarding a business or technology prior to a transaction, including the identification and assessment of liabilities, claims or other circumstances that could result in litigation or regulatory exposure, unfavorable accounting treatment, unexpected tax implications and other adverse effects on our business;

· Increased operating expenses related to the acquired business or technology;

· Maintaining or establishing acceptable standards, controls, procedures and policies;

· Disruption of our ongoing business and distraction of management;

· Impairment of relationships with our employees, partners or customers as a result of any integration of new management and other personnel, products or technology or as a result of the changes in the competitive landscape affected by the transaction;

· Maintaining good relationships with customers or business partners of the acquired business;

· Effective evaluation of talent at an acquired business or cultural challenges associated with integrating employees from the acquired business into our organization;

· Loss of key employees of the acquired business;

· Incorporating and further developing acquired products or technology into our offerings and maintaining quality standards consistent with our brands;

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· Achieving the expected benefits of the transaction;

· Expenses related to the transaction;

· Claims and liabilities we may assume from the acquired business or technology, or that are otherwise related to the transaction;

· Entering into new markets in which we have little or no experience or in which competitors may have stronger market positions;

· Impairment of intangible assets and goodwill acquired in transactions; and

· For foreign transactions, additional risks related to the integration of operations across different cultures and languages, and the economic, political, compliance and regulatory risks associated with specific countries.

There can be no assurance that we will manage these challenges and risks successfully. Moreover, if we are not successful in completing transactions that we have pursued or may pursue, our business may be adversely affected, and we may incur substantial expenses and divert significant management time and resources. In addition, in pursuing and completing such transactions, we could use substantial portions of our available cash as all or a portion of the purchase price for these transactions or as retention incentives to employees of the acquired business, or we may incur substantial debt. We could also issue additional securities as all or a portion of the purchase price for these transactions or as retention incentives to employees of the acquired business, which could cause our stockholders to suffer significant dilution. Any transaction may not generate additional revenue or profit for us, or may take longer to do so than expected, which may adversely affect our business, financial condition, operating results and cash flows.

If we fail to effectively manage our growth, our business, financial condition, operating results and cash flows could be adversely affected.

We have expanded our operations rapidly in recent years. For example, our total revenue increased from $1.33 billion for the fiscal year ended February 28, 2013 to $1.53 billion for the fiscal year ended February 28, 2014. Moreover, the total number of our employees increased from over 5,600 as of February 28, 2013 to approximately 6,300 as of February 28, 2014. In addition, we continue to explore ways to extend our offerings and geographic reach. Our growth has placed and will likely continue to place a strain on our management systems, information systems, resources and internal controls. Our ability to successfully provide our offerings and implement our business plan requires adequate information systems and resources, internal controls and oversight from our senior management. As we expand in international markets, these challenges increase as a result of the need to support a growing business in an environment of multiple languages, cultures, customs, legal systems, dispute resolution systems, regulatory systems and commercial practices. As we grow, (i) we may not be able to adequately screen and hire or adequately train, supervise, manage or develop sufficient personnel, and (ii) we may not be able to develop or effectively manage our controls, oversight functions or information systems. If we are unable to effectively manage our growth, our business, financial condition, operating results and cash flows could be adversely affected.

Industry consolidation may lead to increased competition and may adversely affect our business, financial condition, operating results and cash flows.

There has been a trend of consolidation in the technology industry. We expect this trend to continue as companies attempt to strengthen or hold their market positions in an evolving industry. For example, as the computing, networking, storage, and software technologies that comprise the enterprise data center converge, many companies seek to position themselves as key or single-source vendors providing end-to-end technology solutions for the data center. Also, some of our current and potential competitors have made acquisitions or

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announced new strategic alliances designed to position them as a key or single-source vendor. As a result of these developments, we face greater competition, including competition from entities that are among our key business partners. This increased competition could adversely affect our business, financial condition, operating results and cash flows.

Because of the characteristics of open source software, there are few technology barriers to entry into the open source market by new competitors and it may be relatively easy for competitors, some of which may have greater resources than we have, to enter our markets and compete with us.

One of the characteristics of open source software is that anyone may modify and redistribute the existing open source software and use it to compete with us. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies. It is possible for competitors with greater resources than ours to develop their own open source solutions, potentially reducing the demand for, and putting price pressure on, our offerings. In addition, some competitors make their open source software available for free download and use on an ad hoc basis or may position their open source software as a loss leader. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced operating margins and loss of market share, any one of which could adversely affect our business, financial condition, operating results and cash flows.

We may not be able to continue to attract and retain capable management.

Our future success depends on the continued services and effectiveness of a number of key management personnel, including our CEO. The loss of these individuals, particularly to a competitor, some of which may be in a position to offer greater compensation, could adversely affect our business or stock price.

Our ability to retain key management personnel or hire capable new management personnel as we grow may be challenged to the extent the technology sector performs well and/or if companies with more generous compensation packages or greater perceived growth opportunities compete for the same personnel. In addition, historically we have used share-based compensation as a key component of our compensation packages. Changes in the accounting for share-based compensation could adversely affect our earnings or make it more beneficial for us to use more cash compensation to attract and retain capable personnel. If the price of our common stock falls, the value of our share-based awards to recipients is reduced. Such events, or if we are unable to secure shareholder approval for increases in the number of shares eligible for share-based compensation grants, could adversely affect our ability to successfully attract and retain key management personnel. Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key management personnel could hinder our strategic planning and execution.

We depend on our key non-management employees, and our inability to attract and retain such employees could adversely affect our business or diminish our brands.

Competition in our industry for qualified employees, especially technical employees, is intense and our competitors directly target our employees. Our inability to attract and retain key employees could hinder our influence in open source projects and seriously impede our success. Moreover, the loss of these individuals, particularly to a competitor, some of which may be in a position to offer greater compensation, and any resulting loss of customers could reduce our market share and diminish our brands. We have from time to time in the past experienced, and we may experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications.

A number of our key employees have become, or will become, vested in a significant amount of their equity compensation awards. Employees may be more likely to leave us after a significant portion of their equity compensation awards fully vest, especially if the shares underlying the equity awards have significantly

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appreciated in value. Additionally, as we grow, there may be less equity compensation to award per employee. If we do not succeed in attracting and retaining key personnel, our business, financial performance, operating results and cash flows may be adversely affected.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and collaboration fostered by our culture, and our business may be adversely affected.

We believe that a critical contributor to our success has been our corporate culture, which we believe fosters innovation, creativity and collaboration. As our organization grows, and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain these beneficial aspects of our corporate culture. If we are unable to maintain our corporate culture, we may find it difficult to attract and retain motivated employees.

Our subscription-based business model may encounter customer resistance or we may experience a decline in the demand for our offerings.

We provide Red Hat enterprise technologies primarily under annual or multi-year subscriptions. A subscription generally entitles a customer to, among other things, a specified level of support, as well as new versions of the software, security updates, fixes, functionality enhancements and upgrades to the technology, if and when available, and compatibility with an ecosystem of certified hardware and software applications. While we believe this practice 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 or customers may fail to honor the terms of our subscription agreements. To the extent we are unsuccessful in promoting or defending this distribution model, our business, financial condition, operating results and cash flows could be adversely affected.

Demand for our offerings depends substantially on the general demand for enterprise software, which fluctuates based on numerous factors, including the spending levels and growth of our current and prospective customers, and general economic conditions. In addition, our customers generally undertake a significant evaluation process that may result in a lengthy sales cycle. We spend substantial time, effort, and money on our sales efforts, including developing and implementing appropriate go-to-market strategies and training our sales force and channel partners in order to effectively market new offerings, without any assurance that our efforts will produce any sales. The purchase of our offerings may be discretionary and can involve significant expenditures. If our current and prospective customers cut costs, then they may significantly reduce their enterprise software expenditures.

As technologies and the markets for our enterprise offerings change, our subscription-based business model may no longer meet the needs of our customers. For example, a business model based on annual or multi-year subscriptions may no longer be competitive in an environment where disruptive technologies (such as virtualization and cloud) enable customers to consume computing resources on an hourly basis or for free. We also develop and offer disruptive technologies, which may have an effect on the demand for our subscription-based offerings.

An increased focus on developing and providing virtualization, storage and cloud computing offerings may require a greater focus on marketing more holistic solutions, rather than individual offerings. Consequently, we may need to develop appropriate marketing and pricing strategies for our offerings, our customers’ purchasing decisions may become more complex and require additional levels of approval and the duration of sales cycles for our offerings may increase.

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If we are unable to adapt our business model to changes in the marketplace or if demand for our offerings declines, our business, financial condition, operating results and cash flows could be adversely affected.

If our customers do not renew their subscription agreements with us, or if they renew on less favorable terms, our business, financial results, operating results and cash flows may be adversely affected.

Our customers may not renew their subscriptions after the expiration of their subscription agreements and in fact, some customers elect not to do so. In addition, our customers may opt for a lower-priced edition of our offerings or for fewer subscriptions. We have limited historical data with respect to rates of customer subscription renewals, so we cannot accurately predict customer renewal rates. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our services and their ability to continue their operations and spending levels. Government contracts could be subject to future funding that may affect the extension or termination of programs and generally are subject to the right of the government to terminate for convenience or non-appropriation. If we experience a decline in the renewal rates for our customers or they opt for lower-priced editions of our offerings or fewer subscriptions, our business, financial condition, operating results and cash flows may be adversely affected.

If third-party enterprise hardware and software providers do not continue to make their products and services compatible with our offerings, our software may cease to be competitive and our business, financial condition, operating results and cash flows may be adversely affected.

The competitive position of our offerings is dependent on their compatibility with products and services of third-party enterprise hardware and software companies. To the extent that a software or hardware vendor might have or develop products and services that compete with ours, the vendor may have an incentive to seek to limit the performance, functionality or compatibility of our offerings when used with one or more of the vendor’s offerings. In addition, these vendors may fail to support or issue statements of compatibility or certification of our offerings when used with their offerings. We intend to encourage the development of additional applications that operate on both current and new versions of our offerings by, among other means, attracting third-party developers to our offerings, providing open source tools to create these applications and maintaining our existing developer relationships through marketing and technical support. We intend to encourage the compatibility of our software with various third-party hardware and software offerings by maintaining and expanding our relationships, both business and technical, with relevant independent hardware and software vendors. If we are not successful in achieving these goals, however, our offerings may not be competitive and our business, financial condition, operating results and cash flows may be adversely affected.

If open source software programmers, most of whom we do not employ, do not continue to develop and enhance open source technologies, we may be unable to develop new technologies, adequately enhance our existing technologies or meet customer requirements for innovation, quality and price.

We rely to a significant degree on a number of largely informal communities of independent open source software programmers to develop and enhance our enterprise technologies. For example, Linus Torvalds, a prominent open source software developer, and a relatively small group of software engineers, many of whom are not employed by us, are primarily responsible for the development and evolution of the Linux kernel, which is the heart of the Red Hat Enterprise Linux operating system. If these groups of programmers fail to adequately further develop and enhance open source technologies, we would have to rely on other parties to develop and enhance our offerings or we would need to develop and enhance our offerings with our own resources. We cannot predict whether further developments and enhancements to these technologies would be available from reliable alternative sources. In either event, our development expenses could be increased and our technology release and upgrade schedules could be delayed. Moreover, if third-party software programmers fail to adequately further develop and enhance open source technologies, the development and adoption of these technologies could be stifled and our offerings could become less competitive. Delays in developing, completing or delivering new or enhanced offerings could result in delayed or reduced revenue for those offerings and could also adversely affect customer acceptance of those offerings.

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

Despite our testing procedures, errors have been and may continue to be found in our offerings after deployment. This risk is increased by the fact that much of the code in our offerings 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 and devote significant technical resources to analyze, correct, eliminate or work around them, and we may not be able to successfully do so in a timely manner or at all. Errors and failures in our offerings could result in a loss of, or delay in, market acceptance of our enterprise technologies, loss of existing or potential customers and delayed or lost revenue and could damage our reputation and our ability to convince enterprise users of the benefits of our technologies.

In addition, errors in our technologies could cause system failures, loss of data or other adverse effects for our customers who may assert warranty and other claims for substantial damages against us. Although our agreements with our customers often contain provisions which seek 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. While we seek to insure against these types of claims, our insurance policies may not adequately limit our exposure to such claims. These claims, even if unsuccessful, could be costly and time consuming to defend and could adversely affect our business, financial conditions, operating results and cash flows.

Our virtualization, storage and cloud computing offerings are based on emerging technologies and business models, and the potential market for these offerings remains uncertain.

Our virtualization, storage and cloud computing offerings are based on emerging technologies and business models, the success of which will depend on the perceived technological and operational benefits and cost savings associated with the adoption of these technologies. Virtualization, storage and cloud computing technologies are rapidly evolving, and their development is a complex and uncertain process requiring high levels of innovation and investment as well as the accurate anticipation of technology trends, market demand and customer needs. We expect competition to remain intense and, as with many emerging IT sectors, these technologies may be subject to a “first mover” effect pursuant to which certain product offerings rapidly capture a significant portion of market share and developer attention. Moreover, we may make errors in reacting to relevant business trends and predicting which technologies are successful or otherwise develop into industry standards.

Adoption of virtualization, storage and cloud computing offerings may occur more slowly or less pervasively than we expect and the revenue growth associated with these offerings may be slower than currently expected. Moreover, even if virtualization, storage and cloud computing are adopted widely by enterprises, our offerings in these areas may not attract a sufficient number of users or generate attractive financial results. We incur expenses associated with these offerings in advance of our ability to generate associated revenue. Demand for our virtualization, storage and cloud computing offerings may unfavorably impact demand for our other offerings, including software subscriptions and related professional services. If the market for our virtualization, storage and cloud computing offerings fails to develop adequately, it could have an adverse affect on our business, financial condition, operating results and cash flows.

Our continued success depends on our ability to maintain and enhance strong brands.

We believe that the brand identities that we have developed have contributed significantly to the success of our business. We also believe that maintaining and enhancing our brands is important to expanding our customer base and attracting talented employees. In order to maintain and enhance our brands, we may be required to make further investments that may not be successful. Maintaining our brands will depend in part on our ability to remain a leader in open source technology and our ability to continue to provide high-quality offerings. If we fail to promote and maintain our brands, or if we incur excessive costs in doing so, our business, financial condition, operating results and cash flows may be adversely affected.

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If our growth rate slows, our stock price could be adversely affected.

As the markets for our offerings mature and the scale of our business increases, our rate of revenue growth will likely be lower than the growth rates we experienced in earlier periods. In addition, to the extent that the adoption of our offerings occurs more slowly or is less pervasive than we expect, our revenue growth rates may slow or our revenue may decline, which could adversely affect our stock price.

Security breaches and data loss may expose us to liability, harm our reputation and adversely affect our business.

Our business involves the production and distribution of enterprise software technologies, as well as hosting applications. As part of our business, we (or third parties with whom we contract) receive, store and process our data, as well as our customers’ and partners’ data. While we take security and testing measures relating to our offerings and operations, those measures may not prevent security breaches and data loss that could harm our business or the businesses of our customers and partners. Advances in computer capabilities, new discoveries in the field of cryptography, inadequate technology or facility security measures or other factors may result in data loss or a compromise or breach of our systems and the data we receive, store and process (or systems and the data received, stored and processed by third parties with whom we contract). These security measures may be breached or data lost as a result of actions by third parties or employee error or malfeasance. A party who is able to circumvent security measures or exploit inadequacies in security measures, could, among other things, misappropriate proprietary information (including information about our employees, customers and partners and our customers’ information), cause the loss or disclosure of some or all of this information, cause interruptions in our or our customers’ operations, cause delays in development efforts or expose customers (and their customers) to computer viruses or other disruptions or vulnerabilities. A compromise to these systems could remain undetected for an extended period of time, exacerbating the impact of that compromise. These risks may increase as we continue to grow our cloud and services offerings and as we receive, store and process more of our customers’ data. Actual or perceived vulnerabilities may lead to regulatory investigations, claims against us by customers, partners or other third parties, or costs, such as those related to providing customer notifications and fraud monitoring. While our customer agreements typically contain provisions that seek to limit our liability, there is no assurance these provisions will be enforceable and effective under applicable law. In addition, the cost and operational consequences of implementing further data protection measures could be significant. Any loss of data or compromise of our systems or the data we receive, store or process (or systems and the data received, stored and processed by third parties with whom we contract) could result in a loss of confidence in the security of our offerings, damage our reputation, lead to legal liability and adversely affect our business, financial condition, operating results and cash flows.

We are vulnerable to technology infrastructure failures, which could harm our reputation and adversely affect our business.

We rely on our technology infrastructure, and the technology infrastructure of third parties, for many functions, including selling our offerings, supporting our partners, fulfilling orders and billing, collecting and making payments. This technology infrastructure may be vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer intrusions and viruses, software errors, computer denial-of-service attacks and other events. A significant number of the systems making up this infrastructure are not redundant, and our disaster recovery planning may not be sufficient for every eventuality. This technology infrastructure may fail or be vulnerable to damage or interruption because of actions by third parties or employee error or malfeasance. We may not carry business interruption insurance sufficient to protect us from all losses that may result from interruptions in our services as a result of technology infrastructure failures or to cover all contingencies. Any interruption in the availability of our websites and on-line interactions with customers or partners may cause a reduction in customer or partner satisfaction levels, which in turn could cause additional claims, reduced revenue or loss of customers or partners. Despite any precautions we may take, such problems could result in, among other consequences, a loss of data, loss of confidence in the stability and

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reliability of our offerings, damage to our reputation, legal liability, all of which may adversely affect our business, financial condition, operating results and cash flows interruptions.

A decline in or reprioritization of funding in the U.S. government budget or delays in the budget process could adversely affect our business, financial condition, operating results and cash flows.

We derive, and expect to continue to derive, a portion of our revenue from U.S. government agencies. Government deficit reduction and austerity measures, along with continued economic challenges, continue to place pressure on U.S. government spending. The termination of, or delayed or reduced funding for, government-sponsored programs and contracts from which we derive revenue could adversely affect our business, financial condition, operating results and cash flows.

We may be unable to predict the future course of open source technology development, which could reduce the market appeal of our offerings, damage our reputation and adversely affect our business, financial condition, operating results and cash flows.

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 acquire or adopt new technology and incorporate it into our offerings but competing technology becomes more widely used or accepted, the market appeal of our offerings may be reduced and that could harm our reputation, diminish our brands and adversely affect our business, financial condition, operating results and cash flows.

We include software licensed from other parties in our offerings, the loss of which could increase our costs and delay availability of our offerings.

We utilize various types of software licensed from unaffiliated third parties in our offerings. Aspects of our business could be disrupted if any of the software we license from others or functional equivalents of this software were no longer available to us, no longer offered to us on commercially reasonable terms or changed in ways or included defects that made the third-party software unsuitable for our use. In these cases, we would be required to either redesign our technologies to function with software available from other parties, develop these components ourselves or eliminate the functionality, which could result in increased costs, the need to mitigate customer issues, delays in delivery of our offerings and the release of new offerings and limit the features available in our current or future offerings.

RISKS RELATED TO LEGAL UNCERTAINTY

If our technologies are found or alleged to infringe third-party intellectual property rights, we may be required to take costly and time consuming actions to meet our commitments to customers.

We regularly commit to our subscription customers that if portions of our offerings are 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 technology consistent with their subscription agreement with us; (ii) modify the technology so that it is non-infringing; or (iii) replace the infringing component with a non-infringing component, and indemnify them against specified infringement claims. Although we cannot predict whether we will need to satisfy these commitments and we often have limitations on these commitments, satisfying the commitments could be costly, be time consuming, divert the attention of technical and management personnel, and adversely affect our business, financial condition, operating results and cash flows. In addition, our insurance policies would likely not adequately cover our exposure to this type of claim.

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We are vulnerable to claims that our technologies infringe third-party intellectual property rights and an unfavorable legal decision affecting our intellectual property could adversely affect our business.

We are vulnerable to claims that our technologies infringe third-party intellectual property rights, including patent, copyright and trade secrets, because our technologies are comprised of software components, many of which are developed by numerous independent parties. We are also unlikely to be able to assess adequately the relevance of patents to our technologies, and may be unable to take appropriate responsive action, in a timely or economic manner because, among other reasons, the scope of software patent protection is often not well defined or readily determinable, patent applications in the U.S. are not publicly disclosed at the time of filing, and the number of software patents that are issued each year is significant and growing. Our exposure to risks associated with the use of intellectual property may increase as a result of acquisitions. In addition, third parties may make infringement and similar or related claims after we have acquired technology that had not been asserted prior to our acquisition of such technology.

In the past, our technologies have been subject to intellectual property infringement claims. Some of these claims have been brought by entities that do not design, manufacture, or distribute products or services or that acquire intellectual property like patents for the sole purpose of monetizing their acquired intellectual property through asserting claims of infringement. As these entities do not have operating businesses of their own and therefore have limited risk of counterclaims for damages or injunctive relief, it may be difficult to deter them from bringing intellectual property infringement claims. We expect to face the possibility of more intellectual property infringement claims as our prominence increases, business activities expand, market share and revenue grow, the number of products and competitors in our industry grows and the functionality of products in different portions of the industry overlap. We may not be able to accurately assess the risk related to these suits, and we may be unable to accurately assess our level of exposure.

Defending patent and other intellectual property claims, even claims without significant merit, can be time consuming, costly and can divert the attention of technical and management personnel. We may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained in all cases. We may decide to settle certain lawsuits and disputes on terms that are unfavorable to us. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of such a settlement or judgment may require us to cease offering certain of our technologies or pay substantial amounts to the other party. In addition, we may have to seek a license to continue offering technologies found to be in violation of a third party’s rights, which may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative non-infringing technology or practices could require significant effort and expense or may not be feasible.

An unfavorable legal decision regarding the intellectual property in and to our technology and other offerings could adversely affect our business, financial condition, operating results and cash flows. See Item 3, “Legal Proceedings” for additional information.

Our activities, or the activities of our partners, may violate anti-corruption laws and regulations that apply to us.

In many foreign countries, particularly in certain developing economies, it is not uncommon to engage in business practices that are prohibited by regulations that may apply to us, such as the U.S. Foreign Corrupt Practices Act and similar laws. Although we have policies and procedures designed to help promote compliance with these laws, our employees, contractors, partners and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of our policies and procedures. Any violation of these laws and regulations could result in fines, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business, and damage to our reputation.

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We could be prevented from selling or developing our software if the GNU General Public License and similar licenses under which our technologies are developed and licensed are not enforceable or are modified so as to become incompatible with other open source licenses.

A number of our offerings, including Red Hat Enterprise Linux, 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. It is possible that a court would hold these licenses to be unenforceable 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 open source components of our offerings may not be liberally copied, modified or distributed, may have the effect of preventing us from distributing or developing all or a portion of our offerings. In addition, licensors of open source software employed in our offerings may, from time to time, modify the terms of their license agreements in such a manner that those license terms may no longer be compatible with other open source licenses in our offerings or our end user license agreement, and thus could, among other consequences, prevent us from continuing to distribute the software code subject to the modified license.

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

Our collection of trademarks is valuable and important to our business. The protective steps we have taken in the past may have been, and may in the future continue to be, inadequate to protect and deter misappropriation of our trademark rights. 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 countries in North America, South America, Europe, Asia, Africa and Australia and have other trademark applications pending in various countries around the world. Effective trademark protection may not be available in every country in which we offer or intend to distribute our offerings. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights. Failure to adequately protect our trademark rights could damage or even destroy one or more of our brands 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.

Efforts to assert intellectual property ownership rights in our technologies could impact our standing in the open source community, which could limit our technology innovation capabilities and adversely affect our business.

When we undertake actions to protect and maintain ownership and control over our intellectual property, including patents, copyrights and trademark rights, our standing in the open source community could be adversely affected. This in turn could limit our ability to continue to rely on this community, upon which we are dependent, as a resource to help develop and improve our technologies and further our research and development efforts, and could adversely affect our business.

We are, and may become, involved in disputes and lawsuits that could adversely affect our business.

Lawsuits or legal proceedings may be commenced against us. These disputes and proceedings may involve significant expense and divert the attention of management and other employees. If we do not prevail in these matters, we could be required to pay substantial damages or settlement costs, which could adversely affect our business, financial condition, operating results and cash flows. See Item 3, “Legal Proceedings” for additional information.

Our business is subject to a variety of U.S. and international laws regarding data privacy and protection.

Our business is subject to federal, state and international laws regarding privacy and protection of user data. We post, on our website, our privacy policies and practices concerning the use and disclosure of user data. As

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Internet commerce continues to evolve, increasing regulation by federal, state or foreign agencies becomes more likely. The introduction of new offerings by us may cause new and different regulations to apply to our business. New or increased laws and regulations applying to the solicitation, collection, processing, protection, use or other treatment of information could affect our ability to use and share data, or the adoption of our cloud offerings by customers.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines and penalties, a governmental order could require that we change our data practices. Compliance with these regulations may involve significant costs or require changes in business practices that result in reduced revenue. Noncompliance could result in penalties being imposed on us or orders that we cease conducting the noncompliant activity.

Any failure by us to comply with our posted privacy policies or other federal, state or international privacy-related or data protection laws and regulations or a requirement to change our data practices could have an adverse affect on our business, financial condition, operating results and cash flows.

If we fail to comply with our customer contracts or government contracting regulations, our business could be adversely affected.

Our contracts with our customers may include specialized performance requirements. In particular, our contracts with federal, state, provincial and local governmental customers are subject to various procurements regulations, contract provisions and other requirements relating to their formation, administration and performance. Any failure by us to comply with the specific provisions in our customer contracts or any violation of government contracting regulations could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments and, in the case of our government contracts, fines and suspension from future government contracting. In addition, we may be subject to qui tam litigation, the process by which a private individual sues or prosecutes on behalf of the government relating to government contracts and shares in the proceeds of any successful litigation or settlement, which could include claims for up to treble damages. Further, any negative publicity related to our customer contracts or any proceedings surrounding them, regardless of its accuracy, may damage our business and affect our ability to compete for new contracts. There is increased pressure for governments and their agencies, both domestically and internationally, to reduce spending. If our customer contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, we could suffer an adverse effect on our business, financial condition, operating results and cash flows.

We may be subject to legal liability associated with providing online services or content.

We provide offerings, such as OpenShift, that enable users to exchange information, advertise products and services, conduct business, and engage in various online activities. The law relating to the liability of providers of these online offerings for activities of their users is relatively unsettled and still developing both in the U.S. and internationally and may be significantly different from jurisdiction to jurisdiction. Claims could be brought against us for breaches of contract, defamation, fraud, libel, negligence, patent, copyright or trademark infringement, tort, unfair competition, unlawful activity, or other theories based on the nature and content of information that we publish or to which we provide links or that may be posted online or generated by us or by third parties, including our customers. In addition, we could be subject to domestic or international actions alleging that certain content we have generated or third-party content that we have made available within our services violates applicable law.

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RISKS RELATED TO FINANCIAL UNCERTAINTY

Our quarterly and annual operating results may not be a reliable indicator of our future financial performance.

Due to the unpredictability of the IT spending environment, among other reasons, our revenue and operating results have fluctuated and may continue to fluctuate. 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. Accordingly, 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, among other considerations, our future financial performance falls below the expectations of securities analysts or investors or we are unable to increase or maintain profitability, the market price of our common stock may decline.

Our stock price has been volatile historically and may continue to be volatile. Further, the sale of our common stock by significant stockholders may cause the price of our common stock to decrease.

The trading price of our common stock has been and may continue to be subject to wide fluctuations. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new offerings by us or our competitors, announcements relating to strategic decisions, announcements related to key personnel, customer purchase delays, service disruptions, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable to us, news reports relating to trends in our markets, general economic conditions and other risks listed herein.

In addition, several of our stockholders own significant portions of our common stock. If these stockholders were to sell all or a portion of their holdings of our common stock, then the market price of our common stock could be negatively impacted. The effect of such sales, or of significant portions of our stock being offered or made available for sale, could result in strong downward pressure on our stock price. Investors should be aware that they could experience significant short-term volatility in our stock if such stockholders decide to sell all or a portion of their holdings of our common stock at once or within a short period of time.

We may not be able to meet the financial and operational challenges that we will encounter as our international operations, which represented approximately 44.7% of our total revenue for the fiscal year ended February 28, 2014, continue to expand.

Our international operations accounted for approximately 44.7% of total revenue for the fiscal year ended February 28, 2014. As we expand our international operations, we may have difficulty managing and administering a globally dispersed business and we may need to expend additional funds to, among other activities, reorganize our sales force and technical support services team, outsource or supplement general and administrative functions, staff key management positions, obtain additional information technology infrastructure and successfully localize offerings for a significant number of international markets, which may adversely affect our operating results. Additional challenges associated with the conduct of our business overseas that may adversely affect our operating results include:

· Fluctuations in exchange rates;

· Pricing environments;

· Longer payment cycles and less financial stability of customers;

· Economic, political, compliance and regulatory risks associated with specific countries;

· Laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes;

· Difficulty selecting and monitoring channel partners outside of the U.S.;

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· Lower levels of availability or use of the Internet, through which our software is often delivered;

· Difficulty protecting our intellectual property rights overseas due to, among other reasons, the uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property rights;

· Difficulty in staffing, developing and managing foreign operations as a result of distance, language, legal, cultural and other differences;

· Different employee/employer relationships and the existence of works councils and labor unions;

· Difficulty maintaining quality standards consistent with the our brands;

· Export and import laws and regulations could prevent us from delivering our offerings into and from certain countries;

· Public health risks and natural disasters, particularly in areas in which we have significant operations;

· Limitations on the repatriation and investment of funds and foreign currency exchange restrictions;

· Changes in import/export duties, quotas or other trade barriers that could affect the competitive pricing of our offerings and reduce our market share in some countries; and

· Economic or political instability or terrorist acts in some international markets that could adversely affect our business in those markets or result in the loss or forfeiture of some foreign assets and the loss of sums spent developing and marketing those assets and the revenue associated with them.

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

A substantial portion of our revenue is derived from our Red Hat Enterprise Linux platform.

During our fiscal year ended February 28, 2014, a substantial portion of our subscription revenue was derived from our Red Hat Enterprise Linux technologies. Although we are continuing to develop other offerings, we expect that revenue from Red Hat Enterprise Linux will constitute a majority of our revenue for the foreseeable future. Declines and variability in demand for Red Hat Enterprise Linux could occur as a result of:

· competitive products and pricing;

· failure to release new or enhanced versions of Red Hat Enterprise Linux on a timely basis, or at all;

· technological change that we are unable to address with Red Hat Enterprise Linux; or

· future economic conditions.

Additionally, as more customers and potential customers virtualize their data centers and move computing projects to cloud environments, demand for operating systems such as Red Hat Enterprise Linux may decline. Due to the concentration of our revenue from Red Hat Enterprise Linux, our business, financial condition, operating results and cash flows could be adversely affected by a decline in demand for Red Hat Enterprise Linux.

We may be subject to greater tax liabilities.

We are subject to income and other taxes in the U.S. and in numerous foreign jurisdictions. Our domestic and foreign tax liabilities are subject to the allocation of revenue and expenses in different jurisdictions. Additionally, the amount of taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly subject to audits by tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially

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different from our historical income tax provisions and accruals. Economic and political pressures to increase tax revenue in various jurisdictions may make resolving tax disputes more difficult. The results of an audit or litigation could adversely affect our financial statements in the period or periods for which that determination is made.

We earn a significant amount of our operating income from outside the U.S., and any repatriation of funds currently held in foreign jurisdictions may result in higher effective tax rates for the company. In addition, there have been proposals to change U.S. tax laws that would significantly impact how U.S. multinational corporations are taxed on foreign earnings. Although we cannot predict whether or in what form this proposed legislation may pass, if enacted it could adversely affect our tax expense and cash flows.

Because we recognize revenue from subscriptions for our service over the term of the subscription, downturns or upturns in sales may not be immediately reflected in our operating results.

We generally recognize subscription revenue from customers ratably over the term of their subscription agreements, which are generally 12 to 36 months. As a result, much of the revenue we report in each quarter is deferred revenue from subscription agreements entered into during previous quarters. Consequently, a decline in subscriptions in any one quarter will not necessarily be fully reflected in the revenue in that quarter and will negatively affect our revenue in future quarters. In addition, we may be unable to adjust our cost structure to reflect this reduced revenue. Accordingly, the effect of significant downturns in sales and market acceptance of our service, and potential changes in our rate of renewals, may not be fully reflected in our operating results until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.

If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings.

Under generally accepted accounting principles, we review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry. We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, which could adversely affect our operating results.

We may be exposed to potential risks if we do not have an effective system of disclosure controls or internal controls.

We must comply, on an on-going basis, with the requirements of the Sarbanes-Oxley Act of 2002, including those provisions that establish the requirements for both management and auditors of public companies with respect to reporting on internal control over financial reporting. We cannot be certain that measures we have taken, and will take, will be sufficient or timely completed to meet these requirements on an on-going basis, or that we will be able to implement and maintain adequate disclosure controls and controls over our financial processes and reporting in the future, particularly in light of our rapid growth, international expansion and changes in our offerings, which are expected to result in on-going changes to our control systems and areas of potential risk.

If we fail to maintain an effective system of disclosure controls or internal control over financial reporting, including satisfaction of the requirements of the Sarbanes-Oxley Act, we may not be able to accurately or timely report on our financial results or adequately identify and reduce fraud. As a result, the financial condition of our business could be adversely affected; current and potential future shareholders could lose confidence in us and/or

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our reported financial results, which may cause a negative effect on our trading price; and we could be exposed to litigation or regulatory proceedings, which may be costly or divert management attention.

Changes in accounting principles and guidance, or their interpretation, could result in unfavorable accounting charges or effects, including changes to previously filed financial statements, which could cause our stock to decline.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. These principles are subject to interpretation by the Securities and Exchange Commission and various bodies formed to interpret and create appropriate accounting principles and guidance. A change in these principles or guidance, or in their interpretations, may have a significant effect on our reported results and may retroactively affect previously reported results.

Our investment portfolio is subject to credit and illiquidity risks and fluctuations in the market value of our investments and interest rates. These risks may result in an impairment of, or the loss of all or a portion of, the value of our investments, an inability to sell our investments or a decline in interest income.

We maintain an investment portfolio of various holdings, types and maturities. Our portfolio as of February 28, 2014 consisted primarily of money market funds, U.S. government and agency securities, German sovereign and agency securities, certificates of deposit, and corporate securities. Although we follow an established investment policy and seek to minimize the risks associated with our investments by investing primarily in investment grade, highly liquid securities and by limiting the amounts invested with any one institution, type of security or issuer, we cannot give assurances that the assets in our investment portfolio will not lose value or become impaired, or that our interest income will not decline.

A significant part of our investment portfolio consists of U.S. government and agency securities. If global credit and equity markets experience prolonged periods of decline, or if there is a default or downgrade of U.S. government or agency debt, our investment portfolio may be adversely impacted and we could determine that some of our investments have experienced an other-than-temporary decline in fair value, requiring impairment charges that could adversely affect our financial condition and operating results.

Future fluctuations in economic and market conditions could adversely affect the market value of our investments, and we could record additional impairment charges and lose some or all of the principal value of investments in our portfolio. A total loss of an investment or a significant decline in the value of our investment portfolio could adversely affect our financial condition and operating results. For information regarding the sensitivity of and risks associated with the market value of portfolio investments and interest rates, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”.

Our investments in private companies are subject to risk of loss of investment capital. Some of these investments may have been made to further our strategic objectives and support our key business initiatives. Our investments in private companies are inherently risky because the markets for the technologies they have under development are typically in the early stages and may never materialize. We could lose the value of our entire investment in these companies.

We are subject to risks of currency fluctuations and related hedging operations.

A portion of our business is conducted in currencies other than the U.S. dollar. Changes in exchange rates among other currencies and the U.S. dollar will affect our net revenue, operating expenses and operating margins. We cannot predict the impact of future exchange rate fluctuations. As we expand international operations, our exposure to exchange rate fluctuations increases. We use financial instruments, primarily forward purchase contracts, to economically hedge currency commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations. If these hedging activities are not successful or we change or

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reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates. For information regarding our hedging activity, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”.

Epidemics, geo-political events, Internet and power outages or natural disasters could adversely affect our business, financial condition, operating results and cash flows.

The occurrence of one or more epidemics, geo-political events (such as civil unrest or terrorist attacks), Internet and power outages or natural disasters in a country in which we operate or in which technology industry suppliers or our customers are located, could adversely affect our business, financial condition, operating results and cash flows. Such events could result in physical damage to, or the complete loss of, one or more of our facilities, the lack of an adequate work force in a market, the inability of our customers to access our offerings, the inability of our associates to reach or have transportation to our facilities directly affected by such events, the evacuation of the populace from areas in which our facilities are located, changes in the purchasing patterns of our customers, the temporary or long-term disruption in the supply of computer hardware and related components, the disruption or delay in the manufacture and transport of goods overseas, the disruption of utility services to our facilities or to suppliers, partners or customers, or disruption in our communications with our customers.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters is currently located in a subleased facility at 100 E. Davie Street, Raleigh, North Carolina. The building includes approximately 380,000 square feet of office and retail space and an integrated parking deck. We entered into an agreement to sublease this building on December 27, 2011, and the sublease will expire on August 23, 2035. The rental payments under the sublease are approximately $4.6 million annually until December 31, 2020 and approximately $3.8 million annually thereafter until the end of the sublease. We are also responsible for payment of taxes and all operating expenses relating to the subleased building (other than certain expenses relating to the operation of the integrated parking deck and the retail portions of the building, which are the responsibility of the tenants of those portions of the building). Over the term of the sublease agreement, we also receive certain rent credits and improvement allowances.

In addition to our headquarters, we have leased office facilities in over 35 countries and more than 80 locations. Significant locations in North America include Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; McLean, Virginia; Mountain View, California; Toronto, Canada and Westford, Massachusetts. Significant locations in Latin America include Buenos Aires, Argentina; Mexico City, Mexico; Santiago, Chile and Sao Paulo, Brazil. Significant locations in EMEA include Amsterdam, Netherlands; Barcelona, Spain; Brno, Czech Republic; Cork, Ireland; Dubai, United Arab Emirates; Farnborough, United Kingdom; Frankfurt, Germany; Madrid, Spain; Munich, Germany; Puteaux, France; Ra’anana, Israel; Rome, Italy; Stockholm, Sweden and Stuttgart, Germany. Significant locations in Asia Pacific include Bangalore, India; Beijing, China; Brisbane, Australia; Melbourne, Australia; Mumbai, India; New Delhi, India; Pune, India; Seoul, South Korea; Singapore; Sydney, Australia and Tokyo, Japan. We believe that in all material respects our properties have been satisfactorily maintained, are in good condition and are suitable for our operations.

ITEM 3. LEGAL PROCEEDINGS

The Company experiences routine litigation in the normal course of its business, including patent litigation. The Company presently believes that the outcome of this routine litigation will not have a material adverse effect on its financial condition, results of operations or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

This Item is not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the New York Stock Exchange under the symbol “RHT”. The chart below sets forth the high and low sales information for each of the quarters of the fiscal years ended February 28, 2014 and February 28, 2013.

	FY 2014				FY 2013
Quarter	High		Low		High		Low
First	$	55.59	$	46.75	$	62.75	$	48.25
Second	$	53.72	$	44.92	$	59.49	$	49.45
Third	$	54.38	$	41.89	$	60.00	$	46.76
Fourth	$	60.19	$	45.45	$	57.10	$	46.34

Holders

As of April 16, 2014, we estimate that there were 1,391 registered stockholders of record of our common stock.

Dividends

We have never declared or paid any cash dividends on our common stock. We anticipate that our future earnings will be retained for the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future.

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Stock Performance Graph

The following graph shows a comparison of cumulative total return (equal to dividends plus stock appreciation) during the period from February 28, 2009 through February 28, 2014 for:

· Red Hat, Inc.;

· a peer group consisting of Adobe Systems Incorporated, Akamai Technologies, Inc., Ansys, Inc., Autodesk, Inc., Cadence Design Systems, Inc., Citrix, Informatica Corporation, Intuit Inc., Jack Henry & Associates, Inc., Micros Systems, Inc., NetApp, Nuance Communications, Inc., Salesforce.com, Inc., Synopsys, Inc., TIBCO Software, Inc., Verisign, Inc. and VMware (the “Stock Performance Peer Group”); and

· the S&P 500 Index.

We are required to provide a line-graph presentation comparing cumulative, five-year stockholder returns on an indexed basis with a broad equity market index and either a published industry index or an index of peer companies selected by Red Hat. In our index of peer group companies, we have selected peer companies considered to be peers for purposes of benchmarking executive compensation during the fiscal year ended February 28, 2014.

COMPARISON OF FIVE-YEAR CUMULATIVE

TOTAL RETURN AMONG RED HAT,

STOCK PERFORMANCE PEER GROUP AND S&P 500 INDEX

	2/28/2009		2/28/2010		2/28/2011		2/29/2012		2/28/2013		2/28/2014
RED HAT, INC.	$	100.00	$	204.89	$	301.53	$	361.29	$	371.15	$	430.90
PEER GROUP	$	100.00	$	189.93	$	291.10	$	309.72	$	296.81	$	388.10
S&P 500 INDEX	$	100.00	$	153.55	$	188.25	$	197.84	$	224.44	$	281.34

Notes:

· Assumes initial investment of $100.00 on February 28, 2009. Total return includes reinvestment of dividends.

· The lines represent annual index levels derived from compounded daily returns that include all dividends.

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· If the annual interval, based on the fiscal year-end, ends on a day that is not a trading day, the preceding trading day is used.

· The information included under the heading “Stock Performance Graph” in Item 5 of this Annual Report on Form 10-K is “furnished” and not “filed” and shall not be deemed to be “soliciting material” or subject to Rule 14A, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act or otherwise subject to the limitations of that section, and shall not be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act, whether made before or after the date of this report and irrespective of any general incorporation by reference language in any such filing.

· The stock price performance shown in the graph is not necessarily indicative of future price performance.

Issuer Purchases of Equity Securities

The table below sets forth information regarding the Company’s purchases of its common stock during its fourth fiscal quarter ended February 28, 2014:

Issuer Purchases of Equity Securities

Period	Total Number of  Shares Purchased (1)		Weighted Average Price Paid per Share		Total Number of Shares  Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number  (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans  or Programs (2)
December 1, 2013 – December 31, 2013		—	$	—		—	$	240.0 million
January 1, 2014 – January 31, 2014		72,515	$	59.02		—	$	240.0 million
February 1, 2014 – February 28, 2014		—	$	—		—	$	240.0 million
Total		72,515	$	59.02		—

(1) During the three months ended February 28, 2014, the Company withheld an aggregate of 72,515 shares of common stock from employees to satisfy minimum tax withholding obligations relating to the vesting of restricted share awards. These shares were not withheld pursuant to the program described in Note 2 below.

(2) On April 15, 2013, the Company announced that its Board of Directors has authorized the repurchase of up to $300.0 million of Red Hat’s common stock from time to time on the open market or in privately negotiated transactions. The program commenced on April 16, 2013, and will expire on the earlier of (i) March 31, 2015, or (ii) a determination by the Board, Chief Executive Officer or Chief Financial Officer to discontinue the program.

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data for each of the Company’s fiscal years in the five-year period ended February 28, 2014. The selected balance sheet data as of February 28, 2014 and February 28, 2013 and the selected statement of operations data for the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012 are derived from our Consolidated Financial Statements contained in this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information included herein. The selected statement of operations data for the fiscal years ended February 28, 2011 and February 28, 2010 and the selected balance sheet data as of February 29, 2012, February 28, 2011 and February 28, 2010, are derived from our Consolidated Financial Statements contained in the Annual Reports on Form 10-K for the years ended February 29, 2012 and February 28, 2011.

	Year Ended
	February 28, 2014		February 28, 2013		February 29, 2012			February 28, 2011		February 28, 2010
	(in thousands, except per share data)
SELECTED STATEMENT OF OPERATIONS DATA
Revenue:
Subscriptions	$	1,336,771	$	1,148,341	$	965,575		$	773,404	$	638,654
Training and services		197,844		180,476		167,528			135,873		109,582
Total subscription and training and services revenue	$	1,534,615	$	1,328,817	$	1,133,103		$	909,277	$	748,236
Gross profit	$	1,302,015	$	1,128,217	$	954,555		$	758,990	$	634,391
Income from operations	$	232,289	$	201,038	$	199,913		$	145,676	$	100,349
Interest income	$	6,645	$	8,245	$	8,418		$	6,743	$	10,381
Other income (expense), net	$	614	$	469	$	(322	)	$	1,275	$	10,772
Net income	$	178,292	$	150,204	$	146,626		$	107,278	$	87,253
Basic net income per common share	$	0.94	$	0.78	$	0.76		$	0.56	$	0.46
Diluted net income per common share	$	0.93	$	0.77	$	0.75		$	0.55	$	0.45
Weighted average shares outstanding
Basic		189,920		193,147		193,151			190,294		187,845
Diluted		192,036		195,804		196,451			196,353		193,546

	As of
	February 28, 2014		February 28, 2013		February 29, 2012		February 28, 2011		February 28, 2010
	(in thousands)
SELECTED BALANCE SHEET DATA
Total cash and investments in debt and equity securities (available-for-sale, current and long-term)	$	1,487,429	$	1,318,373	$	1,260,353	$	1,192,391	$	970,185
Working capital	$	423,096	$	383,037	$	395,050	$	504,757	$	436,852
Total assets	$	3,106,619	$	2,813,660	$	2,491,099	$	2,199,322	$	1,870,872
Total deferred revenue (current and long-term)	$	1,289,197	$	1,089,952	$	946,736	$	772,254	$	645,860
Stockholders’ equity	$	1,551,165	$	1,520,161	$	1,398,817	$	1,290,699	$	1,111,052

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a leading global provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, virtualization, middleware, storage and cloud technologies.

Open source software is an alternative to proprietary software and represents a different model for the development and licensing of commercial software code than that typically used for proprietary software. Because open source software code is often freely shared, there are customarily no licensing fees for the use of open source software. Therefore, we do not recognize revenue from the licensing of the code itself. We provide value to our customers through the development, aggregation, integration, testing, certification, delivery, maintenance, enhancement and support of our Red Hat enterprise technologies, and by providing a level of performance, reliability, scalability, flexibility, stability and security for the enterprise technologies we package and distribute. Moreover, because communities of developers not employed by us assist with the creation of our open source offerings, opportunities for further innovation of our offerings are supplemented by these communities.

We primarily provide our enterprise offerings in the form of annual or multi-year subscriptions, and we recognize revenue over the period of the subscription agreements with our customers. We market our offerings primarily to enterprise customers.

We have focused on introducing and gaining acceptance for Red Hat enterprise technologies that comprise our open source architecture. Red Hat Enterprise Linux and Red Hat JBoss Middleware offerings have gained widespread ISV and IHV support. We have continued to build our open source architecture by expanding our enterprise operating system and middleware offerings and introducing virtualization, storage, cloud and other offerings.

We derive our revenue and generate cash from customers primarily from two sources: (i) subscription revenue and (ii) training and services revenue. These arrangements typically involve subscriptions to Red Hat enterprise technologies. Our revenue is affected by, among other factors, corporate, government and consumer spending levels. In evaluating the performance of our business, we consider a number of factors, including total revenue, deferred revenue, operating income, operating margin and cash flows from operations.

The arrangements with our customers that produce this revenue and cash are explained in further detail in Part II, Item 7 under “Critical Accounting Estimates” and in NOTE 2—Summary of Significant Accounting Policies to our Consolidated Financial Statements.

In our fiscal year ended February 28, 2014, we focused on and expect in our fiscal year ending February 28, 2015 to continue to focus on, among other things, (i) promoting the widespread adoption of Red Hat enterprise offerings by enterprise customers globally, (ii) expanding our virtualization, storage, cloud and other enterprise offerings, (iii) investing in the development of open source technologies, (iv) increasing revenue from our existing customer base, (v) increasing revenue by promoting a range of services to help our customers derive additional value, (vi) expanding routes to market, (vii) growing our presence in international markets, and (viii) pursuing strategic acquisitions and alliances.

Revenue 

For the year ended February 28, 2014, total revenue increased 15.5%, or $205.8 million, to $1.53 billion from $1.33 billion for the year ended February 28, 2013. Subscription revenue increased 16.4%, or $188.4

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million, driven primarily by additional subscriptions related to our principal Red Hat Enterprise Linux and Red Hat JBoss Middleware offerings, which continue to gain broader market acceptance in mission-critical areas of computing, and our expansion of sales channels and our geographic footprint. The increase is, in part, a result of the continued migration of enterprises in industries such as financial services, government, technology and telecommunications to our open source solutions from proprietary technologies. Training and services revenue increased 9.6%, or $17.4 million, for the year ended February 28, 2014 as compared to the year ended February 28, 2013. The increase is driven primarily by customer interest in new products and increased demand for our open source solutions.

We believe our success is influenced by:

· the extent to which we can expand the breadth and depth of our enterprise offerings;

· our ability to enhance the value of Red Hat enterprise offerings through frequent and continuing innovation while maintaining stable platforms over multi-year periods;

· our ability to generate increasing revenue from channel partner and other strategic relationships, including cloud computing providers, distributors, IHVs, ISVs, OEMs, SIs, and VARs;

· our ability to generate new and recurring revenue for Red Hat enterprise offerings;

· the widespread and increasing deployment of open source technologies by enterprises and similar institutions, such as government agencies and universities; and

· our ability to provide customers with consulting and training services that generate additional revenue.

Deferred revenue, billings proxy, seasonality and backlog

Deferred revenue

Our deferred revenue, current and long-term, balance at February 28, 2014 was $1.29 billion. Because of our subscription model and revenue recognition policies, deferred revenue improves predictability of future revenue. For example, current deferred revenue provides a baseline for revenue to be recognized over the next twelve months. Similarly, long-term deferred revenue provides a baseline for revenue to be recognized beyond twelve months. Total deferred revenue at February 28, 2014 increased 18.3%, or $199.2 million, as compared to the balance at February 28, 2013 of $1.09 billion.

The change in deferred revenue reported on our Consolidated Balance Sheets of $199.2 million differs from the $205.4 million change in deferred revenue we reported on our Consolidated Statements of Cash Flows for the year ended February 28, 2014 due to changes in foreign currency exchange rates used to translate deferred revenue balances from our foreign subsidiaries’ functional currency into U.S. dollars.

Billings proxy

We approximate our annual billings by adding revenue recognized on our Consolidated Statements of Operations to the change in total deferred revenue reported on our Consolidated Statements of Cash Flows. We use the change in deferred revenue as reported on our Consolidated Statements of Cash Flows because the amount has been adjusted for the impact of changes in foreign currency exchange rates used to translate deferred revenue balances from our foreign subsidiaries’ functional currencies into U.S. dollars.

Our billings proxy increased by 16.7%, or $248.6 million, to $1.74 billion for the year ended February 28, 2014 from $1.49 billion for the year ended February 28, 2013.

Seasonality

Our fourth fiscal quarter has historically been our strongest quarter for new billings and renewals. This pattern has become more pronounced over time as the number of customers with renewal dates occurring in the last half of our fiscal year has continued to increase. Furthermore, our quarterly sales cycles are frequently

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weighted toward the end of the quarter, with an increased volume of sales completed in the last few weeks of each quarter. The year-over-year compounding effect of this seasonality in billing patterns and overall new business and renewal activity causes the value of invoices making up our billings that we generate in the last half of our fiscal year to continually increase in proportion to the value of our invoices making up our billings in the first half of our fiscal year. Below is a summary of our billings (approximated as described above by adding revenue for the period with the change in deferred revenue as reported on our Consolidated Statements of Cash Flows for the same period) by quarter for fiscal 2014, fiscal 2013, fiscal 2012, fiscal 2011 and fiscal 2010 (in thousands):

	First quarter					Second quarter					Third quarter					Fourth quarter
	Billings proxy		% of fiscal year total			Billings proxy		% of fiscal year total			Billings proxy		% of fiscal year total			Billings proxy		% of fiscal year total
Year ended February 28, 2014	$	346,359		19.9	%	$	376,303		21.6	%	$	452,555		26.0	%	$	564,755		32.5	%
Year ended February 28, 2013	$	309,609		20.8	%	$	349,025		23.4	%	$	378,813		25.4	%	$	453,944		30.4	%
Year ended February 29, 2012	$	266,016		20.3	%	$	304,171		23.2	%	$	322,072		24.6	%	$	417,699		31.9	%
Year ended February 28, 2011	$	208,086		20.4	%	$	233,200		22.8	%	$	262,379		25.7	%	$	318,336		31.1	%
Year ended February 28, 2010	$	176,749		21.3	%	$	193,788		23.3	%	$	217,792		26.2	%	$	242,532		29.2	%

We also have historically experienced a seasonal decline in our services revenue during our fiscal fourth quarter as compared to our fiscal third quarter.

Backlog

Our backlog as of February 28, 2014 totaled approximately $1.56 billion and includes amounts billed to customers and recognized as current and long-term deferred revenue on our Consolidated Balance Sheet of $966.8 million and $322.4 million, respectively, plus the value of non-cancellable subscription and services agreements to be billed in the future and not reflected in our financial results, which was in excess of $270.0 million. Our total backlog as of February 28, 2013 was approximately $1.37 billion and included off-balance sheet backlog in excess of $280.0 million. The increase in backlog from approximately $1.37 billion as of February 28, 2013 to $1.56 billion as of February 28, 2014 demonstrates increased customer commitment to our open source technologies.

We report our off-balance sheet backlog as a conservative approximation, often describing the amount as “in excess of”, primarily because the value of underlying contracts is derived from data not yet subjected to the complete application of our revenue recognition policies. We endeavor to derive the value of our off-balance sheet backlog in a consistent manner year over year and therefore believe the amounts are comparable.

Subscription revenue 

Our enterprise technologies are sold primarily under subscription agreements. These agreements typically have a one- or three-year subscription period. A subscription generally entitles a customer to, among other things, a specified level of support, as well as new versions of the software, security updates, fixes, functionality enhancements and upgrades to the technology, if and when available, and compatibility with an ecosystem of certified hardware and software applications. Subscription revenue increased sequentially for each quarter of fiscal 2014, fiscal 2013 and fiscal 2012 and is being driven primarily by the increased use of our offerings by the enterprise and our expansion of sales channels and geographic footprint during these periods.

Revenue by geography 

In the year ended February 28, 2014, approximately 44.7%, or $686.6 million, of our revenue was generated outside the U.S. compared to approximately 43.3%, or $574.9 million, for the year ended February 28, 2013. Our international operations are expected to continue to grow as our international sales force and channels become more mature and as we enter new locations outside the U.S. or expand our presence in existing international locations. As of February 28, 2014, we had offices in more than 80 locations throughout the world.

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We operate our business in three geographic regions: the Americas (U.S., Latin America and Canada); EMEA (Europe, Middle East and Africa); and Asia Pacific (principally Australia, China, India, Japan, Singapore and South Korea). Revenue generated by the Americas, EMEA and Asia Pacific for fiscal 2014, fiscal 2013 and fiscal 2012 was as follows (in thousands):

	Americas		EMEA		Asia Pacific		Total
Year ended February 28, 2014	$	974,655	$	352,935	$	207,025	$	1,534,615
Year ended February 28, 2013	$	855,214	$	284,922	$	188,681	$	1,328,817
Year ended February 29, 2012	$	716,033	$	257,603	$	159,467	$	1,133,103

Year-over-year revenue growth rates in U.S. dollars for our three geographical regions were as follows for fiscal 2014, fiscal 2013 and fiscal 2012:

	Americas			EMEA			Asia Pacific			Total
Year ended February 28, 2014		14.0	%		23.9	%		9.7	%		15.5	%
Year ended February 28, 2013		19.4	%		10.6	%		18.3	%		17.3	%
Year ended February 29, 2012		22.7	%		29.0	%		26.7	%		24.6	%

Excluding the impact of changes in foreign currency exchange rates, revenue from the Americas, EMEA and Asia Pacific grew approximately 14.7%, 19.7% and 23.9%, respectively, for the year ended February 28, 2014. Excluding the impact of changes in foreign currency exchange rates, total revenue grew by 17.1% for the year ended February 28, 2014.

As we expand further within each region, we anticipate revenue growth rates in local currencies to become more similar among our geographic regions due to the similarity of products and services offered and the similarity in customer types or classes.

Gross profit margin 

Gross profit margin decreased slightly to 84.8% for the year ended February 28, 2014 from 84.9% for the year ended February 28, 2013 as a result of increased amortization related to the prior fiscal year’s complementary middleware and cloud-management technology acquisitions and increased staffing to support our emerging cloud offerings, such as OpenStack and OpenShift. These incremental amortization and staffing costs were partially offset by a slight product mix shift from services to subscriptions due to the higher gross profit margins for subscriptions.

Gross profit margin by geography 

Gross profit margins by geographic region for fiscal 2014, fiscal 2013 and fiscal 2012 were as follows:

	Americas			EMEA			Asia Pacific			Total
Year ended February 28, 2014		85.0	%		88.8	%		83.2	%		84.8	%
Year ended February 28, 2013		84.9	%		88.9	%		83.9	%		84.9	%
Year ended February 29, 2012		84.4	%		87.7	%		82.7	%		84.2	%

Regional year-over-year variations in gross profit margins are primarily due to slight product mix shifts between subscriptions and services.

As we continue to expand our sales and support services within our geographic regions, we expect gross profit margins across geographic regions to further converge over the long run due to the similarity of products and services offered, similarity in production and distribution methods and the similarity in customer types or classes. These geographic profit margins exclude the impact of share-based compensation expense, which was not allocated to our geographic regions.

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Income from operations 

Operating income was 15.1% of total revenue for each of the years ended February 28, 2014 and February 28, 2013. Operating expenses as a percent of revenue decreased to 69.7% for the year ended February 28, 2014 from 69.8% for the year ended February 28, 2013 as savings realized from our general and administrative functions offset the increase in costs from investments made in our sales and marketing and research and development functions.

Income from operations by geography 

Operating income as a percentage of revenue generated by our geographic regions for fiscal 2014, fiscal 2013 and fiscal 2012 was as follows:

	Americas			EMEA			Asia Pacific			Total (1)
Year ended February 28, 2014		20.4	%		26.9	%		25.1	%		15.1	%
Year ended February 28, 2013		21.2	%		25.4	%		24.5	%		15.1	%
Year ended February 29, 2012		23.1	%		29.0	%		24.7	%		17.6	%

(1) Total operating income as a percentage of revenue includes corporate (non-allocated) share-based compensation expense for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 of $113.8 million, $98.7 million and $79.3 million, respectively. For additional information, see NOTE 20—Segment Reporting to our Consolidated Financial Statements.

Cash, cash equivalents, investments in debt and equity securities and cash flow from operations 

Cash, cash equivalents and short-term and long-term available-for-sale investments in securities balances at February 28, 2014 totaled $1.49 billion. Cash generated from operating activities for the year ended February 28, 2014 totaled $540.6 million, which represents an increase of 16.2% in operating cash flow as compared to the year ended February 28, 2013. This increase is due to an increase in subscription and services revenues, billings and collections during the same period.

Our significant cash and investment balances give us a measure of flexibility to take advantage of opportunities, such as acquisitions, increasing investment in international areas and repurchasing our common stock.

Foreign currency exchange rates’ impact on results of operations 

Approximately 44.7% of our revenue for the year ended February 28, 2014 came from sales outside the U.S. We are exposed to significant risks of foreign currency fluctuation primarily from receivables denominated in foreign currency and are subject to transaction gains and losses, which are recorded as a component in determining net income. The income statements of our non-U.S. operations are translated into U.S. dollars at the average exchange rates for each applicable month in a period. To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign-currency-denominated transactions results in increased revenue and operating expenses from operations for our non-U.S. operations. Similarly, our revenue and operating expenses will decrease for our non-U.S. operations if the U.S. dollar strengthens against foreign currencies.

Using the average foreign currency exchange rates from our prior fiscal year ended February 28, 2013, our revenue and operating expenses from non-U.S. operations for the fiscal year ended February 28, 2014 would have been higher than we reported by approximately $21.4 million and $12.1 million, respectively, which would have resulted in income from operations being higher by $9.3 million.

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Business combinations 

During the year ended February 28, 2013, we completed the acquisition of ManageIQ, Inc. (“ManageIQ”) for approximately $104.5 million in cash. ManageIQ is a provider of enterprise cloud management and automation solutions that enable organizations to deploy, manage and optimize private clouds, public clouds and virtualized infrastructures. As a result of the acquisition of ManageIQ, operating expenses increased by approximately $3.0 million for the year ended February 28, 2013.

Also during the year ended February 28, 2013, we acquired two businesses operating in the middleware space. These acquisitions include technologies that are complementary to our Red Hat JBoss Middleware technology. One acquisition, which included certain assets and related operations acquired from Polymita Technologies S.L. (“Polymita”), closed on August 28, 2012. The second acquisition closed on September 7, 2012 and included certain assets and related operations acquired from FuseSource, a division of Progress Software Corporation (“FuseSource”). Transaction fees related to these two acquisitions totaled approximately $1.0 million for the year ended February 28, 2013 and are included in general and administrative expense on our Consolidated Statement of Operations for the year ended February 28, 2013. As a result of these two acquisitions, operating expenses increased by approximately $8.0 million for the year ended February 28, 2013.

During the year ended February 29, 2012, we acquired Gluster, Inc. (“Gluster”). Gluster develops, distributes and provides support for open-source, scale-out storage software. The acquisition expands our enterprise software offerings to include management of unstructured data. Total consideration transferred as part of the acquisition was $137.2 million and includes cash consideration of $135.9 million and equity consideration related to assumed, nonvested employee share-based awards of $1.2 million. The total fair value, as of October 7, 2011, of all assumed nonvested awards was $14.5 million, of which $1.2 million has been attributed to pre-acquisition employee services and accordingly has been recognized as consideration transferred. The remaining $13.3 million of fair value will be recognized as compensation expense over the remaining vesting period.

For further discussion related to our acquisitions, see NOTE 3—Business Combinations to our Consolidated Financial Statements.

Facility exit costs

In December 2011, we entered into an agreement to sublease a building located in downtown Raleigh, North Carolina in which our headquarters is currently located. In connection with the transition to our new headquarters, we have subleased or entered into agreements to assign our existing leases related to the two facilities that previously constituted our headquarters in Raleigh, North Carolina.

In May 2012, we entered into a sublease agreement with an unrelated third-party to lease one of the two facilities that previously constituted our headquarters. As a result, we recognized a loss of $3.1 million for the year ended February 28, 2013, which represented the excess of our remaining obligation on the space over the agreed sublease income.

We ceased using the remaining facility in June 2013 and, as a result, recognized a loss of $2.2 million which represented the remaining costs associated with our exit from the facility. In August 2013, we agreed to assign our lease related to the remaining facility to an unrelated third party effective September 2014.

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CRITICAL ACCOUNTING ESTIMATES

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). Our significant accounting policies are disclosed in NOTE 2—Summary of Significant Accounting Policies to our Consolidated Financial Statements and describe our methods for applying U.S. GAAP in areas such as revenue recognition, deferred selling costs, fair value measurements, and foreign currency translation among other areas deemed significant. In applying certain significant accounting policies, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition, results of operations or cash flows could be adversely affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting estimates, which we discuss further below. Critical accounting estimates are applied in the following areas:

· Revenue recognition;

· Goodwill and other long-lived assets;

· Share-based compensation;

· Income taxes; and

· Loss contingencies.

Revenue recognition

Application of accounting principles related to the measurement and recognition of revenue requires judgment. For example, in transactions that include multiple elements, we must exercise judgment in determining whether adequate vendor-specific objective evidence (“VSOE”) of fair value exists for each undelivered element. Changes to the elements in a transaction, the ability to identify VSOE for those elements, and changes in the fair value of the respective elements could materially impact the amount of earned and unearned revenue.

In addition, complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine appropriate accounting, including whether the deliverables specified in a multiple element transaction should be treated as separate units of accounting.

Goodwill and other long-lived assets

We make judgments about the recoverability of goodwill, identifiable intangible assets and other long-lived assets, including capitalized software purchased or developed for internal use. The assumptions and estimates used to determine recoverability of goodwill, identifiable intangible assets and other long-lived assets are complex and subjective. They can be affected by various factors, including external factors, such as industry and economic trends, and internal factors, such as changes in our business strategy and our internal, multi-year forecasts for our subscription and services offerings, which often include emerging technologies. Changes in any of these various factors could materially impact our financial condition and results of operations.

Share-based compensation

We are required to make estimates and assumptions with regards to the number of share-based awards that we expect will ultimately vest and the amount of tax benefits we expect will ultimately be realized, among other things.

46

Share-based awards expected to vest

We currently apply an estimated annual forfeiture rate of 10% to the service-based share awards we grant to our employees. Our estimated forfeiture rate is based on recent historical experience as well as qualitative considerations about management’s expectations for attrition rates over the vesting periods. Actual attrition rates could vary significantly from our expectations resulting in material quarterly adjustments to our financial results. During the year ended February 28, 2014 we granted service-based share awards with a total fair value of $120.9 million to which we applied an estimated annual forfeiture rate of 10%.

With respect to performance-based awards that we grant to certain executive officers and senior management, we estimate the number of shares expected to vest based primarily on our most current reported financial results relative to a defined peer group’s most recent reported financial results. Because past or current financial trends may not be predictive of future financial performance, our estimate of the number of shares expected to vest may differ materially from the number of shares that actually vest. The maximum number of potential performance-based shares available to vest as of February 28, 2014 totaled 1.7 million, of which approximately 1.1 million shares are expected to vest. If all of the potential performance-based shares were to vest, we would be required to recognize additional expense of approximately $6.0 million. See NOTE 13—Share-based Awards to our Consolidated Financial Statements for further discussion related to awards outstanding and expected to vest.

Income tax benefits related to share-based awards

We recognize share-based compensation expense based on an award’s grant date fair value over the requisite service period. Because we do not know the actual amount of tax benefits an award will generate until such award is exercised (or vested), we assume that the amount ultimately recognized for tax purposes will be the same amount we recognized in our operating results, that is for “book” purposes. Consequently, our deferred tax asset related to shared-based compensation expense, which totaled $32.5 million as of February 28, 2014, is based on each qualifying award’s grant date fair value rather than the award’s to-be-determined exercise date intrinsic value (or vesting date fair value).

Historically, the difference between the grant date fair value and the exercise date intrinsic value has been significant. As a result of such differences, for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, we realized excess tax benefits related to share-based awards totaling $12.8 million, $34.2 million and $29.9 million, respectively.

If the share price for our common stock were to depreciate for a sustained period of time we could be required to recognize a tax benefit shortfall. Such shortfalls could have a material adverse effect on our cash flows and—to the extent such shortfalls accumulate in excess of approximately $170.0 million (the amount of our accumulated pool of windfall tax benefits available to offset future shortfalls)—could materially adversely impact our results of operations. For further discussion, see NOTE 2—Summary of Significant Accounting Policies, NOTE 11—Income Taxes and NOTE 13—Share-based Awards to our Consolidated Financial Statements.

Income taxes

As described in NOTE 2—Summary of Significant Accounting Policies to our Consolidated Financial Statements, we account for income taxes using the liability method in which deferred tax assets or liabilities are recognized for the temporary differences between financial reporting and tax bases of our assets and liabilities and for tax carryforwards at enacted statutory tax rates in effect for the years in which the differences are expected to reverse.

We continue to assess the realizability of our deferred tax assets, which primarily consist of share-based compensation expense deductions (described above), tax credit carryforwards and deferred revenue. In assessing the realizability of these deferred tax assets, management considers whether it is more likely than not that some

47

portion or all of the deferred tax assets will be realized. As of February 28, 2014, deferred tax assets totaled $137.9 million, of which $0.7 million was offset by a valuation allowance. For further discussion regarding deferred income taxes see NOTE 2—Summary of Significant Accounting Policies and NOTE 11—Income Taxes to our Consolidated Financial Statements.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, we make certain estimates and assumptions in (i) calculating our income tax expense, deferred tax assets and deferred tax liabilities, (ii) determining any valuation allowance recorded against deferred tax assets and (iii) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. Our estimates and assumptions may differ significantly from tax benefits ultimately realized. For further discussion regarding uncertain tax positions see NOTE 11—Income Taxes to our Consolidated Financial Statements.

Loss contingencies

We are subject to the possibility of various losses arising in the course of conducting our business, including losses related to legal proceedings and claims brought against us. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated.

Significant judgment is required in evaluating both the likelihood and the estimated amount of a potential loss. Until the final resolution of a matter, there may be an exposure to loss in excess of the amount recorded, and such amount could be material. Should any of our estimates or assumptions change or prove to have been incorrect, it could materially adversely impact on our business, financial condition, operating results or cash flows.

48

RESULTS OF OPERATIONS

Years ended February 28, 2014 and February 28, 2013

The following table is a summary of our results of operations for the years ended February 28, 2014 and February 28, 2013 (in thousands):

	Year Ended
	February 28, 2014			February 28, 2013			$ Change			% Change
Revenue:
Subscriptions	$	1,336,771		$	1,148,341		$	188,430			16.4	%
Training and services		197,844			180,476			17,368			9.6
Total subscription and training and services revenue	$	1,534,615		$	1,328,817		$	205,798			15.5	%
Cost of subscription and training and services revenue:
Cost of subscriptions		97,100			80,340			16,760			20.9
As a % of subscription revenue		7.3	%		7.0	%
Cost of training and services		135,500			120,260			15,240			12.7
As a % of training and services revenue		68.5	%		66.6	%
Total cost of subscription and training and services revenue	$	232,600		$	200,600		$	32,000			16.0	%
As a % of total revenue		15.2	%		15.1	%
Total gross profit	$	1,302,015		$	1,128,217		$	173,798			15.4	%
Operating expense:
Sales and marketing		597,885			514,554			83,331			16.2
Research and development		317,263			263,150			54,113			20.6
General and administrative		152,407			146,333			6,074			4.2
Facility exit costs		2,171			3,142			(971	)		(30.9	)
Total operating expense	$	1,069,726		$	927,179		$	142,547			15.4	%
Income from operations		232,289			201,038			31,251			15.5
Interest income		6,645			8,245			(1,600	)		(19.4	)
Other income (expense), net		614			469			145			30.9
Income before provision for income taxes	$	239,548		$	209,752		$	29,796			14.2	%
Provision for income taxes		61,256			59,548			1,708			2.9
Net income	$	178,292		$	150,204		$	28,088			18.7	%
Gross profit margin—subscriptions		92.7	%		93.0	%
Gross profit margin—training and services		31.5	%		33.4	%
Gross profit margin		84.8	%		84.9	%
As a % of total revenue:
Subscription revenue		87.1	%		86.4	%
Training and services revenue		12.9	%		13.6	%
Sales and marketing expense		39.0	%		38.7	%
Research and development expense		20.7	%		19.8	%
General and administrative expense		9.9	%		11.0	%
Facility exit costs		0.1	%		0.2	%
Total operating expenses		69.7	%		69.8	%
Income from operations		15.1	%		15.1	%
Income before provision for income taxes		15.6	%		15.8	%
Net income		11.6	%		11.3	%
Effective income tax rate		25.6	%		28.4	%

49

Revenue

Subscription revenue

Subscription revenue, which is primarily comprised of direct and indirect sales of Red Hat enterprise offerings, increased by 16.4%, or $188.4 million, to $1.34 billion for the year ended February 28, 2014 from $1.15 billion for the year ended February 28, 2013.

Revenue derived from the sale of subscriptions supporting our Infrastructure-related offerings increased by 13.9%, or $143.1 million, to $1.17 billion for the year ended February 28, 2014 from $1.03 billion for the year ended February 28, 2013 and is primarily due to increases in volumes sold, including additional subscriptions attributable to geographic expansion and the continued migration of enterprises to our open source Linux platform from proprietary Unix platforms.

Revenue derived from the sale of subscriptions supporting our Application Development-related and other emerging technology offerings increased by 37.6%, or $45.3 million, to $165.7 million for the year ended February 28, 2014 from $120.4 million for the year ended February 28, 2013. The increase is primarily due to additional subscriptions for Red Hat JBoss Middleware offerings. We expect the growth rate of revenue derived from our Application Development-related and other emerging technology offerings to exceed the growth rate of revenue derived from our Infrastructure-related offerings as our Application Development-related and other emerging technology offerings continue to gain broader market acceptance in the enterprise IT environment.

Training and services revenue

Training revenue includes fees paid by our customers for delivery of educational materials and instruction. Services revenue includes fees received from customers for consulting services regarding our offerings, deployment of Red Hat enterprise technologies and for delivery of added functionality to Red Hat enterprise technologies for our major customers and OEM partners. Total training and services revenue increased by 9.6%, or $17.4 million, to $197.8 million for the year ended February 28, 2014 from $180.5 million for the year ended February 28, 2013. Training revenue increased 3.0%, or $1.5 million. Our services revenue increased by 12.2%, or $15.8 million, as a result of an increase in consulting engagements driven by increased demand for our open source solutions. We expect services revenue to continue growing, though at a slower pace than subscription revenue as we continue to expand our reach by enabling our channel partners to provide consulting services on our behalf. Combined training and services revenue as a percentage of total revenue was 12.9% and 13.6% for the year ended February 28, 2014 and February 28, 2013, respectively.

Cost of revenue

Cost of subscription revenue

The cost of subscription revenue primarily consists of expenses we incur to support, distribute, and package Red Hat enterprise offerings. These costs include labor-related cost to provide technical support, security updates and fixes, as well as costs for fulfillment, physical media, literature, packaging and shipping. Cost of subscription revenue increased by 20.9%, or $16.8 million, to $97.1 million for the year ended February 28, 2014 from $80.3 million for the year ended February 28, 2013. Employee-related expenses increased $11.7 million for the year ended February 28, 2014 as compared to the year ended February 28, 2013, due to the expansion of our technical staff in order to meet the demands of our growing subscriber base for support, security updates and fixes. The remaining increase relates to increased amortization expense of $5.3 million related to technologies acquired either directly or as part of businesses acquired during the year ended February 28, 2013. As the number of open source technology subscriptions continues to increase, we expect associated support cost will continue to increase, although we anticipate this will occur at an overall slower rate than that of subscription revenue growth due to economies of scale. Gross profit margin on subscriptions was 92.7% and 93.0% for the year ended February 28, 2014 and February 28, 2013, respectively.

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Cost of training and services revenue

Cost of training and services revenue is mainly comprised of personnel and third-party consulting costs for the design, development and delivery of custom engineering, training courses and professional services provided to various types of customers. Cost of training and services revenue increased by 12.7%, or $15.2 million, to $135.5 million for the year ended February 28, 2014 from $120.3 million for the year ended February 28, 2013. Costs to deliver our services revenue increased by 15.7%, or $14.5 million, to $107.3 million for the year ended February 28, 2014. The increase in costs to deliver services includes $8.1 million and $6.3 million of increased outside contractor fees and employee compensation expenses, respectively. The increase in both contractor fees and employee compensation expense is due to the necessary expansion of our professional consulting teams needed to provide services related to our emerging technology offerings. As a result of such investment in staffing, profit margin from professional services decreased to 26.1% for the year ended February 28, 2014 from 28.3% for the year ended February 28, 2013. Total costs to deliver training and services as a percentage of training and services revenue increased to 68.5% for the year ended February 28, 2014 from 66.6% for the year ended February 28, 2013.

Gross profit

Gross profit margin decreased slightly to 84.8% for the year ended February 28, 2014 from 84.9% for the year ended February 28, 2013 as a result of both increased amortization expense related to the prior fiscal year’s middleware and cloud-management technology acquisitions and increased staffing to support our emerging cloud offerings. These incremental amortization and staffing costs were partially offset by a slight product mix shift from services to subscriptions.

Operating expenses

Sales and marketing

Sales and marketing expense consists primarily of salaries and other related costs for sales and marketing personnel, sales commissions, travel, public relations and marketing materials and trade shows. Sales and marketing expense increased by 16.2%, or $83.3 million, to $597.9 million for the year ended February 28, 2014 from $514.6 million for the year ended February 28, 2013. Selling costs increased 16.1%, or $62.6 million, for the year ended February 28, 2014 as compared to the year ended February 28, 2013 and includes $56.3 million of additional employee- and travel-related expenses, the majority of which is attributable to the expansion of our sales force from the prior year. Marketing costs grew 16.5%, or $20.7 million, for the year ended February 28, 2014 as compared to the year ended February 28, 2013. The increase in marketing costs includes $10.9 million of employee compensation expense related to increased headcount and incremental advertising costs of $10.0 million to support our marketing efforts. The remaining increase in sales and marketing costs primarily relates to facility and technology infrastructure enhancements, which increased $4.6 million for the year ended February 28, 2014 as compared to the year ended February 28, 2013. As a result of continued investments made to expand the breadth of our global sales coverage and depth of our product sales coverage, sales and marketing expense as a percentage of revenue increased to 39.0% for the year ended February 28, 2014 from 38.7% for the year ended February 28, 2013.

Research and development

Research and development expense consists primarily of personnel and related costs for development of software technologies. Research and development expense increased by 20.6%, or $54.1 million, to $317.3 million for the year ended February 28, 2014 from $263.2 million for the year ended February 28, 2013. Employee compensation increased by $41.9 million primarily from the expansion of our engineering group through both direct hires and business acquisitions. The remaining increase in research and development costs relates primarily to process and technology infrastructure enhancements, which increased $7.4 million. Research and development expense was 20.7% and 19.8% of total revenue for the year ended February 28, 2014 and February 28, 2013, respectively.

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General and administrative

General and administrative expense consists primarily of personnel and related costs for general corporate functions, including information systems, finance, accounting, legal, human resources and facilities expense. General and administrative expense increased by 4.2%, or $6.1 million, to $152.4 million for the year ended February 28, 2014 from $146.3 million for the year ended February 28, 2013. The increase in general and administrative expenses results from increased employee compensation expenses of $10.3 million, primarily related to additional headcount, and increased facilities and information systems costs of $3.2 million. Partially offsetting employee compensation, facilities and information systems costs were outside professional services and litigation related fees, which decreased $5.5 million and $4.0 million, respectively, for the year ended February 28, 2014 as compared to the year ended February 28, 2013. General and administrative expense decreased as a percentage of revenue to 9.9% for the year ended February 28, 2014 from 11.0% for the year ended February 28, 2013 as we began to realize and leverage benefits from investments made during the prior fiscal year in process and technology infrastructure enhancements to support our corporate functions.

Interest income

Interest income decreased by 19.4%, or $1.6 million, to $6.6 million for the year ended February 28, 2014 from $8.2 million for the year ended February 28, 2013. The decrease in interest income for the year ended February 28, 2014 is attributable to prevailing lower yields on our investments as a result of the current low interest rate environment.

Other income (expense), net

Other income (expense), net increased $0.1 million for the year ended February 28, 2014 as compared to the year ended February 28, 2013. There were no significant offsetting gains or losses realized during the year ended February 28, 2014.

Income taxes

During the year ended February 28, 2014, we recorded $61.3 million of income tax expense, which resulted in an effective tax rate of 25.6%. Our effective tax rate of 25.6% differs from the U.S. federal statutory rate of 35.0% primarily due to the foreign tax credit, foreign income taxed at lower rates, the domestic production activities deduction and research tax credits. The provision for income tax for the year ended February 28, 2014 consists of $39.0 million of U.S. income tax expense and $22.3 million of foreign income tax expense.

During the year ended February 28, 2013, we recorded $59.5 million of income tax expense, which resulted in an annual effective tax rate of 28.4%. Our effective tax rate of 28.4%, differs from the U.S. federal statutory rate of 35.0% primarily due to a foreign tax credit, foreign income taxed at different rates and the reenactment of the U.S. research tax credit. These tax credits and foreign tax-rate differentials were partially offset by a deemed foreign dividend. The provision for income tax for the year ended February 28, 2013 consisted of $40.1 million of U.S. income tax expense and $19.4 million of foreign income tax expense.

For further discussion regarding our income taxes see NOTE 11—Income Taxes to our Consolidated Financial Statements.

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Years ended February 28, 2013 and February 29, 2012

The following table is a summary of our results of operations for the years ended February 28, 2013 and February 29, 2012 (in thousands):

	Year Ended
	February 28, 2013			February 29, 2012			$ Change			% Change
Revenue:
Subscriptions	$	1,148,341		$	965,575		$	182,766			18.9	%
Training and services		180,476			167,528			12,948			7.7
Total subscription and training and services revenue	$	1,328,817		$	1,133,103		$	195,714			17.3	%
Cost of subscription and training and services revenue:
Cost of subscriptions		80,340			66,237			14,103			21.3
As a % of subscription revenue		7.0	%		6.9	%
Cost of training and services		120,260			112,311			7,949			7.1
As a % of training and services revenue		66.6	%		67.0	%
Total cost of subscription and training and services revenue	$	200,600		$	178,548		$	22,052			12.4	%
As a % of total revenue		15.1	%		15.8	%
Total gross profit	$	1,128,217		$	954,555		$	173,662			18.2	%
Operating expense:
Sales and marketing		514,554			419,635			94,919			22.6
Research and development		263,150			208,662			54,488			26.1
General and administrative		146,333			126,345			19,988			15.8
Facility exit costs		3,142			—			3,142			100.0
Total operating expense	$	927,179		$	754,642		$	172,537			22.9	%
Income from operations		201,038			199,913			1,125			0.6
Interest income		8,245			8,418			(173	)		(2.1	)
Other income (expense), net		469			(322	)		791			(245.7	)
Income before provision for income taxes	$	209,752		$	208,009		$	1,743			0.8	%
Provision for income taxes		59,548			61,383			(1,835	)		(3.0	)
Net income	$	150,204		$	146,626		$	3,578			2.4	%
Gross profit margin—subscriptions		93.0	%		93.1	%
Gross profit margin—training and services		33.4	%		33.0	%
Gross profit margin		84.9	%		84.2	%
As a % of total revenue:
Subscription revenue		86.4	%		85.2	%
Training and services revenue		13.6	%		14.8	%
Sales and marketing expense		38.7	%		37.0	%
Research and development expense		19.8	%		18.4	%
General and administrative expense		11.0	%		11.2	%
Facility exit costs		0.2	%		—	%
Total operating expenses		69.8	%		66.6	%
Income from operations		15.1	%		17.6	%
Income before provision for income taxes		15.8	%		18.4	%
Net income		11.3	%		12.9	%
Effective income tax rate		28.4	%		29.5	%

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Revenue

Subscription revenue

Subscription revenue increased by 18.9%, or $182.8 million, to $1.15 billion for the year ended February 28, 2013 from $965.6 million for the year ended February 29, 2012. The increase in subscription revenue was primarily due to increases in volumes sold, including additional subscriptions attributable to geographic expansion, and continuing innovation, which attracts new customers and helps to drive renewals from existing customers.

Revenue derived from the sale of subscriptions for Infrastructure-related offerings increased by 18.1%, or $157.7 million, to $1.03 billion for the year ended February 28, 2013 from $870.3 million for the year ended February 29, 2012 and was primarily due to increases in volumes sold, including additional subscriptions attributable to geographic expansion and the continued migration of enterprises to our open source Linux platform from proprietary Unix platforms.

Revenue derived from the sale of subscriptions supporting our Application Development-related and other emerging technology offerings increased by 26.3%, or $25.1 million, to $120.4 million for the year ended February 28, 2013 from $95.3 million for the year ended February 29, 2012. The increase was primarily due to additional subscriptions for Red Hat JBoss Middleware offerings.

Training and services revenue

Total training and services revenue increased by 7.7%, or $12.9 million, to $180.5 million for the year ended February 28, 2013 from $167.5 million for the year ended February 29, 2012. Training revenue increased 0.3%, or $0.2 million. The modest increase in training was due to an increase in on-line course participation, which was partially offset by a decline in on-site class attendance as some enterprises reduced spending on discretionary items, such as training and related travel in response to an overall challenging economic environment. Our services revenue increased by 11.0%, or $12.8 million, as a result of increased adoption of our technologies by enterprises. Combined training and services revenue as a percentage of total revenue was 13.6% and 14.8% for the year ended February 28, 2013 and February 29, 2012, respectively.

Cost of revenue

Cost of subscription revenue

Cost of subscription revenue increased by 21.3%, or $14.1 million, to $80.3 million for the year ended February 28, 2013 from $66.2 million for the year ended February 29, 2012. Employee-related expenses increased $8.3 million for the year ended February 28, 2013 as compared to the year ended February 29, 2012, due to the expansion of our technical staff in order to meet the demands of our growing subscriber base for support, security updates and fixes. The remaining increase related to both increased amortization expense of $2.2 million related to technologies acquired either directly or as part of businesses acquired during the year ended February 28, 2013 and increased facilities costs of $2.0 million related to our growing support staff. Gross profit margin on subscriptions was 93.0% and 93.1% for the years ended February 28, 2013 and February 29, 2012, respectively.

Cost of training and services revenue

Cost of training and services revenue increased by 7.1%, or $7.9 million, to $120.3 million for the year ended February 28, 2013 from $112.3 million for the year ended February 29, 2012. The cost to deliver training decreased 12.3%, or $3.9 million, to $27.5 million for the year ended February 28, 2013 compared to $31.4 million for the year ended February 29, 2012. Costs to deliver training decreased as a percentage of training revenue to 53.9% for the year ended February 28, 2013 from 61.6% for the year ended February 29,

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2012 due to better utilization of both instructors and classroom space as we transitioned from an on-site, employee-based, fixed-cost delivery model to a variable-cost delivery model with a global training partner that provides training services on our behalf. Costs to deliver our services revenue increased by 14.6%, or $11.8 million, to $92.7 million for the year ended February 28, 2013. The increase in costs to deliver services included $7.8 million of increased employee-related expenses, the majority of which were due to the expansion of our professional consulting staff. As a result of such investment in staffing, profit margin from professional services decreased to 28.3% for the year ended February 28, 2013 from 30.6% for the year ended February 29, 2012. Total costs to deliver training and services as a percentage of training and services revenue decreased to 66.6% for the year ended February 28, 2013 from 67.0% for the year ended February 29, 2012.

Gross profit

Gross profit margin increased to 84.9% for the year ended February 28, 2013 from 84.2% for the year ended February 29, 2012 as a result of both a product mix shift to subscriptions and a slight increase in profit margins related to training and services offerings. Subscription revenue as a percentage of total revenue increased to 86.4% for the year ended February 28, 2013 from 85.2% for the year ended February 29, 2012. Gross profit margin on training and services revenue increased to 33.4% for the year ended February 28, 2013 from 33.0% for the year ended February 29, 2012, as a result of better utilization of training classes and consulting resources.

Operating expenses

Sales and marketing

Sales and marketing expense increased by 22.6%, or $94.9 million, to $514.6 million for the year ended February 28, 2013 from $419.6 million for the year ended February 29, 2012. Selling costs increased 18.5%, or $60.8 million, for the year ended February 28, 2013 as compared to the year ended February 29, 2012 and included $46.9 million of additional employee- and travel-related expenses, the majority of which were attributable to the expansion of our sales force from the prior year. Marketing costs grew 37.3%, or $34.2 million, for the year ended February 28, 2013 as compared to the year ended February 29, 2012. The increase in marketing costs included $13.9 million of employee-related expenses, of which approximately $13.6 million related to increased headcount to support our expanding marketing efforts. The remaining increase in sales and marketing costs primarily related to incremental advertising costs of $12.7 million and facility and technology infrastructure enhancements, which increased $10.5 million for the year ended February 28, 2013 as compared to the year ended February 29, 2012. As a result of continued investments made in our sales and marketing functions, sales and marketing expense as a percentage of revenue increased to 38.7% for the year ended February 28, 2013 from 37.0% for the year ended February 29, 2012.

Research and development

Research and development expense increased by 26.1%, or $54.5 million, to $263.2 million for the year ended February 28, 2013 from $208.7 million for the year ended February 29, 2012. Employee compensation increased by $41.1 million primarily from the expansion of our engineering group through both direct hires and business acquisitions. The remaining increase in research and development costs related primarily to process and technology infrastructure enhancements, which increased $8.2 million. Research and development expense was 19.8% and 18.4% of total revenue for the year ended February 28, 2013 and February 29, 2012, respectively.

General and administrative

General and administrative expense increased by 15.8%, or $20.0 million, to $146.3 million for the year ended February 28, 2013 from $126.3 million for the year ended February 29, 2012. The increase in general and administrative expenses resulted primarily from employee-related expenses which increased $6.4 million, of which the majority was due to additional headcount, and outside professional fees primarily related to data

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processing systems upgrades, which increased $6.1 million. The remaining increase in general and administrative expense included hardware and facility infrastructure upgrades of $3.9 million and accelerated leasehold improvement expense of $2.9 million associated with the exit from one of our facilities in Raleigh, North Carolina. These expense increases were partially offset by litigation-related expenses, which were $2.3 million lower for the year ended February 28, 2013 as compared to the year ended February 29, 2012. General and administrative expense decreased as a percentage of revenue to 11.0% for the year ended February 28, 2013 from 11.2% for the year ended February 29, 2012.

Interest income

Interest income decreased by 2.1%, or $0.2 million, to $8.2 million for the year ended February 28, 2013 from $8.4 million for the year ended February 29, 2012. The decrease in interest income for the year ended February 28, 2013 was attributable to prevailing lower yields on our investments.

Other income (expense), net

Other income (expense), net increased $0.8 million for the year ended February 28, 2013 as compared to the year ended February 29, 2012. The increase was principally due to an investment gain realized during the year ended February 28, 2013.

Income taxes

During the year ended February 28, 2013, we recorded $59.5 million of income tax expense. Tax expense for the year ended February 28, 2013 of $59.5 million resulted in an effective tax rate of 28.4%. Our effective tax rate of 28.4% differs from the U.S. federal statutory rate of 35.0% primarily due to a foreign tax credit, foreign income taxed at different rates and the reenactment of the U.S. research tax credit. These tax credits and foreign tax-rate differentials were partially offset by a deemed foreign dividend. The provision for income tax for the year ended February 28, 2013 consisted of $40.1 million of U.S. income tax expense and $19.4 million of foreign income tax expense.

During the year ended February 29, 2012, we recorded $61.4 million of income tax expense, which resulted in an annual effective tax rate of 29.5%. Our effective tax rate of 29.5% differed from the U.S. federal statutory rate of 35.0% primarily due to foreign income taxed at different rates and foreign tax credits, which were partially offset by state income tax expense. The provision for income tax for the year ended February 29, 2012 consisted of $49.2 million of U.S. income tax expense and $12.2 million of foreign income tax expense.

LIQUIDITY AND CAPITAL RESOURCES

We derive our liquidity and operating capital primarily from cash flows from operations. Historically, we also received cash from the sale of equity securities, including private sales of preferred stock and the sale of common stock in our initial and follow-on public offerings, and the issuance of convertible debentures. At February 28, 2014, we had total cash and investments of $1.49 billion, which was comprised of $646.7 million in cash and cash equivalents, $248.5 million of short-term, available-for-sale fixed-income investments, $505.3 million of long-term, available-for-sale fixed-income investments, and $86.9 million in deposit accounts with maturity dates greater than 30 days. This compares to total cash and investments of $1.32 billion at February 28, 2013.

With $646.7 million in cash and cash equivalents on hand, we believe our cash and cash equivalent balances, together with our ability to generate additional cash from operations, should be sufficient to satisfy our cash requirements for the next twelve months and for the foreseeable future. However, we may take advantage of favorable capital market conditions that may arise from time to time to raise additional capital. We presently do

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not intend to liquidate our short- and long-term investments in debt securities prior to their scheduled maturity dates. However, in the event that we liquidate these investments prior to their scheduled maturities and there are adverse changes in market interest rates or the overall economic environment, we could be required to recognize a realized loss on those investments when we liquidate. At February 28, 2014 and February 28, 2013, accumulated unrealized gains on our available-for-sale debt securities totaled $0.5 million and $1.0 million, respectively.

Year ended February 28, 2014

Cash flows—overview

At February 28, 2014, cash and cash equivalents totaled $646.7 million, an increase of $159.7 million as compared to February 28, 2013. The increase in cash and cash equivalents for the year ended February 28, 2014 is the result of cash provided by operating activities, which totaled $540.6 million for the year ended February 28, 2014. Partially offsetting cash provided by operating activities was $108.3 million of cash used in investing activities, which included capital expenditures for property and equipment and intangible assets of $97.6 million, and cash used in financing activities, which totaled $263.1 million and included the repurchase of 5,006,579 shares of our common stock for $239.4 million. Net cash generated by operating activities and used for investing and financing activities is further described below.

Cash flows from operations

Cash provided by operations of $540.6 million during the year ended February 28, 2014 includes net income of $178.3 million, adjustments to exclude the impact of non-cash revenue and expenses, which totaled a $212.1 million net source of cash, and changes in operating assets and liabilities, which totaled a $150.2 million net source of cash. Cash provided by changes in operating assets and liabilities for the year ended February 28, 2014 was primarily the result of an increase in our deferred revenue, which generated operating cash flow of $205.4 million. The increase in deferred revenue is due to growth in billings as we generally bill our customers in advance of subscription periods. Cash adjustments related to deferred income taxes of $26.6 million was primarily due to share-based compensation deductions of which $12.8 million were in excess of amounts originally recognized in our consolidated statements of operations. Excess tax benefits from share-based compensation are considered a financing source of cash.

Cash flows from investing

Cash used in investing activities of $108.3 million for the year ended February 28, 2014 includes net purchases of available-for-sale debt securities of $8.6 million, investments in property and equipment of $79.6 million, primarily related to facilities and information technology infrastructure enhancements and investments in other intangible assets, primarily patents, of $18.0 million.

Cash flows from financing

Cash used in financing activities of $263.1 million for the year ended February 28, 2014 includes $239.4 million used to repurchase 5,006,579 shares of our common stock at an average price per share of $47.81, including transaction costs. Payments made in return for common shares received from employees to satisfy employees’ minimum tax withholding obligations related to restricted share awards vesting during the year ended February 28, 2014 totaled $37.4 million. Partially offsetting financing activities using cash were proceeds from excess tax benefits related to share-based employee compensation, which totaled $12.8 million and proceeds from employees’ exercise of common stock options, which totaled $2.1 million. Payments on other borrowings totaled $1.3 million for the year ended February 28, 2014.

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Year ended February 28, 2013

Cash flows—overview

At February 28, 2013, cash and cash equivalents totaled $487.1 million, a decrease of $62.1 million as compared to February 29, 2012. The decrease in cash and cash equivalents for the year ended February 28, 2013 is primarily the result of cash used in investing activities, including net purchases of available-for-sale debt securities of $134.1 million and cash used to acquire FuseSource, Polymita and ManageIQ, which totaled $135.5 million, net of $0.2 million cash acquired. Also contributing to the overall decrease in cash was the repurchase of 2,290,936 shares of our common stock for $120.7 million and investments in facilities, information technology systems and patents, which totaled $120.0 million. Partially offsetting cash used in investing and financing activities was cash provided by operating activities, which totaled $465.3 million for the year ended February 28, 2013. Net cash generated by operating activities and used for investing and financing activities is further described below.

Cash flows from operations

Cash provided by operations of $465.3 million during the year ended February 28, 2013 includes net income of $150.2 million, adjustments to exclude the impact of non-cash revenue and expenses, which totaled a $170.9 million net source of cash, and changes in operating assets and liabilities, which totaled a $144.2 million net source of cash. Cash provided by changes in operating assets and liabilities for the year ended February 28, 2013 was primarily the result of an increase in our deferred revenue, which generated operating cash flow of $162.6 million. The increase in deferred revenue is due to growth in billings as we generally bill our customers in advance of subscription periods. Cash adjustments related to deferred income taxes of $39.8 million was primarily due to share-based compensation deductions which were in excess of amounts originally recognized in our consolidated statements of operations. Excess tax benefits from share-based compensation, which totaled $34.2 million, are considered a financing source of cash.

Cash flows from investing

Cash used in investing activities of $389.0 million for the year ended February 28, 2013 includes net purchases of available-for-sale debt securities of $134.1 million, investments in property and equipment of $85.7 million, primarily related to facilities and information technology infrastructure enhancements and investments in other intangible assets, primarily patents, of $34.4 million. During the year ended February 28, 2013, we completed three business acquisitions, which included cash consideration of $135.5 million, net of $0.2 million cash acquired. For further discussion regarding our business acquisitions, see NOTE 3—Business Combinations to our Consolidated Financial Statements.

Cash flows from financing

Cash used in financing activities of $126.0 million for the year ended February 28, 2013 includes $120.7 million used to repurchase 2,290,936 shares of our common stock at an average price per share of $52.67, including transaction costs. Payments made in return for common shares received from employees to satisfy employees’ minimum tax withholding obligations related to restricted share awards vesting during the year ended February 28, 2013 totaled $50.0 million. Partially offsetting financing activities using cash were proceeds from excess tax benefits related to share-based employee compensation, which totaled $34.2 million and proceeds from employees’ exercise of common stock options, which totaled $11.5 million. Payments on other borrowings totaled $1.0 million for the year ended February 28, 2013.

Investments in debt and equity securities

Our investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair market values. At February 28, 2014 and February 28, 2013, the vast majority of our

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investments were priced with the assistance of pricing vendors. These pricing vendors use the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs. In the event observable inputs are not available, we assess other factors to determine the securities’ market value, including broker quotes or model valuations. Independent price verifications of all of our holdings are performed by the pricing vendors, which we review. In the event a price fails a pre-established tolerance check, it is researched so that we can assess the cause of the variance to determine what we believe is the appropriate fair market value.

Capital requirements

We have experienced a substantial increase in our operating expenses since our inception in connection with the growth of our operations, the development of our enterprise technologies, the expansion of our services operations and our acquisition activity. Our capital requirements during the year ending February 28, 2015 will depend on numerous factors, including the amount of resources we devote to:

· funding the continued development of our enterprise offerings;

· improving and extending our services and the technologies used to market and deliver these services to our customers and support our business;

· pursuing strategic acquisitions and alliances;

· investing in or acquiring businesses, products and technologies; and

· investing in enhancements to the systems we use to run our business and the expansion of our office facilities.

We have utilized, and will continue from time to time to utilize, cash and investments to fund, among other potential uses, purchases of our common stock, purchases of fixed assets, purchases of intangible assets (primarily patents), and mergers and acquisitions. Given our historically strong operating cash flow and the $1.49 billion of cash and investments held at February 28, 2014, we do not presently anticipate the need to raise cash to fund our operations, either through the sale of additional equity or through the issuance of debt, in the foreseeable future. However, we may take advantage of favorable capital market conditions that may arise from time to time to raise additional capital.

We believe that cash flow from operations will continue to improve; however, there can be no assurances that we will improve our cash flow from operations from the current rate or that such cash flows will be adequate to fund other investments or acquisitions that we may choose to make or be located in the appropriate geography where we can effectively use them or be generated in the appropriate geography where we can effectively use them. We may choose to accelerate the expansion of our business from our current plans, which may require us to raise additional funds through the sale of equity or debt securities or through other financing means. There can be no assurances that any such financing would occur in amounts or on terms favorable to us, if at all.

As of February 28, 2014, our cash, cash equivalents and available-for-sale investment securities totaled $1.49 billion, of which $721.2 million was held outside the U.S. Our intent is to reinvest the earnings of foreign subsidiaries indefinitely outside the U.S. to fund both organic growth and acquisitions.

With 51.5% of our available cash, cash equivalents and available-for-sale investments, as of February 28, 2014, held within the U.S., we do not anticipate a need to repatriate any foreign earnings for the foreseeable future. However, if cash held outside the U.S. were needed to fund our U.S. operations, under current tax law we would be subject to additional taxes on the portion related to repatriated earnings of our foreign subsidiaries. As of February 28, 2014, undistributed foreign earnings totaled $296.4 million. For further discussion, see NOTE 11—Income Taxes to our Consolidated Financial Statements.

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Off-balance sheet arrangements

As of February 28, 2014 and February 28, 2013, we had no off-balance sheet financing arrangements and did not utilize any “structured debt”, “special purpose” or similar unconsolidated entities for liquidity or financing purposes.

Contractual obligations

The following table summarizes our principal contractual obligations at February 28, 2014 (in thousands):

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating lease obligations	$	194,524	$	27,977	$	50,032	$	29,726	$	86,789
Purchase obligations		4,925		1,925		3,000		—		—
Total	$	199,449	$	29,902	$	53,032	$	29,726	$	86,789

Obligations under contracts that we may cancel without significant penalty are not included in the table above. In addition, because we are unable to reasonably estimate the timing of settlements and any future payments related to uncertain tax positions, such liabilities are not included in the above table. However, as of February 28, 2014, we have recognized a total of $45.6 million related to such liabilities, which are included in Other long-term obligations on our Consolidated Balance Sheet.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), to eliminate diversity in practice of presenting unrecognized tax benefits as a liability or presenting unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances by requiring that an unrecognized tax benefit be presented in the financial statements as a reduction to deferred tax assets excluding certain exceptions. ASU 2013-11 is effective prospectively for us in the first quarter of our fiscal year ending February 28, 2015. We do not believe that this updated standard will have a material impact on our consolidated financial statements.

In March 2013, the FASB issued Accounting Standards Update No. 2013-05, Foreign Currency Matters (Topic 830)—Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”), which requires a parent entity to release a related foreign entity’s cumulative translation adjustment into net income only if its sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-05 is effective prospectively for us in the first quarter of our fiscal year ending February 28, 2015. We do not believe that this updated standard will have a material impact on our consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes, foreign currency exchange rate fluctuations and changes in the market value of our investments.

Interest rate risk

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. The primary objective of our investment activities is to preserve principal and liquidity while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term and long-term investments in a variety of fixed-income securities, including both government and corporate obligations and money market funds. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in prevailing interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities which have declined in market value due to changes in interest rates or perceived credit risk related to the securities’ issuers. A hypothetical one-half percentage point change in interest rates, assuming a parallel shift of all interest rates, would result in a $0.6 million change in annual interest income derived from investments in our portfolio as of February 28, 2014. For further discussion related to our investments as of February 28, 2014 and February 28, 2013, see NOTE 2—Summary of Significant Accounting Policies and NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis to our Consolidated Financial Statements.

Investment risk

The fair market value of our investment portfolio is subject to interest rate risk. Based on a sensitivity analysis performed on this investment portfolio, a hypothetical one percentage increase in interest rates, assuming a parallel shift of all interest rates, would result in an approximate $14.4 million decrease in the fair value of our available-for-sale investment securities as of February 28, 2014. For further discussion related to our investments as of February 28, 2014 and February 28, 2013, see NOTE 2—Summary of Significant Accounting Policies and NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis to our Consolidated Financial Statements.

Credit risk

The fair market values of our investment portfolio and cash balances are exposed to counterparty credit risk. Accordingly, while we periodically review our portfolio in an effort to mitigate counterparty risk, the principal values of our cash balances, money market accounts and investments in available-for-sale securities could suffer a loss of value.

Accounts receivable

As of February 28, 2014 and February 28, 2013, no individual customer accounted for 10% or more of the Company’s accounts receivable.

Foreign currency risk

Approximately 44.7% of our revenue for the year ended February 28, 2014 was produced by sales outside the U.S. We are exposed to significant risks of foreign currency fluctuation primarily from receivables denominated in foreign currency and are subject to transaction gains and losses, which are recorded as a component in determining net income. The statements of operations of our non-U.S. operations are translated into U.S. dollars at the average exchange rates for each applicable month in a period. Thus, to the extent the

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U.S. dollar weakens against foreign currencies, the translation of these foreign currency statements results in increased revenue and operating expenses for our non-U.S. operations. Similarly, our revenue and operating expenses for our non-U.S. operations decreases if the U.S. dollar strengthens against foreign currencies.

Using the average foreign currency exchange rates from our prior fiscal year ended February 28, 2013, our revenue and operating expenses from non-U.S. operations for the year ended February 28, 2014 would have been higher than we reported by approximately $21.4 million and $12.1 million, respectively, which would have resulted in income from operations being higher by $9.3 million.

Derivative instruments

We transact business in various foreign countries and are, therefore, subject to risk of foreign currency exchange rate fluctuations. From time to time we enter into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. All derivative instruments are recorded on the Consolidated Balance Sheets at their respective fair market values in accordance with FASB Accounting Standards Codification Section 815 (formerly referenced as Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities). The Company has elected not to prepare and maintain the documentation required to qualify its forward contracts for hedge accounting treatment and, therefore, changes in fair value are recorded in the Consolidated Statements of Operations. For further discussion related to our management of foreign currency risk see NOTE 10—Derivative Instruments to our Consolidated Financial Statements.

The aggregate notional amount of outstanding forward contracts at February 28, 2014 was $28.3 million. The fair value of these outstanding contracts at February 28, 2014 was a gross $0.1 million asset and a gross less than $0.1 million liability, and is recorded in Other current assets and Accounts payable and accrued expenses, respectively on our Consolidated Balance Sheets. The forward contracts generally expire within three months of the period ended February 28, 2014. The forward contracts will settle in Argentine pesos, Australian dollars, Chilean pesos, Czech koruna, Danish krone, Euros, Israeli shekels, Japanese yen, Korean won, Norwegian krona, Singapore dollars, Swedish krona, Swiss francs, and U.S. dollars.

The aggregate notional amount of outstanding forward contracts at February 28, 2013 was $65.5 million. The fair value of these outstanding contracts at February 28, 2013 was a gross $0.3 million asset and a gross $0.2 million liability, and is recorded in Other current assets and Accounts payable and accrued expenses, respectively on our Consolidated Balance Sheets.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Management on Internal Control Over Financial Reporting		64
Report of Independent Registered Public Accounting Firm		65
Financial Statements:
Consolidated Balance Sheets at February 28, 2014 and February 28, 2013		66
Consolidated Statements of Operations for the years ended February 28, 2014, February  28, 2013 and February 29, 2012		67
Consolidated Statements of Comprehensive Income for the years ended February 28, 2014, February  28, 2013 and February 29, 2012		68
Consolidated Statements of Stockholders’ Equity for the years ended February 28, 2014,  February 28, 2013 and February 29, 2012		69
Consolidated Statements of Cash Flows for the years ended February 28, 2014, February  28, 2013 and February 29, 2012		70
Notes to Consolidated Financial Statements		71

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REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of the end of the period covered by this report.

Our independent registered public accounting firm, which has audited the financial statements included in Part II, Item 8 of this report, has also audited the effectiveness of the Company’s internal control over financial reporting as of February 28, 2014, as stated in their attestation report on our internal control over financial reporting, which is included below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Red Hat, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Red Hat, Inc. and its subsidiaries at February 28, 2014 and February 28, 2013, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 2014 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 28, 2014, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing in Item 8. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

April 24, 2014

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RED HAT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands—except share and per share amounts)

	February 28, 2014			February 28, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	646,742		$	487,084
Investments in available-for-sale securities, current		335,387			392,381
Accounts receivable, net of allowances for doubtful accounts of $1,986 and $1,339, respectively		360,594			302,942
Deferred tax assets, net		108,264			88,765
Prepaid expenses		118,387			94,421
Other current assets		1,808			3,156
Total current assets	$	1,571,182		$	1,368,749
Property and equipment, net of accumulated depreciation and amortization of $209,295 and $189,985, respectively		173,917			141,586
Goodwill		687,430			690,911
Identifiable intangibles, net		133,399			142,243
Investments in available-for-sale securities, long-term		505,300			438,908
Other assets, net		35,391			31,263
Total assets	$	3,106,619		$	2,813,660
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	179,468		$	154,202
Deferred revenue		966,832			830,486
Other current obligations		1,786			1,024
Total current liabilities	$	1,148,086		$	985,712
Long-term deferred revenue		322,365			259,466
Other long-term obligations		85,003			48,321
Commitments and contingencies (NOTES 14 and 15)
Stockholders’ equity:
Preferred stock, 5,000,000 shares authorized, none outstanding		—			—
Common stock, $0.0001 per share par value, 300,000,000 shares authorized, 230,915,589 and 229,210,961 shares issued, 189,712,211 and 193,021,226 shares outstanding at February 28, 2014 and February 28, 2013, respectively		23			23
Additional paid-in capital		1,891,848			1,802,899
Retained earnings		720,172			541,880
Treasury stock at cost, 41,203,378 and 36,189,735 shares at February 28, 2014 and February 28, 2013, respectively		(1,056,419	)		(816,674	)
Accumulated other comprehensive loss		(4,459	)		(7,967	)
Total stockholders’ equity	$	1,551,165		$	1,520,161
Total liabilities and stockholders’ equity	$	3,106,619		$	2,813,660

The accompanying notes are an integral part of these consolidated financial statements.

66

RED HAT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands—except per share amounts)

	Year Ended
	February 28, 2014		February 28, 2013		February 29, 2012
Revenue:
Subscriptions	$	1,336,771	$	1,148,341	$	965,575
Training and services		197,844		180,476		167,528
Total subscription and training and services revenue	$	1,534,615	$	1,328,817	$	1,133,103
Cost of subscription and training and services revenue:
Cost of subscriptions		97,100		80,340		66,237
Cost of training and services		135,500		120,260		112,311
Total cost of subscription and training and services revenue	$	232,600	$	200,600	$	178,548
Gross profit	$	1,302,015	$	1,128,217	$	954,555
Operating expense:
Sales and marketing		597,885		514,554		419,635
Research and development		317,263		263,150		208,662
General and administrative		152,407		146,333		126,345
Facility exit costs (NOTE 14)		2,171		3,142		—
Total operating expense	$	1,069,726	$	927,179	$	754,642
Income from operations		232,289		201,038		199,913
Interest income		6,645		8,245		8,418
Other income (expense), net		614		469		(322	)
Income before provision for income taxes	$	239,548	$	209,752	$	208,009
Provision for income taxes		61,256		59,548		61,383
Net income	$	178,292	$	150,204	$	146,626
Basic net income per common share	$	0.94	$	0.78	$	0.76
Diluted net income per common share	$	0.93	$	0.77	$	0.75
Weighted average shares outstanding
Basic		189,920		193,147		193,151
Diluted		192,036		195,804		196,451

The accompanying notes are an integral part of these consolidated financial statements.

67

RED HAT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Year Ended
	February 28, 2014			February 28, 2013			February 29, 2012
Net income	$	178,292		$	150,204		$	146,626
Other comprehensive income (loss):
Change in foreign currency translation adjustment		3,945			(2,810	)		(2,708	)
Available-for-sale securities:
Unrealized gain (loss) on available-for-sale securities during the period		(466	)		2,092			(146	)
Reclassification for gain realized on available-for-sale securities, reported in Other income (expense), net		(350	)		(797	)		(1,982	)
Tax (expense) benefit		379			(500	)		703
Net change in available-for-sale securities (net of tax)		(437	)		795			(1,425	)
Total other comprehensive income (loss)		3,508			(2,015	)		(4,133	)
Comprehensive income	$	181,800		$	148,189		$	142,493

The accompanying notes are an integral part of these consolidated financial statements.

68

RED HAT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Common Stock				Additional Paid-In Capital			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Shares		Amount
Balance at February 28, 2011		223,778	$	22	$	1,610,238		$	245,050	$	(562,792	)	$	(1,819	)	$	1,290,699
Net income		—		—		—			146,626		—			—			146,626
Other comprehensive income (loss), net of tax		—		—		—			—		—			(4,133	)		(4,133	)
Vest and exercise of share-based awards		2,775		1		16,811			—		—			—			16,812
Common stock repurchase		—		—		—			—		(133,220	)		—			(133,220	)
Share-based compensation expense		—		—		79,267			—		—			—			79,267
Assumed employee share-based awards from acquisitions						1,244											1,244
Tax benefits related to share-based awards		—		—		37,854			—		—			—			37,854
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards		—		—		(36,332	)		—		—			—			(36,332	)
Balance at February 29, 2012		226,553	$	23	$	1,709,082		$	391,676	$	(696,012	)	$	(5,952	)	$	1,398,817
Net income		—		—		—			150,204		—			—			150,204
Other comprehensive income (loss), net of tax		—		—		—			—		—			(2,015	)		(2,015	)
Vest and exercise of share-based awards		2,658		—		11,478			—		—			—			11,478
Common stock repurchase		—		—		—			—		(120,662	)		—			(120,662	)
Share-based compensation expense		—		—		98,698			—		—			—			98,698
Tax benefits related to share-based awards		—		—		33,625			—		—			—			33,625
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards		—		—		(49,984	)		—		—			—			(49,984	)
Balance at February 28, 2013		229,211	$	23	$	1,802,899		$	541,880	$	(816,674	)	$	(7,967	)	$	1,520,161
Net income		—		—		—			178,292		—			—			178,292
Other comprehensive income (loss), net of tax		—		—		—			—		—			3,508			3,508
Vest and exercise of share-based awards		1,705		—		2,122			—		—			—			2,122
Common stock repurchase (See NOTE 17)		—		—					—		(239,363	)		—			(239,363	)
Share-based compensation expense		—		—		113,774			—		—			—			113,774
Tax benefits related to share-based awards		—		—		10,073			—		—			—			10,073
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards		—		—		(37,402	)		—		—			—			(37,402	)
Other		—		—		382			—		(382	)		—			—
Balance at February 28, 2014		230,916	$	23	$	1,891,848		$	720,172	$	(1,056,419	)	$	(4,459	)	$	1,551,165

Note: No preferred stock was issued or outstanding during the three years ended February 28, 2014.

The accompanying notes are an integral part of these consolidated financial statements.

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RED HAT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended
	February 28, 2014			February 28, 2013			February 29, 2012
Cash flows from operating activities:
Net income	$	178,292		$	150,204		$	146,626
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		74,405			62,341			51,372
Deferred income taxes		26,613			39,849			45,702
Excess tax benefits from share-based payment arrangements		(12,837	)		(34,219	)		(29,931	)
Share-based compensation expense		113,774			98,698			79,267
Net amortization of bond premium on debt securities available for sale		8,697			6,889			6,518
Other		1,411			(2,626	)		(1,186	)
Changes in operating assets and liabilities net of effects of acquisitions:
Accounts receivable		(61,785	)		(46,913	)		(70,410	)
Prepaid expenses		(25,122	)		(14,726	)		(19,190	)
Accounts payable and accrued expenses		28,436			40,196			5,986
Deferred revenue		205,357			162,574			176,855
Other		3,339			3,030			274
Net cash provided by operating activities	$	540,580		$	465,297		$	391,883
Cash flows from investing activities:
Purchase of investment in debt securities available for sale		(772,741	)		(875,428	)		(962,974	)
Proceeds from sales and maturities of investment in debt securities available for sale		764,122			741,301			791,585
Acquisitions of businesses, net of cash acquired		—			(135,501	)		(135,210	)
Purchase of developed software and other intangible assets		(17,972	)		(34,367	)		(5,349	)
Purchase of property and equipment		(79,587	)		(85,671	)		(46,269	)
Other		(2,084	)		617			(643	)
Net cash used in investing activities	$	(108,262	)	$	(389,049	)	$	(358,860	)
Cash flows from financing activities:
Excess tax benefits from share-based payment arrangements		12,837			34,219			29,931
Proceeds from exercise of common stock options		2,122			11,478			16,812
Purchase of treasury stock		(239,363	)		(120,662	)		(133,220	)
Payments related to settlement of employee shared-based awards		(37,402	)		(49,984	)		(36,332	)
Payments on other borrowings		(1,304	)		(1,016	)		(1,027	)
Net cash used in financing activities	$	(263,110	)	$	(125,965	)	$	(123,836	)
Effect of foreign currency exchange rates on cash and cash equivalents	$	(9,550	)	$	(12,416	)	$	(2,600	)
Net increase (decrease) in cash and cash equivalents	$	159,658		$	(62,133	)	$	(93,413	)
Cash and cash equivalents at beginning of year		487,084			549,217			642,630
Cash and cash equivalents at end of year	$	646,742		$	487,084		$	549,217
Supplemental cash flow information:
Cash paid during the year for:
Interest	$	43		$	50		$	45
Income taxes	$	34,736		$	14,863		$	12,381
Non-cash investing and financing activities:
Fixed assets acquired under capital leases	$	1,560		$	1,137		$	1,746

The accompanying notes are an integral part of these consolidated financial statements.

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RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—Company

Red Hat, Inc., incorporated in Delaware, together with its subsidiaries (“Red Hat” or the “Company”) is a leading global provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, virtualization, middleware, storage and cloud technologies.

Open source software is an alternative to proprietary software and represents a different model for the development and licensing of commercial software code than that typically used for proprietary software. Because open source software code is often freely shared, there are customarily no licensing fees for the use of open source software. Therefore, the Company does not recognize revenue from the licensing of the code itself. The Company provides value to its customers through the development, aggregation, integration, testing, certification, delivery, maintenance, enhancement and support of its Red Hat enterprise technologies, and by providing a level of performance, reliability, scalability, flexibility, stability and security for the enterprise technologies the Company packages and distributes. Moreover, because communities of developers not employed by the Company assist with the creation of the Company’s open source offerings, opportunities for further innovation of the Company’s offerings are supplemented by these communities.

The Company derives its revenue and generates cash from customers primarily from two sources: (i) subscription revenue and (ii) training and services revenue. These arrangements typically involve subscriptions to Red Hat enterprise technologies. The arrangements with the Company’s customers that produce this revenue and cash are explained in further detail in NOTE 2—Summary of Significant Accounting Policies.

NOTE 2—Summary of Significant Accounting Policies

Basis of presentation

The accompanying Consolidated Financial Statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation. There are no significant foreign exchange restrictions on the Company’s foreign subsidiaries.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from such estimates.

Revenue recognition

The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on either a signed contract with the end customer, a click-through contract on the Company’s website whereby the customer agrees to the Company’s standard subscription terms, signed or click-through distribution contracts with original equipment manufacturers (“OEMs”) and other resellers, or, in the case of individual training seats, through receipt of payment which indicates acceptance of the Company’s training agreement terms.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Subscription revenue

Subscription revenue is comprised of direct and indirect sales of subscriptions relating to Red Hat enterprise technologies. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement for the purchase of a subscription, subscription services are made available to the customer and the customer is billed. The deferred revenue amount is recognized as revenue ratably over the life of the subscription. Red Hat enterprise technologies are generally offered with either one or three-year base subscription periods; the majority of the Company’s subscriptions have one-year terms. Under these subscription agreements, renewal rates are generally specified for one or three-year renewal terms. Subscriptions generally entitle the end user to the technology itself and post-contract customer support, generally consisting of varying levels of support services as well as access to security errata, fixes, functionality enhancements to the technology and upgrades to new versions of the technologies, each on a when-and-if-available basis, during the term of the subscription. The Company sells its offerings through two principal channels: (1) direct, which includes sales by the Company’s sales force as well as web store sales, and (2) indirect, which includes distributors, resellers, systems integrators and OEMs. The Company recognizes revenue from the sale of Red Hat enterprise technologies ratably over the period of the subscription beginning on the commencement date of the subscription agreement.

Subscription arrangements with large enterprise customers often have contracts with multiple elements (e.g., software technology, support, training, consulting and other services). The Company allocates revenue to each element of the arrangement based on vendor-specific objective evidence of each element’s fair value when the Company can demonstrate sufficient evidence of the fair value of at least those elements that are undelivered. The fair value of each element in multiple element arrangements is created by either (i) providing the customer with the ability during the term of the arrangement to renew that element at the same rate paid for the element included in the initial term of the agreement or (ii) selling the element on a stand-alone basis.

Training and services revenue

Training and services revenue is comprised of revenue for consulting, engineering and customer training and education services. Consulting services consist of time-based arrangements, and revenue is recognized as these services are performed. Engineering services represent revenue earned under fixed fee arrangements with the Company’s OEM partners and other customers to provide for significant modification and customization of Red Hat enterprise technologies. The Company recognizes revenue for these fixed fee engineering services using the percentage of completion basis of accounting, provided the Company has the ability to make reliable estimates of progress towards completion, the fee for such services is fixed or determinable and collection of the resulting receivable is probable. Under the percentage of completion method, earnings under the contract are recognized based on the progress toward completion as estimated using the ratio of labor hours incurred to total expected project hours. Changes in estimates are recognized in the period in which they are known. Revenue for customer training and education services is recognized on the dates the services are complete.

Deferred selling costs

Deferred commissions are the incremental costs that are directly associated with non-cancelable subscription contracts with customers and consist of sales commissions paid to the Company’s sales force. The commissions are deferred and amortized over a period that approximates the period of the subscription term. The commission payments are paid in full subsequent to the month in which the customer’s service commences. The deferred commission amounts are recoverable through the future revenue streams under the non-cancelable customer contracts. In addition, the Company has the ability and intent under the commission plans with its sales force to recover commissions previously paid to its sales force in the event that customers breach the terms of

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their subscription agreements and do not fully pay for their subscription agreements. Deferred commissions are included in prepaid expenses on the accompanying Consolidated Balance Sheets. Amortization of deferred commissions is included in sales and marketing expense in the accompanying Consolidated Statements of Operations.

Goodwill and other long-lived assets

Goodwill

The Company tests goodwill for impairment annually. For the years ended February 28, 2014 and February 28, 2013, the Company applied its test for goodwill impairment as permitted by ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying value. The outcome of these qualitative tests determines whether it is necessary for a company to perform the two-step goodwill impairment test as required in years prior to the adoption of ASU 2011-08.

After considering such qualitative factors as macroeconomic conditions, actual or anticipated changes to cost factors (for example, selling and delivery), overall financial performance and other Company-specific factors, such as potential changes in strategy, the Company determined that it was not more likely than not that any impairment to goodwill had occurred during the years ended February 28, 2014 and February 28, 2013. Consequently, the Company was not required to perform the remaining two-step quantitative goodwill impairment test.

Other long-lived assets

The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate that an impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets.

For the years ended February 28, 2014, February 28, 2013 and February 29, 2012, no significant impairment losses related to the Company’s long-lived assets were identified.

Cash and cash equivalents

The Company considers highly liquid investments purchased with a maturity period of three months or less at the date of purchase to be cash equivalents.

Accounts receivable and allowance for doubtful accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure

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related to its customers. See NOTE 4—Accounts Receivable for further discussion on accounts receivable balances.

Fair value measurements

Fair value is defined as the exchange price that would be received for the purchase of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair market values. Liquid investments with effective maturities of three months or less from the balance sheet date (that is, time remaining on the day of purchase) are classified as cash equivalents. Investments with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than twelve months from the balance sheet date are classified as long-term investments. The Company’s Level 1 financial instruments are valued using quoted prices in active markets for identical instruments. The Company’s Level 2 financial instruments, including derivative instruments, are valued using quoted prices for identical instruments in less active markets or using other observable market inputs for comparable instruments.

Unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Upon realization, such amounts are reclassified from accumulated other comprehensive income to other income, net. Realized gains and losses and other than temporary impairments, if any, are reflected in the statements of operations as other income, net. The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary. The vast majority of the Company’s investments are priced by pricing vendors. These pricing vendors use the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs. In the event observable inputs are not available, the Company assesses other factors to determine the security’s market value, including broker quotes or model valuations. Independent price verifications of all holdings are performed by pricing vendors which are then reviewed by the Company. In the event a price fails a pre-established tolerance check, it is researched so that the Company can assess the cause of the variance to determine what the Company believes is the appropriate fair market value. See NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion on fair value measurements.

The Company minimizes its credit risk associated with investments by investing primarily in investment grade, liquid securities. The Company’s policy is designed to limit exposures to any one issuer depending on

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credit quality. Periodic evaluations of the relative credit standing of those issuers are considered in the Company’s investment strategy.

Internal use software

The Company capitalizes costs related to the development of internal use software for its website, enterprise resource planning system and systems management applications. The Company amortizes the costs of computer software developed for internal use on a straight-line basis over an estimated useful life of five years. The carrying value of internal use software is included in property and equipment on the Company’s Consolidated Balance Sheets.

Capitalized software costs

Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. As a result of the Company’s practice of releasing source code that it has developed on a weekly basis for unrestricted download on the Internet, there is generally no passage of time between achievement of technological feasibility and the availability of the Company’s product for general release. Therefore, at February 28, 2014 and February 28, 2013, the Company had no internally developed capitalized software costs for products to be sold to third parties.

Property and equipment

Property and equipment is primarily comprised of furniture, computer equipment, computer software and leasehold improvements, which are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: furniture and fixtures, seven years; computer equipment, three to four years; computer software, five years; leasehold improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. Expenditures for maintenance and repairs are charged to operations as incurred; major expenditures for renewals and betterments are capitalized and depreciated. Property and equipment acquired under capital leases are depreciated over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease.

Share-based compensation

The Company measures share-based compensation cost at grant date, based on the estimated fair value of the award and recognizes the cost over the employee’s requisite service period typically on a straight-line basis, net of estimated forfeitures. The Company estimates the fair value of stock options using the Black-Scholes-Merton valuation model. The fair value of nonvested share awards, nonvested share units and performance share units (“PSUs”) are measured at their underlying closing share price on the date of grant. The Company’s share-based compensation is described further in NOTE 13—Share-based Awards.

Sales and marketing expenses

Sales and marketing expenses consist of costs, including salaries, sales commissions and related expenses, such as travel, of all personnel involved in the sales and marketing process. Sales and marketing expenses also include costs of advertising, sales lead generation programs, cooperative marketing arrangements and trade shows. Payments made to resellers or other customers are recognized as a reduction of revenue unless the Company (i) receives an identifiable benefit (goods or services) in exchange for such payments that is

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sufficiently separable from the purchase of the Company’s products and (ii) the Company can reasonably estimate the fair value of the benefit identified. Advertising costs are expensed as incurred.

Advertising expense totaled $53.4 million, $42.7 million and $29.2 million for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively.

Research and development expenses

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new software products, significant enhancements to existing software products, and the portion of costs of development of internal use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

Income taxes

The Company accounts for income taxes using the liability method in which deferred tax assets or liabilities are recognized for the temporary differences between financial reporting and tax bases of the Company’s assets and liabilities and for tax carryforwards at enacted statutory tax rates in effect for the years in which the differences are expected to reverse.

The Company continues to assess the realizability of its deferred tax assets, which primarily consist of share-based compensation expense deductions, tax credit carryforwards and deferred revenue. In assessing the realizability of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The Company continues to maintain a valuation allowance against its deferred tax assets with respect to certain foreign net operating loss (“NOL”) carryforwards.

With respect to foreign earnings, it is the Company’s policy to invest the earnings of foreign subsidiaries indefinitely outside the U.S. From time to time, however, the Company may remit a portion of these earnings to the extent it incurs no additional U.S. tax and it is otherwise feasible.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in (i) calculating its income tax expense, deferred tax assets and deferred tax liabilities, (ii) determining any valuation allowance recorded against deferred tax assets and (iii) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. The Company’s income tax expense and deferred taxes are described further in NOTE 11—Income Taxes.

Foreign currency translation

The Euro has been determined to be the primary functional currency for the Company’s European operations and local currencies have been determined to be the functional currencies for the Company’s Asia Pacific and Latin American operations, with the exception of the Company’s operations in Mexico, where the functional currency is the U.S. dollar. Foreign exchange gains and losses, which result from the process of remeasuring foreign currency transactions into the appropriate functional currency, are included in other income, net in the Company’s Consolidated Statements of Operations.

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The impact of changes in foreign currency exchange rates resulting from the translation of foreign currency financial statements into U.S. dollars for financial reporting purposes is included in other comprehensive income, which is a separate component of stockholders’ equity. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average rates for the period.

Customers and credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, investments and trade receivables. The Company primarily places its cash, cash equivalents and investments with high-credit quality financial institutions which invest predominantly in U.S. government instruments, investment grade corporate bonds and certificates of deposit guaranteed by banks which are members of the Federal Deposit Insurance Corporation. Cash deposits are primarily in financial institutions in the U.S. and the United Kingdom. However, cash for monthly operating costs of international operations are deposited in banks outside the U.S.

The Company performs credit evaluations to reduce credit risk and generally requires no collateral from its customers. Management estimates the allowance for uncollectible accounts based on their historical experience and credit evaluation. The Company’s standard credit terms are net 30 days in North America, net 30 to 45 days in EMEA (Europe, Middle East and Africa) and Latin America, and range from net 30 to net 60 days in Asia Pacific.

Net income per common share

The Company computes basic net income per common share by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares and dilutive potential common share equivalents then outstanding. Potential common share equivalents consist of shares issuable upon the exercise of stock options or vesting of share-based awards.

Segment reporting

The Company is organized primarily on the basis of three geographic business units: the Americas (U.S., Latin America and Canada), EMEA (Europe, Middle East and Africa) and Asia Pacific. These business units are aggregated into one reportable segment due to the similarity in nature of products and services provided, financial performance economic characteristics (e.g., revenue growth and gross margin), methods of production and distribution and customer classes (e.g., distributors, resellers and enterprise).

The Company has offices in more than 80 locations around the world. The Company manages its international business on an Americas-wide, EMEA-wide and Asia Pacific-wide basis. See NOTE 20—Segment Reporting for further discussion.

Recent accounting pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), to eliminate diversity in practice of presenting unrecognized tax benefits as a liability or presenting unrecognized tax benefits as a reduction of a deferred tax asset for a net

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operating loss or tax credit carryforward in certain circumstances by requiring that an unrecognized tax benefit be presented in the financial statements as a reduction to deferred tax assets excluding certain exceptions. ASU 2013-11 is effective prospectively for the Company in the first quarter of its fiscal year ending February 28, 2015. The Company does not believe that this updated standard will have a material impact on its consolidated financial statements.

In March 2013, the FASB issued Accounting Standards Update No. 2013-05, Foreign Currency Matters (Topic 830)—Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”), which requires a parent entity to release a related foreign entity’s cumulative translation adjustment into net income only if its sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-05 is effective prospectively for the Company in the first quarter of its fiscal year ending February 28, 2015. The Company does not believe that this updated standard will have a material impact on its consolidated financial statements.

NOTE 3—Business Combinations

Acquisition of ManageIQ, Inc.

On December 21, 2012, the Company completed its acquisition of ManageIQ, Inc. (“ManageIQ”), a provider of enterprise cloud management and automation solutions that enable organizations to deploy, manage and optimize private clouds, public clouds and virtualized infrastuctures. Under the terms of the purchase agreement, the consideration transferred by the Company totaled $104.5 million. The Company incurred approximately $0.5 million in transaction costs including legal and accounting fees relating to the acquisition. These costs have been expensed as incurred and included in general and administrative expense on the Consolidated Statement of Operations for the year ended February 28, 2013.

The table below represents the tangible and identifiable intangible assets and liabilities (in thousands) based on management’s assessment of the acquisition date fair value of the assets acquired and liabilities assumed:

	Total Consideration Allocated
Identifiable intangible assets (see detail below)	$	17,340
Cash		222
Accounts receivable		570
Fixed assets		69
Deferred tax assets, net		6,610
Other assets		155
Accrued liabilities		(262	)
Deferred revenue		(132	)
Goodwill		79,910
Total consideration allocated	$	104,482

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the allocation of identifiable intangible assets resulting from the acquisition. For purposes of this allocation, the Company has assessed a fair value of ManageIQ’s identifiable intangible assets related to developed technology, employee covenants not to compete, customer relationships, and tradenames and trademarks based on the net present value of the projected income stream of these identifiable intangible assets. The fair value of the identifiable intangible assets is being amortized over the estimated useful life of each intangible asset on a straight-line basis which approximates the economic pattern of benefits (in thousands):

	Amortization Expense Type		Estimated  Life (Years)		Total
Developed technology		Cost of revenue		5	$	13,500
Employee covenants not to compete		Research and development		4		2,800
Customer relationships		Sales and marketing		5		1,000
Tradenames and trademarks		General and administrative		2		40
Total identifiable intangible assets					$	17,340

Other acquisitions in fiscal 2013

During the year ended February 28, 2013, the Company entered into agreements to acquire two businesses operating in the middleware space. These acquisitions include technologies that are complementary to the Company’s JBoss Middleware technology. One acquisition, which included certain assets and related operations acquired from Polymita Technologies S.L. (“Polymita”), closed on August 28, 2012. The second acquisition closed on September 7, 2012 and included certain assets and related operations acquired from FuseSource, a division of Progress Software Corporation (“FuseSource”). The total cash consideration for these two acquisitions was $31.2 million. The total cash consideration transferred of $31.2 million has been allocated to the Company’s assets as follows: $17.5 million to goodwill, $13.2 million to identifiable intangible assets and the remaining $0.5 million to other current assets.

Transaction fees related to these two acquisitions totaled approximately $1.0 million for the year ended February 28, 2013 and are included in general and administrative expense on the Company’s Consolidated Statement of Operations for the year ended February 28, 2013.

Acquisition of Gluster, Inc.

On October 7, 2011, the Company completed its acquisition of all issued and outstanding shares of Gluster, Inc. (“Gluster”), a provider of scale-out, open source storage solutions. The acquisition was intended to expand the Company’s enterprise software offerings to include management of unstructured data. Under the terms of the purchase agreement, the consideration transferred by the Company totaled $137.2 million. The Company incurred approximately $0.5 million in transaction costs including legal and accounting fees relating to the acquisition. These costs have been expensed as incurred and included in general and administrative expense on the Consolidated Statement of Operations for the year ended February 29, 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total consideration transferred by the Company in connection with the acquisition is summarized in the following table (in thousands):

	Total Consideration Transferred
Cash consideration paid to and/or on behalf of holders of Gluster stock and vested options	$	135,906
Fair value of unvested employee share-based awards assumed and attributed to pre-combination services (1)		1,244
Total	$	137,150

(1) The total fair value, as of October 7, 2011, of all assumed nonvested share-based awards was $14.5 million, of which $1.2 million has been attributed to pre-acquisition employee services and accordingly has been recognized as consideration transferred. The remaining $13.3 million of fair value will be recognized as compensation expense over the remaining vesting period.

The table below represents the tangible and identifiable intangible assets and liabilities (in thousands) based on management’s assessment of the acquisition date fair value of the assets acquired and liabilities assumed:

	Total Consideration Allocated
Identifiable intangible assets (see detail below)	$	6,800
Cash		696
Accounts receivable		321
Fixed assets		454
Deferred tax assets, net		3,263
Other assets		1,093
Accrued liabilities		(1,872	)
Deferred revenue		(321	)
Goodwill		126,716
Total consideration allocated	$	137,150

The following table summarizes the allocation of identifiable intangible assets resulting from the acquisition. For purposes of this allocation, the Company has assessed a fair value of Gluster identifiable intangible assets related to customer relationships and tradenames and trademarks based on the net present value of the projected income stream of these identifiable intangible assets. The fair value of the identifiable intangible assets is being amortized over the estimated useful life of each intangible asset on a straight-line basis which approximates the economic pattern of benefits (in thousands):

	Amortization Expense Type		Estimated  Life (Years)		Total
Customer relationships		Sales and marketing		5	$	6,200
Tradenames and trademarks		General and administrative		Indefinite		600
Total identifiable intangible assets					$	6,800

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pro forma consolidated financial information

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the years ended February 28, 2013 and February 29, 2012 (in thousands, except per share amounts) as if the acquisitions of Gluster, Polymita, FuseSource and ManageIQ had closed on March 1, 2011, after giving effect to certain purchase accounting adjustments. These pro forma results are not necessarily indicative of what the Company’s operating results would have been had the acquisitions actually taken place at the beginning of the period.

	Year ended February 28, 2013 (unaudited)		Year ended February 29, 2012 (unaudited)
Revenue	$	1,329,780	$	1,134,679
Net income and diluted net income		136,459		125,387
Basic net income per common share	$	0.71	$	0.65
Diluted net income per common share	$	0.70	$	0.64

Related party matters

Dr. Naren Gupta, a director of Red Hat since 2005, was a director of Gluster and is the Managing Director of Nexus Venture Partners (“Nexus”), a venture capital fund that was a principal investor in Gluster. Nexus held approximately 36.4% percent of the shares of Gluster capital stock and vested options outstanding on the closing date.

Dr. Gupta did not attend the meeting at which Red Hat’s Board of Directors (the “Board”) approved the transaction and recused himself from all Board deliberations with respect to the transaction. The purchase price in the transaction was determined through arm’s-length negotiations between Red Hat and Gluster.

Goodwill and other business combinations

The Company completed its annual goodwill impairment test in February 2014. No goodwill impairment was deemed to have occurred. The following is a summary of goodwill for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

Balance at February 28, 2011	$	463,673
Acquisition of Gluster		126,716
Impact of foreign currency fluctuations and other adjustments		1,174
Balance at February 29, 2012	$	591,563
Acquisition of ManageIQ		83,074
Other acquisitions		17,462
Impact of foreign currency fluctuations and other adjustments		(1,188	)
Balance at February 28, 2013	$	690,911
Final purchase price allocation adjustment for ManageIQ (1)		(3,164	)
Impact of foreign currency fluctuations		(317	)
Balance at February 28, 2014	$	687,430

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(1) The final measurement period adjustment of $3.2 million was not significant relative to the total consideration paid for ManageIQ and, therefore, the final adjustment has not been retrospectively applied to the Company’s Consolidated Balance Sheet as of February 28, 2013. If the Company had applied the adjustment retrospectively, the Deferred tax assets, net balance on the Company’s Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million higher and the Goodwill balance on its Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million lower.

NOTE 4—Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. Activity in the Company’s allowance for doubtful accounts for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is presented in the following table (in thousands):

	Balance  at beginning of period		Charged to (recovery  of) expense			Adjustments (1)			Balance at end of period
2012	$	1,379	$	989		$	(491	)	$	1,877
2013	$	1,877	$	(102	)	$	(436	)	$	1,339
2014	$	1,339	$	841		$	(194	)	$	1,986

(1) Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable.

As of February 28, 2014 and February 28, 2013, no individual customer accounted for 10% or more of the Company’s accounts receivable.

NOTE 5—Property and Equipment

The Company’s property and equipment is recorded at cost and consists of the following (in thousands):

	February 28, 2014			February 28, 2013
Computer equipment	$	137,570		$	127,741
Software, including software developed for internal use		112,348			108,644
Furniture and fixtures		28,007			19,271
Leasehold improvements		96,410			58,443
Property and equipment – in progress		8,877			17,472
Property and equipment	$	383,212		$	331,571
Less: accumulated depreciation		(209,295	)		(189,985	)
Property and equipment, net	$	173,917		$	141,586

The useful lives of property and equipment range from three to fifteen years. Leasehold improvements are amortized over the lesser of the useful life or lease term. Depreciation expense recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is summarized as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total depreciation expense	$	45,169	$	38,818	$	31,623

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 6—Identifiable Intangible Assets

Identifiable intangible assets consist primarily of trademarks, copyrights and patents, purchased technologies, customer and reseller relationships, and covenants not to compete which are amortized over the estimated useful life, generally on a straight-line basis, with the exception of customer and reseller relationships which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit. Useful lives range from three to ten years. As of February 28, 2014 and February 28, 2013, trademarks with an indefinite estimated useful life totaled $9.6 million and $9.3 million, respectively. The following is a summary of identifiable intangible assets (in thousands):

	February 28, 2014							February 28, 2013
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Trademarks, copyrights and patents	$	105,269	$	(34,784	)	$	70,485	$	94,020	$	(27,412	)	$	66,608
Purchased technologies		79,433		(55,960	)		23,473		79,201		(46,507	)		32,694
Customer and reseller relationships		89,992		(63,075	)		26,917		89,959		(53,391	)		36,568
Covenants not to compete		10,690		(5,977	)		4,713		10,516		(4,143	)		6,373
Other intangible assets		8,922		(1,111	)		7,811		—		—			—
Total identifiable intangible assets	$	294,306	$	(160,907	)	$	133,399	$	273,696	$	(131,453	)	$	142,243

The balances in identifiable intangible assets as of February 28, 2013 include $30.6 million of identifiable intangible assets acquired as part of business combinations completed during the year ended February 28, 2013. See NOTE 3—Business Combinations for further discussion related to business combinations.

Patents purchased from a related party during the year ended February 28, 2013 totaled $22.4 million. See NOTE 7—Other Assets, Net for further discussion.

Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is summarized as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Cost of revenue	$	11,212	$	5,943	$	3,533
Sales and marketing		8,872		8,416		8,348
Research and development		3,836		3,836		4,194
General and administrative		5,316		5,328		3,674
Total amortization expense	$	29,236	$	23,523	$	19,749

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of February 28, 2014, future amortization expense on existing intangibles is as follows (in thousands):

Fiscal Year	Amortization Expense of Intangible Assets
2015	$	29,293
2016		22,727
2017		20,146
2018		16,238
2019		12,740
Thereafter		22,617
Total amortization expense	$	123,761

NOTE 7—Other Assets, Net

Other assets, net were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Cost-basis investments (1)	$	21,801	$	5,354
Net non-current deferred tax assets (see NOTE 11—Income Taxes)		7,655		5,226
Security deposits and other		5,935		5,123
Equity-method investment (1)		—		15,560
Other assets, net	$	35,391	$	31,263

(1) Equity-method investment represents the Company’s investment in Open Invention Network LLC (“OIN”) and the related share of OIN’s accumulated deficit for the fiscal year ended February 28, 2013. During the fourth quarter of the fiscal year ended February 28, 2014, OIN accepted an additional full member which decreased the Company’s overall influence as well as ownership stake in OIN below the threshold prescribed by U.S. GAAP to qualify for equity method accounting treatment. As a result, the Company’s investment in OIN was reclassified as a cost-basis investment for the fiscal year ended February 28, 2014 and totaled $14.2 million as of February 28, 2014.

The Company reviews its non-marketable cost-basis investments in equity securities for other than temporary declines in fair value based on prices recently paid for shares in that company, as well as changes in market conditions. The carrying values are not necessarily representative of the amounts that the Company could realize in a current transaction. During the years ended February 28, 2014, February 28, 2013 and February 29, 2012, no significant losses were recognized for equity investments in other companies.

During the year ended February 28, 2013, the Company purchased patents for $22.4 million from OIN. The gain recognized by OIN related to the sale of these patents was excluded from the Company’s pro rata share of OIN’s gains and losses for the year ended February 28, 2013.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 8—Prepaid Expenses

Prepaid expenses include sales commissions, taxes and insurance. Sales commissions are the incremental costs that are directly associated with non-cancelable subscription contracts with customers and consist of sales commissions paid to the Company’s sales force. The commissions are deferred and amortized over a period to approximate the period of the subscription term. For further discussion on deferred commissions see NOTE 2—Summary of Significant Accounting Policies. Prepaid expenses, including sales commissions, were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Deferred commissions	$	80,987	$	62,159
Professional services		12,827		13,172
Taxes		13,012		10,743
Insurance		1,207		1,547
Other		10,354		6,800
Prepaid expenses	$	118,387	$	94,421

NOTE 9—Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Accounts payable	$	18,326	$	27,096
Accrued wages and other compensation related expenses		100,474		72,912
Accrued other trade payables		40,998		38,595
Accrued income and other taxes payable		19,253		15,111
Accrued other		417		488
Accounts payable and accrued expenses	$	179,468	$	154,202

NOTE 10—Derivative Instruments

The Company transacts business in various foreign countries and is, therefore, subject to risk of foreign currency exchange rate fluctuations. The Company from time to time enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. All derivative instruments are recorded on the Consolidated Balance Sheets at their respective fair market values. The Company has elected not to prepare and maintain the documentation required to qualify its forward contracts for hedge accounting treatment and, therefore, changes in fair value are recorded in the Consolidated Statements of Operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of February 28, 2014 and for the year then ended (in thousands):

							Year ended February 28, 2014
	As of February 28, 2014						Classification of  Gain (Loss) Recognized in Income  on Derivatives	Amount of  Gain (Loss) Recognized in Income on Derivatives
	Balance Sheet Classification	Fair Value			Notional Value
Assets—foreign currency forward contracts not designated as hedges	Other current assets	$	134		$	24,790	Other income (expense), net	$	1,147
Liabilities—foreign currency forward contracts not designated as hedges	Accounts payable and accrued expenses		(15	)		3,546	Other income (expense), net		(2,697	)
TOTAL		$	119		$	28,336		$	(1,550	)

The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of February 28, 2013 and for the year then ended (in thousands):

							Year ended February 28, 2013
	As of February 28, 2013						Classification of  Gain (Loss) Recognized in Income  on Derivatives	Amount of  Gain (Loss) Recognized in Income on Derivatives
	Balance Sheet Classification	Fair Value			Notional Value
Assets—foreign currency forward contracts not designated as hedges	Other current assets	$	280		$	36,214	Other income (expense), net	$	1,309
Liabilities—foreign currency forward contracts not designated as hedges	Accounts payable and accrued expenses		(219	)		29,328	Other income (expense), net		(1,695	)
TOTAL		$	61		$	65,542		$	(386	)

NOTE 11—Income Taxes

The U.S. and foreign components of the Company’s income before provision for income taxes consisted of the following (in thousands):

	February 28, 2014		February 28, 2013		February 29, 2012
U.S.	$	135,371	$	130,560	$	147,148
Foreign		104,177		79,192		60,861
Income before provision for income taxes	$	239,548	$	209,752	$	208,009

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of the Company’s provision for income taxes consisted of the following (in thousands):

	February 28, 2014			February 28, 2013			February 29, 2012
Current:
Foreign	$	23,391		$	16,556		$	16,612
Federal		19,734			33,598			18,609
State		7,147			1,882			3,069
Current tax expense	$	50,272		$	52,036		$	38,290
Deferred:
Foreign		(1,100	)		2,899			(4,390	)
Federal		14,468			9,687			27,483
State		(2,384	)		(5,074	)		—
Deferred tax expense	$	10,984		$	7,512		$	23,093
Net provision for income taxes	$	61,256		$	59,548		$	61,383

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2014 and February 28, 2013, consisted of the following (in thousands):

	February 28, 2014			February 28, 2013
Deferred tax assets:
Foreign net operating loss carryforwards	$	4,016		$	7,629
Domestic net operating loss carryforwards		8,650			12,227
Domestic credit carryforwards		24,045			29,062
Share-based compensation		32,478			26,781
Deferred revenue		49,749			43,066
Foreign deferred royalty expenses		8,396			6,000
Other		10,599			8,299
Total deferred tax assets	$	137,933		$	133,064
Valuation allowance for deferred tax assets		(699	)		(659	)
Total deferred tax assets, net of valuation allowance	$	137,234		$	132,405
Deferred tax liabilities:
Goodwill		5,163			2,971
Fixed and intangible assets		28,283			23,905
Compensation accruals		12,738			9,124
Other		3,342			8,132
Total deferred tax liabilities	$	49,526		$	44,132
Net deferred tax asset	$	87,708		$	88,273

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s gross and net deferred tax asset and liability positions at February 28, 2014 are as follows (in thousands):

	Domestic			Foreign			Consolidated
Deferred tax assets:
Current	$	108,678		$	11,350		$	120,028
Non-current		9,125			8,081			17,206
Deferred tax liabilities:
Current		8,753			3,681			12,434
Non-current		35,522			1,570			37,092
Net deferred tax asset	$	73,528		$	14,180		$	87,708
Net current deferred tax asset	$	99,925		$	8,339		$	108,264
Net non-current deferred tax asset, recorded in Other assets, net		—			7,655			7,655
Net current deferred tax liability, recorded in Other current obligations		—			(670	)		(670	)
Net non-current deferred tax liability, recorded in Other long-term obligations		(26,397	)		(1,144	)		(27,541	)
Net deferred tax asset	$	73,528		$	14,180		$	87,708

As of February 28, 2014, the Company continues to maintain a valuation allowance against its deferred tax assets with respect to certain state NOLs.

As of February 28, 2014, the Company had U.S. federal NOL carryforwards of $23.5 million and state NOL carryforwards of $114.5 million, of which $55.5 million consists of share-based compensation deductions in excess of the amounts expensed in the Company’s operating results. The resulting excess tax benefit will be recognized as an increase to additional paid in capital when realized. The NOL carryforwards expire in varying amounts beginning in the fiscal year ending February 29, 2016. As of February 28, 2014, the Company had U.S. federal research tax credit carryforwards of $30.6 million and state research tax credit carryforwards of $10.5 million, which expire in varying amounts beginning in the fiscal year ending February 28, 2018.

Taxes computed at the statutory federal income tax rates are reconciled to the provision for income taxes for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively, as follows (in thousands):

	February 28, 2014			February 28, 2013			February 29, 2012
Effective rate		25.6	%		28.4	%		29.5	%
Provision at federal statutory rate, 35%	$	83,842		$	73,413		$	72,803
State tax, net of federal tax benefit (1)		3,169			907			3,070
Foreign rate differential		(10,817	)		(7,034	)		(7,631	)
Israel tax holiday (2)		(1,901	)		(1,806	)		(1,447	)
Foreign dividend		623			5,787			3,721
Nondeductible items		2,157			2,141			2,923
Research tax credit		(3,070	)		(5,348	)		(2,357	)
Foreign tax credit		(11,878	)		(7,852	)		(10,830	)
Domestic production activities deduction		(4,973	)		—			—
Other		4,104			(660	)		1,131
Provision for income taxes	$	61,256		$	59,548		$	61,383

88

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1) During the year ended February 28, 2013, the Company amended its state income tax returns for prior years, which resulted in a reduction of state tax, net of federal tax benefit, of $3.4 million.

(2) The Company qualifies for a tax holiday in Israel which began during the fiscal year ended February 28, 2011 and is scheduled to terminate as of the fiscal year ending February 29, 2020. The tax holiday provides for an exemption from income tax in the first two years, and for a reduced rate of taxation on income generated in Israel for the subsequent eight years. The financial impact of this holiday for the year ended February 28, 2014 was a $1.9 million reduction in the Company’s provision for income taxes, which increased the Company’s diluted earnings per share by $0.01.

As of February 28, 2014, cumulative undistributed earnings of non-U.S. subsidiaries totaled $296.4 million. Determination of the deferred tax liability, if any, on these earnings reinvested indefinitely outside the U.S. is not practicable because of available foreign tax credits. It is the Company’s policy to invest the earnings of foreign subsidiaries indefinitely outside the U.S. From time to time, however, the Company may remit a portion of these earnings to the extent it does not incur additional U.S. tax and it is otherwise feasible. The Company has provided U.S. income taxes on the earnings of certain foreign subsidiaries that are not considered as permanently reinvested outside the U.S. The U.S. income tax on such earnings is completely offset by U.S. foreign tax credits.

Unrecognized tax benefits

The following table reconciles unrecognized tax benefits for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

Balance at February 28, 2011	$	42,083
Additions based on tax positions related to the current year		2,066
Additions based on tax positions related to prior years		531
Reductions related to settlements with tax authorities		(259	)
Reductions related to changes in facts and circumstances		(659	)
Balance at February 29, 2012	$	43,762
Additions based on tax positions related to prior years		2,122
Additions based on tax positions related to the current year		2,576
Reductions related to changes in facts and circumstances		(147	)
Balance at February 28, 2013	$	48,313
Additions based on tax positions related to prior years		100
Additions based on tax positions related to the current year		9,005
Reductions related to settlements with tax authorities		(364	)
Balance at February 28, 2014	$	57,054

The Company’s unrecognized tax benefits as February 28, 2014 and February 28, 2013, which, if recognized, would affect the Company’s effective tax rate were $49.7 million and $45.3 million, respectively.

It is the Company’s policy to recognize interest and penalties related to uncertain tax positions as income tax expense. Accrued interest and penalties related to unrecognized tax benefits totaled $6.0 million and $4.2 million as of February 28, 2014 and February 28, 2013, respectively.

The results and timing of the resolution of tax audits is highly uncertain and the Company is unable to estimate the range of the possible changes to the balance of unrecognized tax benefits. However, the Company

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does not anticipate that within the next 12 months that the total amount of unrecognized tax benefits will significantly increase or decrease as a result of any such potential tax audit resolutions.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The following table summarizes the tax years in the Company’s major tax jurisdictions that remain subject to income tax examinations by tax authorities as of February 28, 2014. Due to NOL carryforwards, in some cases the tax years continue to remain subject to examination with respect to such NOLs:

Tax Jurisdiction	Years Subject to Income  Tax Examination
U.S. federal		1994 – Present
North Carolina		1999 – Present
Ireland		2008 – Present
Japan (1)		2012 – Present

(1) The Company has been examined for income tax for years through February 28, 2011. A tax examination was concluded in fiscal 2012 with no significant adjustments resulting. However, the statute of limitations remains open for five years.

The U.S. Internal Revenue Service recently completed its examination with respect to the Company’s fiscal year ended February 28, 2010 and proposed certain adjustments. The Company believes that it has adequately provided for any reasonably foreseeable outcomes that may result from the proposed adjustments but, depending on the ultimate outcome, the Company could be required to pay additional income taxes. The Company does not believe that such outcome would have a material effect on its consolidated financial condition or consolidated results of operations.

The Company is currently undergoing an income tax examination in India.

The Company believes it has adequately provided for any reasonably foreseeable outcomes related to tax audits.

NOTE 12—Common and Preferred Stock

Common stock

The Company has authorized 300,000,000 shares of common stock with a par value of $0.0001 per share. Holders of these shares have one vote per share. Upon the dissolution, liquidation or winding up of the Company, holders of common stock will be entitled to receive the assets of the Company after satisfaction of the preferential rights of any outstanding preferred stock or any other outstanding stock ranking on liquidation senior to or on parity with the common stock.

The Company repurchased 5,006,579 shares, 2,290,936 shares and 3,167,413 shares of its common stock during the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively, at an aggregate cost of $239.4 million, $120.7 million and $133.2 million, respectively. These amounts are recorded as treasury stock on the Company’s Consolidated Balance Sheets.

Preferred stock

At February 28, 2014, the Company has authorized 5,000,000 shares of preferred stock with a par value of $0.0001 per share. No shares of preferred stock were outstanding as of February 28, 2014 or February 28, 2013.

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NOTE 13—Share-based Awards

Overview

The Company’s 2004 Long-Term Incentive Plan, as amended and restated (the “2004 Plan”), provides for the granting of stock options, service-based share awards and performance-based share awards, among other awards. As of February 28, 2014, there were 19.6 million shares of common stock reserved for issuance under future share-based awards to be granted to any employee, officer or director or consultant of the Company at terms and prices to be determined by the Board of Directors.

The following table summarizes share-based awards, by type, granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Awards Granted Year ended February 28, 2014				Awards Granted Year ended February 28, 2013				Awards Granted Year ended February 29, 2012
	Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value		Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value		Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value
Stock options		133,800	$	12.64		114,361	$	15.16		51,563	$	15.41
Service-based shares and share units		2,513,328	$	47.43		2,471,872	$	54.62		2,148,070	$	45.35
Performance-based shares and share units—Maximum		671,448	$	47.86		613,800	$	52.23		633,336	$	43.60
Total share-based awards		3,318,576	$	46.11		3,200,033	$	52.75		2,832,969	$	44.41

The following summarizes share-based compensation expense recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Cost of revenue	$	11,793	$	9,433	$	7,880
Sales and marketing		40,322		32,906		25,060
Research and development		34,194		29,647		21,570
General and administrative		27,465		26,712		24,757
Total share-based compensation expense	$	113,774	$	98,698	$	79,267

Share-based compensation expense qualifying for capitalization was insignificant for each of the Company’s fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012. Accordingly, no share-based compensation expense was capitalized during these years.

Estimated annual forfeitures—An estimated forfeiture rate of 10% per annum, which approximates the Company’s historical rate, was applied to options and service-based share awards. Awards are adjusted to actual forfeiture rates at vesting. The Company reassesses its estimated forfeiture rate annually or when new information, including actual forfeitures, indicate a change is appropriate.

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Stock options

The 2004 Plan provides that the purchase price per share for each option shall not be less than the fair market value of the underlying share on the date of grant. Options granted under the 2004 Plan to date include contract terms of five years and generally vest 25% upon completion of one full year of service and 6.25% on the first day of each subsequent three-month period of service. The maximum contract term for an option granted under the 2004 Plan is seven years from the date of grant.

The total fair value of stock options recognized in the Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of stock options recognized	$	2,139	$	2,791	$	3,104

The following table summarizes the activity for the Company’s stock options for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Shares  Underlying Options			Weighted Average Exercise  Price Per Share
Outstanding at February 28, 2011		2,029,488		$	16.88
Granted		51,563			45.08
Exercised		(1,059,191	)		15.87
Forfeited		(123,618	)		17.16
Assumed (1)		204,911			1.13
Outstanding at February 29, 2012		1,103,153		$	16.21
Granted		114,361			55.17
Exercised		(735,086	)		15.61
Forfeited		(29,741	)		25.10
Outstanding at February 28, 2013		452,687		$	26.43
Granted		133,800			47.12
Exercised		(175,026	)		12.13
Forfeited		(34,840	)		22.93
Outstanding at February 28, 2014		376,621		$	40.75

(1) Amount represents partially vested options assumed as part of a business combination.

As described above, options are typically granted with an exercise price equal to the fair market value of the Company’s common stock on the date of grant. No options were granted by the Company during the three years ended February 28, 2014 with exercise prices less than the grant date fair value of the Company’s common stock.

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The following summarizes information, as of February 28, 2014, about the Company’s outstanding and exercisable stock options:

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.00 – $10.00		52,214		4.6	$	1.85		32,588	$	1.70
$10.01 – $20.00		7,157		1.0	$	16.24		7,157	$	16.24
$20.01 – $30.00		20,773		0.6	$	27.51		20,773	$	27.51
$30.01 – $40.00		24,813		1.6	$	39.37		19,350	$	39.36
$40.01 – $50.00		115,623		4.0	$	44.31		19,857	$	45.13
$50.01 and over		156,041		3.8	$	54.23		34,156	$	55.45
Total		376,621		3.6	$	40.75		133,881	$	32.08

The following summarizes the intrinsic value, as of February 28, 2014, of the Company’s outstanding, exercisable and expected to vest stock options:

Intrinsic Value of Stock Options	Number of Stock Options		Weighted  Average Remaining Contractual Life		Intrinsic Value  at February 28, 2014 (in thousands)
Outstanding		376,621		3.6	$	6,886
Exercisable		133,881		2.4	$	3,609
Expected to vest (assuming annual forfeiture rate of 10%)		212,369		4.3	$	2,972

The intrinsic value of stock options exercised during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of stock options exercised	$	6,775	$	29,598	$	31,736

As of February 28, 2014, compensation cost related to unvested stock options not yet recognized in the Company’s Consolidated Financial Statements totaled $3.8 million. The weighted average period over which these unvested stock options are expected to be recognized is approximately 2.6 years.

The fair values of options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated on the date of grant using the Black-Scholes-Merton option-pricing model based on the following weighted average assumptions:

	Year ended February 28, 2014			Year ended February 28, 2013			Year ended February 29, 2012
Expected dividend yield		—	%		—	%		—	%
Risk-free interest rate		0.62	%		0.41	%		0.61	%
Expected volatility (1)		36.80	%		38.13	%		47.91	%
Expected life (in years) (2)		3.27			3.27			3.27
Weighted average fair value of options granted during the period	$	12.64		$	15.16		$	15.41

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(1) The expected volatility rates for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated based on an approximate equal weighting of the historical volatility of the Company’s common stock over a period of approximately 3.27 years and the implied volatility of publicly traded options for the Company’s common stock.

(2) The expected term for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was determined based on the Company’s historical exercise data. The Company reassesses its estimate of expected term annually or when new information indicates a change is appropriate.

Service-based share awards

Service-based share awards include nonvested shares, nonvested share units and deferred share units granted under the 2004 Plan. Nonvested shares and share units generally vest, subject to continued service to the Company, 25% on the first anniversary of the date of grant and (i) 6.25% on the first day of each subsequent three-month period for nonvested shares and (ii) 25% each year over a four-year period beginning on the date of grant for nonvested share units. Nonvested shares and nonvested share units are generally amortized to expense on a straight-line basis over four years. Deferred share units are awarded to directors and generally vest within one year when issued in lieu of annual share awards or immediately when issued in lieu of cash.

The total fair value of service-based share awards recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of service-based awards recognized	$	92,450	$	76,460	$	61,818

The following table summarizes the activity for the Company’s service-based share awards for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Nonvested Shares and Share Units			Weighted  Average Grant-date Fair Value
Service-based share awards at February 28, 2011		5,793,338		$	28.60
Granted		2,148,070			45.35
Vested		(2,162,667	)		25.78
Forfeited		(431,900	)		32.22
Assumed (1)		139,798			43.34
Service-based share awards at February 29, 2012		5,486,639		$	36.36
Granted		2,471,872			54.62
Vested		(2,184,588	)		31.33
Forfeited		(580,490	)		41.56
Service-based share awards at February 28, 2013		5,193,433		$	46.59
Granted		2,513,328			47.43
Vested		(1,915,326	)		42.35
Forfeited		(418,127	)		48.53
Service-based share awards at February 28, 2014		5,373,308		$	48.34

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(1) Amount represents partially vested share awards assumed as part of a business combination.

The following summarizes the intrinsic value, as of February 28, 2014, of the Company’s service-based awards outstanding and expected to vest:

Intrinsic Value of Service-based Awards	Number of Shares and Share Units		Weighted  Average Remaining Vesting Period		Intrinsic Value  at February 28, 2014 (in thousands)
Outstanding		5,373,308		1.5	$	316,971
Expected to vest (assuming annual forfeiture rate of 10%)		4,553,165		1.5	$	268,591

The intrinsic value of service-based awards vesting during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of service-based awards vesting	$	88,969	$	118,299	$	96,536

As of February 28, 2014, compensation cost related to service-based share awards not yet recognized in the Company’s Consolidated Financial Statements totaled $213.4 million. The weighted average period over which these nonvested awards are expected to be recognized is approximately 1.4 years.

Performance-based share awards

Under the 2004 Plan, certain executive officers and senior management were awarded a target number of PSUs. The PSU payouts are either based on (i) the Company’s financial performance (“performance condition”) or (ii) the performance of the Company’s common stock (“market condition”). Set forth below are general descriptions of the two types of performance-based awards granted to certain executive officers and members of senior management:

PSUs with performance conditions

Depending on the Company’s financial performance measured against the financial performance of specified peer companies during a three-year performance period, PSU grantees may earn up to 200% of the target number of PSUs (the “Maximum PSUs”). Payouts are earned over a performance period with two separate performance segments. Up to 50% of the Maximum PSUs may be earned in respect of the first performance segment; and up to 100% of the Maximum PSUs may be earned in respect of the second performance segment, less the amount earned in the first performance segment.

PSUs with market conditions

Depending on the performance of the Company’s common stock over a performance period of approximately three years, PSU grantees may earn up to 200% of the target number of PSUs. The number of PSUs earned is determined based on a comparison of the performance of the Company’s stock price relative to the performance of the stock price of specified peer companies during the same performance period. Each grantee will receive a number of shares of common stock equal to the number of PSUs earned in a single payout following the end of the performance period.

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The following table summarizes the activity for the Company’s PSUs for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Maximum
Activity	Shares Underlying Performance Share Units			Weighted Average Grant  Date Fair Value
Outstanding at February 28, 2011		1,430,005		$	24.48
Granted		633,336			43.60
Vested		(337,734	)		23.98
Forfeited		—			—
Outstanding at February 29, 2012		1,725,607		$	31.60
Granted		613,800			52.23
Vested		(634,384	)		23.62
Forfeited		(200,353	)		32.81
Outstanding at February 28, 2013		1,504,670		$	43.22
Granted		671,448			47.86
Vested		(399,334	)		33.47
Forfeited		(101,559	)		44.34
Outstanding at February 28, 2014		1,675,225		$	47.34

(1) Vested and forfeited amounts represent the actual number of shares vesting and forfeited during the year. Outstanding represents the remaining maximum potential shares available to vest as of the period ended.

The total fair value of performance-based share awards recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of performance-based awards recognized	$	19,185	$	19,447	$	14,345

The total intrinsic value of performance-based share awards vesting during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of performance-based awards vesting	$	19,639	$	37,872	$	16,032

As of February 28, 2014, the number of shares subject to PSU awards expected to vest was 1.1 million shares. Compensation expense related to PSUs expected to vest but not yet recognized in the Consolidated Financial Statements totaled $19.8 million as of February 28, 2014. The weighted average period over which these awards are expected to be recognized is approximately 1.7 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 14—Commitments and Contingencies

Operating leases

As of February 28, 2014, the Company leased office space and certain equipment under various non-cancelable operating leases. Future minimum lease payments required under the operating leases at February 28, 2014 are as follows (in thousands):

Fiscal Year	Operating Leases
2015	$	27,977
2016		26,247
2017		23,785
2018		16,372
2019		13,354
Thereafter		86,789
Total minimum lease payments	$	194,524

Rent expense under operating leases for the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012 is provided in the following table (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total operating lease expense	$	29,472	$	26,830	$	24,434

Facility exit costs

In December 2011, the Company entered into an agreement to sublease a building located in downtown Raleigh, North Carolina in which the Company’s headquarters are currently located. In connection with the transition to the Company’s new headquarters, the Company subleased or entered into agreements to assign its existing leases related to the two facilities that previously constituted the Company’s headquarters in Raleigh, North Carolina.

In May 2012, the Company entered into a sublease agreement with an unrelated third-party to lease one of the two facilities that previously constituted its headquarters. As a result, the Company recognized a loss of $3.1 million for the year ended February 28, 2013, which represented the excess of the Company’s remaining obligation on the space over the agreed sublease income.

The Company ceased using the remaining facility in June 2013 and, as a result, recognized a loss of $2.2 million which represented the remaining costs associated with its exit from the facility. In August 2013, the Company agreed to assign its lease related to the remaining facility to an unrelated third party effective September 2014.

Amortization of related leasehold improvements was accelerated to coincide with the Company’s exit from the two facilities. This change in estimated useful life resulted in incremental amortization expense of $2.9 million for the year ended February 28, 2013 and is included in general and administrative expense on the Company’s Consolidated Statement of Operations.

Product indemnification

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party from losses arising in connection with the Company’s services or products, or from losses arising in

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connection with certain events defined within a particular contract, which may include litigation or claims relating to intellectual property infringement, certain losses arising from damage to property or injury to persons or other matters. In each of these circumstances, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements may in certain cases be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third-parties for certain payments made by the Company.

It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the facts and circumstances involved in each particular agreement. The Company does not record a liability for claims related to indemnification unless the Company concludes that the likelihood of a material claim is probable and estimable. Payments pursuant to these indemnification claims during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were in the aggregate immaterial.

NOTE 15—Legal Proceedings

The Company experiences routine litigation in the normal course of its business, including patent litigation. The Company presently believes that the outcome of this routine litigation will not have a material adverse effect on its financial condition, results of operations or cash flows.

NOTE 16—Employee Benefit Plans

The Company provides retirement plans whereby participants may elect to contribute a portion of their annual compensation to the plans, after complying with certain limitations. The Company has the option to make contributions to the plans and contributed to the plans for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total contributions to employee benefit plans	$	17,613	$	14,695	$	11,377

NOTE 17—Share Repurchase Program

Between March 1, 2013 and April 15, 2013, the Company repurchased an aggregate of 3,648,575 shares of its common stock for $179.3 million. These repurchases were made pursuant to the Company’s repurchase program previously announced on March 28, 2012 and completed the repurchases authorized under such program.

On April 15, 2013, the Company announced that its Board of Directors has authorized the repurchase of up to $300.0 million of Red Hat’s common stock from time to time on the open market or in privately negotiated transactions. The program commenced on April 16, 2013 and will expire on the earlier of (i) March 31, 2015, or (ii) a determination by the Board, Chief Executive Officer or Chief Financial Officer to discontinue the program.

As of February 28, 2014, the Company had repurchased 1,358,004 shares of its common stock for $60.0 million under this program. As of February 28, 2014, the amount available under the program for the repurchase of the Company’s common stock was $240.0 million.

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NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2014 (in thousands):

	As of February 28, 2014			Quoted Prices  In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Money markets (1)	$	178,280		$	178,280	$	—		$	—
Available-for-sale securities (1):
Interest-bearing deposits		86,937			—		86,937			—
Commercial paper		37,643			—		37,643			—
U.S. agency securities		279,049			—		279,049			—
Corporate securities		382,516			—		382,516			—
Foreign government securities		79,841			—		79,841			—
Foreign currency derivatives (2)		134			—		134			—
Liabilities:
Foreign currency derivatives (3)		(15	)		—		(15	)		—
Total	$	1,044,385		$	178,280	$	866,105		$	—

(1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2014 in addition to $443.2 million of cash.

(2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2014.

(3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2014.

The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2013 (in thousands):

	As of February 28, 2013			Quoted Prices  In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Money markets (1)	$	143,680		$	143,680	$	—		$	—
Available-for-sale securities (1):
Interest-bearing deposits		123,518			—		123,518			—
Commercial paper		54,483			—		54,483			—
U.S. agency securities		359,993			—		359,993			—
Corporate securities		312,691			—		312,691			—
Foreign government securities		26,869			—		26,869			—
Equity securities (1)		274			274		—			—
Foreign currency derivatives (2)		280			—		280			—
Liabilities:
Foreign currency derivatives (3)		(219	)		—		(219	)		—
Total	$	1,021,569		$	143,954	$	877,615		$	—

99

RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2013, in addition to $296.9 million of cash.

(2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2013.

(3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2013.

The following table represents the Company’s investments measured at fair value as of February 28, 2014 (in thousands):

	Amortized Cost		Gross Unrealized					Aggregate Fair Value		Balance Sheet Classification
										Cash Equivalent Marketable Securities		Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses(1)
Money markets	$	178,280	$	—	$	—		$	178,280	$	178,280	$	—	$	—
Interest-bearing deposits		86,937		—		—			86,937		—		86,937		—
Commercial paper		37,643		—		—			37,643		25,299		12,344		—
U.S. agency securities		279,657		12		(620	)		279,049		—		56,314		222,735
Corporate securities		381,446		1,279		(209	)		382,516		—		131,612		250,904
Foreign government securities		79,818		34		(11	)		79,841		—		48,180		31,661
Total	$	1,043,781	$	1,325	$	(840	)	$	1,044,266	$	203,579	$	335,387	$	505,300

(1) As of February 28, 2014, there were $0.2 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

The following table summarizes the stated maturities of the Company’s investment in available-for-sale securities at February 28, 2014 (in thousands):

	Total		Less than 1 Year		2-3 Years		4-5 Years		More than 5 Years
Maturity of short and long term available-for-sale securities	$	840,687	$	335,387	$	337,189	$	168,111	$	—

100

RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table represents the Company’s investments measured at fair value as of February 28, 2013 (in thousands):

	Amortized Cost		Gross Unrealized					Aggregate Fair Value		Balance Sheet Classification
										Cash Equivalent Marketable Securities		Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses(1)
Money markets	$	143,680	$	—	$	—		$	143,680	$	143,680	$	—	$	—
Interest-bearing deposits		123,518		—		—			123,518		—		123,518		—
Commercial paper		54,483		—		—			54,483		39,498		14,985		—
U.S. agency securities		360,060		136		(203	)		359,993		7,041		54,485		298,467
Corporate securities		311,561		1,262		(132	)		312,691		—		172,250		140,441
Foreign government securities		26,902		2		(35	)		26,869		—		26,869		—
Equity securities		6		268		—			274		—		274		—
Total	$	1,020,210	$	1,668	$	(370	)	$	1,021,508	$	190,219	$	392,381	$	438,908

(1) As of February 28, 2013, there were less than $0.1 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

NOTE 19—Earnings Per Share

The following table reconciles the numerators and denominators of the earnings per share calculation for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands, except per share amounts):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Net income, basic and diluted	$	178,292	$	150,204	$	146,626
Weighted average common shares outstanding		189,920		193,147		193,151
Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares		2,116		2,657		3,300
Diluted shares		192,036		195,804		196,451
Net income per share—diluted	$	0.93	$	0.77	$	0.75

The following share awards are not included in the computation of diluted earnings per share because the aggregate value of proceeds considered received upon either exercise or vesting was greater than the average market price of the Company’s common stock during the related periods and the effect of including such share awards in the computation would be anti-dilutive (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Number of shares considered anti-dilutive for calculating diluted EPS		360		77		311

101

RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 20—Segment Reporting

The following summarizes revenue from unaffiliated customers, income (loss) from operations, total cash, cash equivalents and available-for-sale investment securities and total assets by geographic segment at and for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	Americas		EMEA		Asia Pacific		Corporate(1)			Total
	Year ended February 28, 2014
Revenue from unaffiliated customers	$	974,655	$	352,935	$	207,025	$	—		$	1,534,615
Income (loss) from operations	$	199,254	$	94,949	$	51,860	$	(113,774	)	$	232,289
Cash, cash equivalents and available-for-sale investment securities	$	808,830	$	517,397	$	161,202	$	—		$	1,487,429
Total assets	$	2,153,828	$	703,929	$	248,862	$	—		$	3,106,619

	Year ended February 28, 2013
Revenue from unaffiliated customers	$	855,214	$	284,922	$	188,681	$	—		$	1,328,817
Income (loss) from operations	$	181,136	$	72,440	$	46,160	$	(98,698	)	$	201,038
Cash, cash equivalents and available-for-sale investment securities	$	825,906	$	370,174	$	122,293	$	—		$	1,318,373
Total assets	$	2,068,879	$	534,093	$	210,688	$	—		$	2,813,660

	Year ended February 29, 2012
Revenue from unaffiliated customers	$	716,033	$	257,603	$	159,467	$	—		$	1,133,103
Income (loss) from operations	$	165,278	$	74,581	$	39,321	$	(79,267	)	$	199,913
Cash, cash equivalents and available-for-sale investment securities	$	887,256	$	299,703	$	73,394	$	—		$	1,260,353
Total assets	$	1,898,897	$	424,542	$	167,660	$	—		$	2,491,099

(1) Amounts represent share-based compensation expense for each of the three fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, which was not allocated to geographic segments.

Supplemental information about geographic areas

The following table lists, for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, revenue from unaffiliated customers in the U.S., the Company’s country of domicile, and revenue from foreign countries (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
U.S., the Company’s country of domicile	$	848,053	$	753,898	$	622,608
Foreign		686,562		574,919		510,495
Total revenue from unaffiliated customers	$	1,534,615	$	1,328,817	$	1,133,103

There were no individual foreign countries in which the Company earned 10% or more of its revenue from unaffiliated customers.

102

RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Total tangible long-lived assets located in the U.S., the Company’s country of domicile, and similar tangible long-lived assets held outside the U.S. are summarized in the following table for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	As of February 28, 2014		As of February 28, 2013		As of February 29, 2012
U.S., the Company’s country of domicile	$	137,356	$	105,029	$	63,069
Foreign		36,561		36,557		28,996
Total tangible long-lived assets	$	173,917	$	141,586	$	92,065

Supplemental information about major customers

For the year ended February 28, 2013, the U.S. government and its agencies generated approximately 11% of the Company’s total revenue from unaffiliated customers. For the years ended February 28, 2014 and February 29, 2012 there were no individual customers from which the Company generated 10% or greater revenue.

Supplemental information about products and services

The following table, for each of the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, provides further detail, by type, of our subscription and services revenues. Infrastructure-related offerings subscription revenue includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Enterprise Virtualization. Subscription revenue generated from our Application development-related and other emerging technology offerings includes Red Hat JBoss Middleware, Red Hat Storage Server and Red Hat cloud offerings such as OpenStack and OpenShift (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Subscription revenue:
Infrastructure-related offerings	$	1,171,103	$	1,027,983	$	870,315
Application Development-related and other emerging technology offerings		165,668		120,358		95,260
Total subscription revenue		1,336,771		1,148,341		965,575
Training and services revenue:
Consulting services		145,191		129,363		116,573
Training		52,653		51,113		50,955
Total training and services revenue		197,844		180,476		167,528
Total revenue	$	1,534,615	$	1,328,817	$	1,133,103

103

RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 21—Other Long-Term Obligations

Other long-term obligations were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Accrued income taxes	$	45,645	$	32,530
Deferred rent credits		10,879		9,299
Net non-current deferred tax liability		27,541		5,718
Other		938		774
Other long-term obligations	$	85,003	$	48,321

NOTE 22—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss was comprised of the following (in thousands):

	February 28, 2014			February 28, 2013
Accumulated loss from foreign currency translation adjustment	$	(4,823	)	$	(8,768	)
Accumulated unrealized gain, net of tax, on available-for-sale securities		364			801
Accumulated other comprehensive loss	$	(4,459	)	$	(7,967	)

NOTE 23—Unaudited Quarterly Results

Below are unaudited condensed quarterly results for the year ended February 28, 2014:

	Year ended February 28, 2014 Unaudited
	4th Quarter		3rd Quarter			2nd Quarter		1st Quarter
	(in thousands, except per share data)
Revenue:
Subscriptions	$	351,492	$	342,770		$	326,692	$	315,817
Training and services		48,905		53,766			47,731		47,442
Total subscription and training and services revenue	$	400,397	$	396,536		$	374,423	$	363,259
Gross profit	$	339,861	$	336,109		$	318,843	$	307,202
Income from operations	$	59,300	$	60,792		$	55,574	$	56,623
Interest income	$	2,037	$	1,579		$	1,527	$	1,502
Other income (expense), net	$	282	$	(440	)	$	1,196	$	(424	)
Net income, basic and diluted	$	45,068	$	52,025		$	40,808	$	40,391
Net income per common share (1):
Basic	$	0.24	$	0.27		$	0.22	$	0.21
Diluted	$	0.24	$	0.27		$	0.21	$	0.21
Weighted average shares outstanding:
Basic		189,604		189,514			189,437		191,114
Diluted		191,712		191,365			191,432		192,969

(1) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

104

RED HAT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Below are unaudited condensed quarterly results for the year ended February 28, 2013:

	Year ended February 28, 2013 Unaudited
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(in thousands, except per share data)
Revenue:
Subscriptions	$	302,784		$	294,186		$	278,800		$	272,571
Training and services		45,101			49,420			43,795			42,160
Total subscription and training and services revenue	$	347,885		$	343,606		$	322,595		$	314,731
Gross profit	$	294,280		$	290,488		$	274,737		$	268,712
Income from operations	$	50,231		$	49,919		$	49,980		$	50,908
Interest income	$	1,861		$	1,936		$	2,154		$	2,294
Other income (expense), net	$	(32	)	$	(730	)	$	(656	)	$	1,887
Net income, basic and diluted	$	42,973		$	34,765		$	35,005		$	37,461
Net income per common share (1):
Basic	$	0.22		$	0.18		$	0.18		$	0.19
Diluted	$	0.22		$	0.18		$	0.18		$	0.19
Weighted average shares outstanding:
Basic		193,207			193,374			193,064			192,947
Diluted		195,133			195,666			195,795			195,937

(1) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

105

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with our accountants on accounting and financial disclosure matters.

ITEM 9A. CONTROLS AND PROCEDURES

Role of Controls and Procedures

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) or our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of the controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of effectiveness of controls and procedures to future periods are subject to the risk that the controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the controls and procedures may have deteriorated.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

Report of Management on Internal Control Over Financial Reporting

Report of Management on Internal Control Over Financial Reporting is set forth above under PART II, Item 8, “Financial Statements and Supplementary Data—Report of Management on Internal Control Over Financial Reporting.”

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting occurred during the fiscal quarter ended February 28, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

106

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We intend to file with the SEC a definitive proxy statement with respect to our Annual Meeting of Stockholders to be held on August 7, 2014 (the “2014 Annual Meeting”). The information under the sections entitled “Item No. 1—Election of Directors”, “Corporate Governance and Board of Directors Information”, “Compensation and Other Information Concerning Executive Officers” and “Other Matters” from the definitive proxy statement for the 2014 Annual Meeting, which is to be filed with the SEC not later than 120 days after the close of our fiscal year ended February 28, 2014 (the “2014 Proxy Statement”), is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information under the sections entitled “Compensation and Other Information Concerning Executive Officers” and “Corporate Governance and Board of Directors Information” from the 2014 Proxy Statement is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information under the sections entitled “Beneficial Ownership of Our Common Stock” and “Compensation and Other Information Concerning Executive Officers” from the 2014 Proxy Statement is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information under the section entitled “Corporate Governance and Board of Directors Information” from the 2014 Proxy Statement is hereby incorporated by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information under the section entitled “Item No. 2—Ratification of Selection of Independent Registered Public Accounting Firm” from the 2014 Proxy Statement is hereby incorporated by reference.

107

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Report under “Item 8—Financial Statements and Supplementary Data”:

1. Financial Statements:

Report of Independent Registered Public Accounting Firm	65
Consolidated Balance Sheets at February 28, 2014 and February 28, 2013	66
Consolidated Statements of Operations for the years ended February 28, 2014, February  28, 2013 and February 29, 2012	67
Consolidated Statements of Comprehensive Income for the years ended February 28, 2014, February  28, 2013 and February 29, 2012	68
Consolidated Statements of Stockholders’ Equity for the years ended February 28, 2014, February  28, 2013 and February 29, 2012	69
Consolidated Statements of Cash Flows for the years ended February 28, 2014, February  28, 2013 and February 29, 2012	70
Notes to Consolidated Financial Statements	71

2. Financial Statement Schedules:

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

3. List of Exhibits:

Exhibit No.		Description of Exhibits
	2.1+	Agreement and Plan of Merger, dated as of October 3, 2011, by and among Red Hat, Inc., a Delaware corporation, Gluster, Inc., a Delaware corporation, Matte Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Red Hat, Inc., and Fortis Advisors LLC, as the Holder Agent (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the SEC on October 4, 2011 (File no. 001-33162))
	3.1+	Fourth Amended and Restated Certificate of Incorporation of Red Hat, Inc. (incorporated by reference to Exhibit 3.3 to the registrant’s Current Report on Form 8-K filed with the SEC on August 13, 2013 (File no. 001-33162))
	3.2+	Amended and Restated By-Laws of Red Hat, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the SEC on August 13, 2013 (File no. 001-33162))
	4.1+	Specimen certificate representing the common stock of the registrant (incorporated by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-1/A filed with the SEC on July 19, 1999 (File no. 333-80051))
	4.2+	See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and By-Laws of the registrant defining the rights of holders of common stock of the registrant
	4.3+	First Amended and Restated Investor Rights Agreement by and among the registrant and the Investors and Founders listed therein, dated as of February 25, 1999, as amended (incorporated by reference to Exhibit 10.7 to the registrant’s Registration Statement on Form S-1 filed with the SEC on June 4, 1999 (File no. 333-80051))
	10.1+	GNU General Public License (incorporated by reference to Exhibit 10.13 to the registrant’s Registration Statement on Form S-1 filed with the SEC on June 4, 1999 (File no. 333-80051))
	10.2*	Red Hat, Inc. 1999 Stock Option and Incentive Plan, as Amended and Restated

108

Exhibit No.		Description of Exhibits
	10.3+*	Form of Non-Qualified Stock Option Agreement pursuant to the Red Hat, Inc. 1999 Stock Option and Incentive Plan, as amended (incorporated by reference to Exhibit 10.7 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 29, 2011 (File no. 001-33162))
	10.4-+	Limited Liability Company Agreement of Open Inventions Network LLC dated November 8, 2005 (incorporated by reference to Exhibit 10.9 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 29, 2011 (File no. 001-33162))
	10.5*	Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated
	10.6+*	Form of Indemnification Agreement (incorporated by reference to Exhibit 10.10 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2012 (File no. 001-33162))
	10.7+*	Letter Agreement dated May 10, 2012, between Red Hat, Inc. and Arun Oberoi (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on July 6, 2012 (File no. 001-33162))
	10.8+*	Form of Amendment to Equity Awards pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated (incorporated by reference to Exhibit 10.13 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2012 (File no. 001-33162))
	10.9+*	Senior Management Change in Control Severance Policy (incorporated by reference to Exhibit 10.14 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2012 (File no. 001-33162))
	10.10+*	Executive Variable Compensation Plan (incorporated by reference to Exhibit 10.15 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2013 (File no. 001-33162))
	10.11+*	Executive Employment Agreement, dated December 19, 2007, between Red Hat, Inc. and James M. Whitehurst (incorporated by reference to Exhibit 10.18 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2013 (File no. 001-33162))
	10.12*	Form of Director Deferred Stock Unit Agreement (Vested) pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended
	10.13*	Form of Director Deferred Stock Unit Agreement (With Vesting) pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended
	10.14*	Form of Director Restricted Stock Agreement pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended
	10.15*	Senior Management Severance Plan
	10.16*	Form of Executive Agreement by and between Red Hat, Inc. and each Plan Participant
	10.17*	Letter Agreement dated December 23, 2008 between Red Hat, Inc. and James M. Whitehurst amending the Executive Employment Agreement between the parties dated December 19, 2007
	10.18*	Employee Inventions Assignment and Restrictive Obligations Agreement dated January 1, 2008 between Red Hat, Inc. and James M. Whitehurst
	10.19+*	Clawback Policy of Red Hat, Inc. adopted May 13, 2009 (incorporated by reference to Exhibit 99.3 to the registrant’s Current Report filed on Form 8-K with the SEC on May 19, 2009 (File no. 001-33162))
	10.20+*	2006 Performance Compensation Plan as Amended and Restated Effective June 19, 2008 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report filed on Form 10-Q with the SEC on July 10, 2009 (File no. 001-33162))

109

Exhibit No.		Description of Exhibits
	10.21+*	Red Hat, Inc. Stock Ownership Policy for Directors and Senior Executives, amended and restated as of March 21, 2011 (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report filed on Form 8-K with the SEC on March 25, 2011 (File no. 001-33162))
	10.22+*	Form of Performance Restricted Stock Agreement adopted May 19, 2010 (incorporated by reference to Exhibit 99.4 to the registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2010 (File no. 001-33162))
	10.23+*	Form of Restricted Stock Unit Agreement (Non-Executive Participants) pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated, adopted August 11, 2010 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report filed on Form 10-Q with the SEC on October 8, 2010 (File no. 001-33162))
	10.24+*	Executive Base Salaries and Target Award Amounts under Red Hat, Inc.’s Executive Variable Compensation Plan for the Fiscal Year Ending February 29, 2012 (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2011 (File No. 001-33162))
	10.25+*	Executive Base Salaries and Target Award Amounts under Red Hat, Inc.’s Executive Variable Compensation Plan for the Fiscal Year Ending February 28, 2013 (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 30, 2012 (File no. 001-33162))
	10.26+*	Executive Base Salaries and Target Award Amounts under Red Hat, Inc.’s Executive Variable Compensation Plan for the Fiscal Year Ending February 28, 2014 (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2013 (File no. 001-33162))
	10.27+*	Form of Performance Share Unit Agreement (Operating Performance Form) adopted May 25, 2011 (incorporated by reference to Exhibit 99.2 to the registrant’s Current Report filed on Form 8-K with the SEC on May 27, 2011 (File no. 001-33162)).
	10.28+*	Form of Performance Share Unit Agreement (Stock Price Performance Form) adopted May 25, 2011 (incorporated by reference to Exhibit 99.3 to the registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2011 (File no. 001-33162)).
	10.29+*	Peer Group for Fiscal Year 2012 Performance Share Units (incorporated by reference to Exhibit 99.4 to the registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2011 (File no. 001-33162)).
	10.30+*	Peer Group for Fiscal Year 2013 Performance Share Units (incorporated by reference to Exhibit 99.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 30, 2012 (File no. 001-33162))
	10.31+*	Peer Group for Fiscal Year 2014 Performance Share Units (incorporated by reference to Exhibit 99.4 to the registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2013 (File no. 001-33162))
	10.32+*	Red Hat, Inc. 2011 Performance Compensation Plan (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on August 16, 2011 (File no. 001-33162))
	10.33+	Sublease Agreement, dated as of December 27, 2011, by and between Carolina Power & Light Company, a North Carolina corporation, d/b/a Progress Energy Carolinas, Inc. and Red Hat, Inc. (incorporated by reference to Exhibit 10.44 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2012 (File no. 001-33162))

110

Exhibit No.		Description of Exhibits
	10.34*	Red Hat, Inc. 2010 Non-Employee Director Compensation Plan, as amended and restated effective January 1, 2013
	10.35+*	Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated Effective August 9, 2012 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on October 5, 2012 (File no. 001-33162))
	10.36+*	Form of Operating Performance Share Unit Agreement adopted May 22, 2013 (incorporated by reference to Exhibit 99.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2013 (File no. 001-33162))
	10.37+*	Form of Total Stockholder Return Performance Share Unit Agreement adopted May 22, 2013 (incorporated by reference to Exhibit 99.3 to the registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2013 (File no. 001-33162))
	10.38+*	Form of 162(m) Restricted Stock Agreement adopted May 22, 2013 (incorporated by reference to Exhibit 99.5 to the registrant’s Current Report on Form 8-K filed with the SEC on May 29, 2013 (File no. 001-33162))
	10.39+*	Cash Retention Agreement, dated October 16, 2013, between Red Hat, Inc. and Brian Stevens (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on January 9, 2014 (File no. 001-33162))
	10.40+	Agreement and Plan of Merger, dated as of December 19, 2012, by and among Red Hat, Inc., a Delaware corporation, ManageIQ, Inc., a Delaware corporation, Salta Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Red Hat, Inc., and Shareholder Representative Services LLC, as the Holder Agent (incorporated by reference to Exhibit 10.47 to the registrant’s Annual Report on Form 10-K filed with the SEC on April 25, 2013 (File no. 001-33162))
	21.1	Subsidiaries of Red Hat, Inc.
	23.1	Consent of PricewaterhouseCoopers LLP
	31.1	Certification of the registrant’s Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of the registrant’s Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification of the registrant’s principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase
	101.DEF	XBRL Taxonomy Extension Definition Linkbase
	101.LAB	XBRL Taxonomy Extension Label Linkbase
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* Indicates a management contract or compensatory plan, contract or arrangement.

+ Previously filed.

- Indicates confidential treatment as to certain portions of this exhibit have been requested or granted. Omitted portions have been filed separately with the SEC.

111

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RED HAT, INC.
By:	/S/    JAMES M. WHITEHURST
	James M. Whitehurst President and Chief Executive Officer

Date: April 24, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    JAMES M. WHITEHURST         James M. Whitehurst	President, Chief Executive Officer and Director (principal executive officer)	April 24, 2014
/S/    CHARLES E. PETERS, JR.         Charles E. Peters, Jr.	Executive Vice President and Chief Financial Officer (principal financial officer)	April 24, 2014
/S/    MARK E. COOK         Mark E. Cook	Vice President Finance and Controller (principal accounting officer)	April 24, 2014
/S/    SOHAIB ABBASI         Sohaib Abbasi	Director	April 24, 2014
/S/    W. STEVE ALBRECHT         W. Steve Albrecht	Director	April 24, 2014
/S/    JEFFREY J. CLARKE         Jeffrey J. Clarke	Director	April 24, 2014
/S/    MARYE ANNE FOX         Marye Anne Fox	Director	April 24, 2014
/S/    NARENDRA K. GUPTA         Narendra K. Gupta	Director	April 24, 2014
/S/    WILLIAM S. KAISER         William S. Kaiser	Director	April 24, 2014
/S/    DONALD H. LIVINGSTONE         Donald H. Livingstone	Director	April 24, 2014
/S/    HENRY HUGH SHELTON         Henry Hugh Shelton	Chairman of the Board of Directors	April 24, 2014

112

Exhibit Index

Exhibit No.	Description of Exhibits
10.2	Red Hat, Inc. 1999 Stock Option and Incentive Plan, as Amended and Restated
10.5	Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated
10.12	Form of Director Deferred Stock Unit Agreement (Vested) pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended
10.13	Form of Director Deferred Stock Unit Agreement (With Vesting) pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended
10.14	Form of Director Restricted Stock Agreement pursuant to the Red Hat, Inc. 2004 Long-Term Incentive Plan, as Amended
10.15	Senior Management Severance Plan
10.16	Form of Executive Agreement by and between Red Hat, Inc. and each Plan Participant
10.17	Letter Agreement dated December 23, 2008 between Red Hat, Inc. and James M. Whitehurst amending the Executive Employment Agreement between the parties dated December 19, 2007
10.18	Employee Inventions Assignment and Restrictive Obligations Agreement dated January 1, 2008 between Red Hat, Inc. and James M. Whitehurst
10.34	Red Hat, Inc. 2010 Non-Employee Director Compensation Plan, as amended and restated effective January 1, 2013
21.1	Subsidiaries of Red Hat, Inc.
23.1	Consent of PricewaterhouseCoopers LLP
31.1	Certification of the registrant’s Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the registrant’s Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the registrant’s principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

113

EX-10.2

Exhibit 10.2

RED HAT, INC.

1999 STOCK OPTION AND INCENTIVE PLAN

As Amended and Restated August 2, 2001

1. Purpose and Eligibility

The purpose of this 1999 Stock Option and Incentive Plan (the “Plan”) of Red Hat, Inc. (the “Company”) is to provide stock options and other equity interests in the Company (each an “Award”) to employees, officers, directors, consultants and advisors of the Company and its Subsidiaries, all of whom are eligible to receive Awards under the Plan. Any person to whom an Award has been granted under the Plan is called a “Participant.” Additional definitions are contained in Section 8.

2. Administration

a. Administration by Board of Directors. The Plan will be administered by the Board of Directors of the Company (the “Board”). The Board, in its sole discretion, shall have the authority to grant and amend Awards, to adopt, amend and repeal rules relating to the Plan and to interpret and correct the provisions of the Plan and any Award. All decisions by the Board shall be final and binding on all interested persons. Neither the Company nor any member of the Board shall be liable for any action or determination relating to the Plan.

b. Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean such Committee or the Board.

c. Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to grant Awards and exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the maximum number of Awards to be granted and the maximum number of shares issuable to any one Participant pursuant to Awards granted by such executive officers.

3. Stock Available for Awards

a. Number of Shares. Subject to adjustment under Section 3(c), the aggregate number of shares of Common Stock, $.0001 par value, of the Company (the “Common Stock”) that may be issued pursuant to the Plan is 28,000,000 shares. If any Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan.

b. Per-Participant Limit. Subject to adjustment under Section 3(c), no Participant may be granted Awards during any one fiscal year to purchase more than 3,250,000 shares of Common Stock.

c. Adjustment to Common Stock. In the event of any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, (i) the number and class of securities available for Awards under the Plan and the per-Participant share limit, (ii) the number and class of securities, vesting schedule and exercise price per share subject to each outstanding Option, (iii) the repurchase price per security subject to repurchase, and (iv) the terms of each other outstanding stock-based Award shall be adjusted by the Company (or substituted Awards may be made) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is appropriate.

4. Stock Options

a. General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option and the Common Stock issued upon the exercise of each Option, including vesting provisions, repurchase provisions and restrictions relating to applicable federal or state securities laws, as it considers advisable.

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b. Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall be granted only to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Board and the Company shall have no liability if an Option or any part thereof that is intended to be an Incentive Stock Option does not qualify as such. An Option or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a “Nonstatutory Stock Option”.

c. Exercise Price. The Board shall establish the exercise price (or determine the method by which the exercise price shall be determined) at the time each Option is granted and specify it in the applicable option agreement.

d. Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.

e. Exercise of Option. Options may be exercised only by delivery to the Company of a written notice of exercise signed by the proper person together with payment in full as specified in Section 4(f) for the number of shares for which the Option is exercised.

f. Payment Upon Exercise. Common Stock purchased upon the exercise of an Option shall be paid for by one or any combination of the following forms of payment:

(i) by check payable to the order of the Company;

(ii) except as otherwise explicitly provided in the applicable option agreement, and only if the Common Stock is then publicly traded, delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or

(iii) to the extent explicitly provided in the applicable option agreement, by (x) delivery of shares of Common Stock owned by the Participant valued at fair market value (as determined by the Board or as determined pursuant to the applicable option agreement), (y) delivery of a promissory note of the Participant to the Company (and delivery to the Company by the Participant of a check in an amount equal to the par value of the shares purchased), or (z) payment of such other lawful consideration as the Board may determine.

5. Restricted Stock

a. Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to (i) delivery to the Company by the Participant of a check in an amount at least equal to the par value of the shares purchased, and (ii) the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).

b. Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). After the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or, if the Participant has died, to the beneficiary designated by a Participant, in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

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6. Other Stock-Based Awards

The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights, phantom stock awards or stock units.

7. General Provisions Applicable to Awards

a. Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

b. Documentation. Each Award under the Plan shall be evidenced by a written instrument in such form as the Board shall determine or as executed by an officer of the Company pursuant to authority delegated by the Board. Each Award may contain terms and conditions in addition to those set forth in the Plan provided that such terms and conditions do not contravene the provisions of the Plan.

c. Board Discretion. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly.

d. Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.

e. Acquisition of the Company

(i) Consequences of an Acquisition. Unless otherwise expressly provided in the applicable Option or Award, upon the occurrence of an Acquisition, the Board or the board of directors of the surviving or acquiring entity (as used in this Section 7(e)(i), also the “Board”), shall, as to outstanding Awards (on the same basis or on different bases, as the Board shall specify), make appropriate provision for the continuation of such Awards by the Company or the assumption of such Awards by the surviving or acquiring entity and by substituting on an equitable basis for the shares then subject to such Awards either (a) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition, (b) shares of stock of the surviving or acquiring corporation or (c) such other securities as the Board deems appropriate, the fair market value of which (as determined by the Board in its sole discretion) shall not materially differ from the fair market value of the shares of Common Stock subject to such Awards immediately preceding the Acquisition. In addition to or in lieu of the foregoing, with respect to outstanding Options, the Board may, upon written notice to the affected optionees, provide that one or more Options must be exercised, to the extent then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date of such notice, at the end of which period such Options shall terminate; or terminate one or more Options in exchange for a cash payment equal to the excess of the fair market value (as determined by the Board in its sole discretion) of the shares subject to such Options (to the extent then exercisable or to be exercisable as a result of the Acquisition) over the exercise price thereof.

(ii) Acquisition Defined. An “Acquisition” shall mean: (x) any merger or consolidation after which the voting securities of the Company outstanding immediately prior thereto represent (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) less than 50% of the combined voting power of the voting securities of the Company or such surviving or acquiring entity outstanding immediately after such event; or (y) any sale of all or substantially all of the assets or capital stock of the Company (other than in a spin-off or similar transaction) or (z) any other acquisition of the business of the Company, as determined by the Board.

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(iii) Assumption of Options Upon Certain Events. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards under the Plan in substitution for stock and stock-based awards issued by such entity or an affiliate thereof. The substitute Awards shall be granted on such terms and conditions as the Board considers appropriate in the circumstances.

(iv) Pooling-of Interests-Accounting. If the Company proposes to engage in an Acquisition intended to be accounted for as a pooling-of-interests, and in the event that the provisions of this Plan or of any Award hereunder, or any actions of the Board taken in connection with such Acquisition, are determined by the Company’s or the acquiring company’s independent public accountants to cause such Acquisition to fail to be accounted for as a pooling-of-interests, then such provisions or actions shall be amended or rescinded by the Board, without the consent of any Participant, to be consistent with pooling-of-interests accounting treatment for such Acquisition.

(v) Parachute Awards. If, in connection with an Acquisition, a tax under Section 4999 of the Code would be imposed on the Participant (after taking into account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code), then the number of Awards which shall become exercisable, realizable or vested as provided in such section shall be reduced (or delayed), to the minimum extent necessary, so that no such tax would be imposed on the Participant (the Awards not becoming so accelerated, realizable or vested, the “Parachute Awards”); provided, however, that if the “aggregate present value” of the Parachute Awards would exceed the tax that, but for this sentence, would be imposed on the Participant under Section 4999 of the Code in connection with the Acquisition, then the Awards shall become immediately exercisable, realizable and vested without regard to the provisions of this sentence. For purposes of the preceding sentence, the “aggregate present value” of an Award shall be calculated on an after-tax basis (other than taxes imposed by Section 4999 of the Code) and shall be based on economic principles rather than the principles set forth under Section 280G of the Code and the regulations promulgated thereunder. All determinations required to be made under this Section 7(e)(v) shall be made by the Company.

f. Withholding. Each Participant shall pay to the Company, or make provisions satisfactory to the Company for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. The Board may allow Participants to satisfy such tax obligations in whole or in part by transferring shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value (as determined by the Board or as determined pursuant to the applicable option agreement). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

g. Amendment of Awards. The Board may amend, modify or terminate any outstanding Award including, but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that, except as otherwise provided in Section 7(e)(iv), the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

h. Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

i. Acceleration. The Board may at any time provide that any Options shall become immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of some or all restrictions, or that any

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other stock-based Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be, despite the fact that the foregoing actions may (i) cause the application of Sections 280G and 4999 of the Code if a change in control of the Company occurs, or (ii) disqualify all or part of the Option as an Incentive Stock Option.

8. Miscellaneous

a. Definitions.

(i) “Company” for purposes of eligibility under the Plan, shall include any present or future subsidiary corporations of Red Hat, Inc., as defined in Section 424(f) of the Code (a “Subsidiary”), and any present or future parent corporation of Red Hat, Inc., as defined in Section 424(e) of the Code. For purposes of Awards other than Incentive Stock Options, the term “Company” shall include any other business venture in which the Company has a direct or indirect significant interest, as determined by the Board in its sole discretion.

(ii) “Code” means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.

(iii) “Employee” for purposes of eligibility under the Plan shall include a person to whom an offer of employment has been extended by the Company.

b. No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan.

c. No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder thereof.

d. Effective Date and Term of Plan. The Plan shall become effective upon adoption by the Board. No Awards shall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the Board, but Awards previously granted may extend beyond that date.

e. Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time.

f. Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of Delaware, without regard to any applicable conflicts of law.

Adopted by the Board of Directors on June 2, 1999.

Approved by the stockholders on June 3, 1999.

Amended by the stockholders on August 2, 2001.

5

EX-10.5

Exhibit 10.5

RED HAT, INC.

2004 LONG-TERM INCENTIVE PLAN

As Amended and Restated Effective August 14, 2008

Red Hat, Inc., a corporation existing under the laws of the State of Delaware (the “Company”), hereby amends and restates its 2004 Long-Term Incentive Plan (the “Plan”) effective August 14, 2008.

1. PURPOSE OF THE PLAN

1.1. Purpose. The purpose of the Plan is to assist the Company and its Affiliates in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all shareholders of the Company through the additional incentives inherent in the Awards hereunder.

2. DEFINITIONS

2.1. “Acquired Plans” shall mean the Red Hat, Inc. 1999 Stock Option and Incentive Plan, as amended, the Red Hat, Inc. 1998 Stock Option Plan, as amended, the Akopia, Inc. 2000 Stock Plan, the Bluecurve, Inc. 1996 Stock Plan, the Cygnus Solutions 1997 Stock Plan, the Planning Technologies, Inc. Stock Incentive Plan, the Wirespeed Communications Stock Option Plan (as amended July 12, 2000), the Sistina Software, Inc. 1997 Omnibus Stock Plan, the JBoss, Inc. Second Amended and Restated 2004 Stock Option and Incentive Plan, and, if and to the extent determined by the Committee, any other plans of any company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.

2.2. “Affiliate” shall mean (i) any person or entity that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company (including any Subsidiary) or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee; provided, however, that the definition of Affiliate shall be limited to entities that are eligible issuers of service recipient stock (as defined in Treas. Reg. Section 1.409A-1(b)(5)(iii)(E), or applicable successor regulation) for Awards that would otherwise be subject to Section 409A, unless the Committee determines otherwise.

2.3. “Authorized Shares” shall mean any Shares authorized for issuance under this Plan under Section 3.1 of the Plan since its inception, as that number may increase from time to time.

2.4. “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award, Dividend Equivalent, Other Stock-Based Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan.

2.5. “Award Agreement” shall mean the form (written, electronic or otherwise) by which the Committee evidences any Award granted under the Plan.

2.6. “Board” shall mean the board of directors of the Company.

2.7. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. All citations to Sections of the Code are to such Sections as they may from time to time be amended or renumbered.

2.8. “Committee” shall mean the Compensation Committee of the Board or such other committee appointed by the Board to administer the Plan, consisting of no fewer than two Directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m)(4)(C)(i) of the Code, and (iii) an “independent director” for purpose of the rules and regulations of the New York Stock Exchange (“NYSE”).

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2.9 “Covered Employee” shall mean a “covered employee” within the meaning of Section 162(m)(3) of the Code.

2.10. “Director” shall mean a non-employee member of the Board.

2.11. “Dividend Equivalents” shall have the meaning set forth in Section 12.5.

2.12. “Employee” shall mean any employee (including an officer) of the Company or any Affiliate. Solely for purposes of the Plan, an Employee shall also mean any other natural person, including a consultant or advisor, who provides services to the Company or any Affiliate, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company’s securities.

2.13. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and any successor thereto. All citations to Sections of the Exchange Act are to such Sections as they may from time to time be amended or renumbered.

2.14. “Fair Market Value” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the NYSE for the principal trading session on that date (or if there was no reported closing price on such date, on the last preceding date on which the closing price was reported) or, if the Company is not then listed on the NYSE, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. The Committee can substitute a particular time of day or other measure of “closing sale price” if appropriate because of exchange or market procedures or can, in its sole discretion, use weighted averages either on a daily basis or such longer period as complies with Section 409A of the Code.

2.15. “Freestanding Stock Appreciation Right” shall have the meaning set forth in Section 6.1(a).

2.16. “Incentive Stock Option” shall mean an Option that is an “incentive stock option” as defined in Section 422 of the Code.

2.17. “Limitations” shall have the meaning set forth in Section 10.

2.18. “Nonstatutory Stock Option” shall mean an Option that is not an Incentive Stock Option.

2.19. “Option” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.

2.20. “Other Stock-Based Award” shall have the meaning set forth in Section 8.1.

2.21. “Participant” shall mean an Employee or Director to whom the Committee has granted an Award under the Plan.

2.22. “Payee” shall have the meaning set forth in Section 13.1.

2.23. “Performance Award” shall mean any performance award granted pursuant to Section 9 and, if applicable, the Company’s 2006 Performance Compensation Plan, as such plan may be amended from time to time.

2.24. “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

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2.25. “Restricted Stock Unit” means an Award that is valued by reference to Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including without limitation, cash or Shares, or any combination thereof, and that has such restrictions as the Committee, in its sole discretion, may impose, including without limitation, any restriction on the right to retain such Award, to sell, transfer, pledge or assign such Award, and/or to receive any cash Dividend Equivalents with respect to such Award, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

2.26. “Restriction Period” shall have the meaning set forth in Section 7.1.

2.27. “Restricted Stock Award” shall have the meaning set forth in Section 7.1.

2.28. “Restricted Stock Unit Award” shall have the meaning set forth in Section 7.1.

2.29. “Share” shall mean a share of common stock of the Company, par value $.0001 per share.

2.30. “Stock Appreciation Right” shall mean the right granted to a Participant pursuant to Section 6.

2.31. “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain and shall also include limited liability companies and other noncorporate entities based on equivalent levels of economic or voting ownership interests.

2.32. “Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.

2.33. “Tandem Stock Appreciation Right” shall have the meaning set forth in Section 6.1(b).

3. SHARES SUBJECT TO THE PLAN

3.1. Number of Shares.

(a) Subject to adjustment as provided in this Section 3.1 and in Section 12.2, a total of 22,500,000 Shares shall be authorized for issuance pursuant to Awards granted under the Plan. No further grants may be made under the Acquired Plans, but Shares subject to awards granted under the Acquired Plans may become again available for Awards under the Plan, in addition to the number of Shares specified immediately above, pursuant to paragraph (c) below.

(b) The maximum aggregate number of Shares that may be issued under the Plan through Incentive Stock Options is 8,000,000.

(c) If any Award expires or is terminated, surrendered or canceled without having been fully exercised, is forfeited in whole or in part (including as a result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right), is settled in cash or otherwise results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock delivered (either by actual delivery or attestation) to the Company by a Participant to exercise an Award or to satisfy any applicable tax withholding obligation (including shares retained from the Award creating the tax obligation) shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan and shares retained with respect to a net exercise of an Option shall not be subtracted from the shares of Common Stock available for grant. However, in the case of Incentive

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Stock Options, the foregoing provisions shall be subject to any limitations under the Code. Shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for future grant of Awards. If any Shares subject to an award under the Acquired Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or an award under the Acquired Plans does not result in the issuance of all or a portion of the Shares subject to such award, the Shares shall, to the extent of such forfeiture, expiration, termination, or non-issuance, be available for Awards under the Plan.

(d) In the case of Freestanding Stock Appreciation Rights, the full number of shares subject to such SAR, if settled in stock, shall be counted against the shares available under the Plan in proportion to the portion of the Freestanding Stock Appreciation Right exercised, regardless of the number of shares actually used to settle such Freestanding Stock Appreciation Right upon exercise.

(e) Substitute Awards may be granted under the Plan and any such grants shall not reduce the Shares authorized for grant under the Plan or authorized for grant to a Participant in any calendar year.

3.2. Character of Shares. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.

4. ELIGIBILITY AND ADMINISTRATION

4.1. Eligibility. Any Employee or Director shall be eligible to be selected as a Participant.

4.2. Administration.

(a) The Plan shall be administered by the Committee.

(b) The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant (in a manner consistent with Section 409A of the Code); (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.

(c) Decisions of the Committee regarding the Plan, any Award, or any issue relating to the Plan or an Award, shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, any shareholder and any Employee or any Affiliate.

(d) The Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, including the rules and regulations of NYSE or any rule or regulation of any stock exchange or quotation system on which Shares are listed or quoted, to one or more officers or a committee of officers the right to grant Awards to Employees who are not Directors or officers of the Company (provided that the Committee shall fix the terms of the Awards to be granted by such officers (including the

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exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to such Awards) and to cancel or suspend Awards to Employees who are not Directors or officers of the Company. Delegation of granting authority to officers shall be limited to Awards of Options and other compensation constituting “stock rights” under Delaware law. The Committee may not delegate the granting of restricted stock.

(e) The Committee shall specifically administer any plan, and review and approve any program or arrangement pursuant to which a Director is granted an Award under the Plan.

5. OPTIONS

5.1. Grant of Options. Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to the terms and conditions of this Section 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option. In the absence of designation as an Incentive Stock Option, an Option will be a Nonstatutory Stock Option.

5.2. Incentive Stock Options. An Option that the Committee intends to be an Incentive Stock Option shall only be granted to employees of the Company, any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option.

5.3. Award Agreements. All Options granted pursuant to this Section 5 shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Section 5 may hold more than one Option granted pursuant to the Plan at the same time.

5.4. Option Price. Other than in connection with Substitute Awards or Section 12.2, the option price per each Share purchasable under any Option granted pursuant to this Section 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. Other than pursuant to Section 12.2, the Committee shall not be permitted to (a) lower the option price per Share of an Option after it is granted, (b) cancel an Option when the option price per Share exceeds the Fair Market Value of the underlying Shares in exchange for another Award (other than in connection with Substitute Awards), or (c) take any other action with respect to an Option that may be treated as a repricing under the rules and regulations of NYSE, without shareholder approval.

5.5. Option Period. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after (i) with respect to Options granted prior to August 17, 2006, the expiration of ten years from the date the Option is granted or (ii) with respect to Options granted on and after August 17, 2006, the expiration of seven years from the date the Option is granted.

5.6. Minimum Vesting Period. Except with respect to Substitute Awards, grants to Directors, or in other limited situations as determined by the Committee (including termination of employment, death, disability, a Change in Control referred to in Section 11, grants to new hires to replace forfeited compensation, grants representing payment of earned Performance Awards or other incentive compensation), Options subject solely to future service requirements shall have a vesting period of not less than one year from date of grant. Notwithstanding the foregoing, Options granted under the Plan in lieu of earned, but unpaid, cash compensation shall not be subject to this Section 5.6.

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5.7. Exercise of Options. Vested Options granted under the Plan shall be exercised by the Participant (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written, voice- or key-response telephonic, electronic, or other Committee-approved method of notice of exercise to the Company or its designated agent pursuant to rules and procedures established by the Committee for this purpose, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds); (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value); (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards or the consideration to be received by the Participant on the closing of a Change in Control), having a Fair Market Value on the exercise date equal to the total purchase price; (d) to the extent provided for in the applicable option agreement or approved by the Committee, in its sole discretion, and subject to any Company trading restrictions, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive the number of shares of Common Stock underlying the Option so exercised reduced by the number of shares of Common Stock equal to the aggregate exercise price of the Option divided by the fair market value; (e) through any other method specified in an Award Agreement; (f) as provided by the Committee, cashless exercises as permitted under the Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions; or (g) any combination of any of the foregoing; provided, however, that the addition of methods of payment to this Section 5.7 shall not apply to any Incentive Stock Option granted before August 14, 2008 under the Plan unless either such addition is not a modification to the Incentive Stock Option for purposes of Treas. Reg. Section 1.424-1(e) or the Committee determines otherwise. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of issuance upon exercise. Except under certain circumstances contemplated by Section 5.6 or 11 or as may be set forth in an Award Agreement with respect to death or disability of a Participant, Options will not be exercisable before the expiration of one year from the date the Option is granted.

5.8. Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or may reserve the right so to provide after the time of grant.

6. STOCK APPRECIATION RIGHTS

6.1. Grant and Exercise. The Committee may provide Stock Appreciation Rights alone or in tandem with other Awards (including Options), in each case upon such terms and conditions, not inconsistent with the Plan, as the Committee may establish. The provisions of Stock Appreciation Rights need not be the same with respect to each recipient.

(a) Stock Appreciation Rights granted without regard to any Option or other Award (a “Freestanding Stock Appreciation Right”) shall generally have the same terms and conditions as Options, including (i) an exercise price not less than Fair Market Value on the date of grant (except in the case of Substitute Awards or in connection with an adjustment provided in Section 12.2) (ii) a term not greater than seven years, and (iii) a vesting schedule not less than one year from the date of grant, except for Substitute Awards or under certain circumstances contemplated by Section 11 or as may be set forth in an Award Agreement with respect to death or disability of a Participant. Upon the exercise of a Freestanding Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the exercise price of the right on the date of grant.

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(b) Stock Appreciation Rights may be granted in conjunction with all or part of any Option granted under the Plan (a “Tandem Stock Appreciation Right”). Any Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or at any time thereafter before exercise or expiration of such Option if there would be no adverse tax consequences under Section 409A of the Code. Upon the exercise of a Tandem Stock Appreciation Right, the holder shall have the right to receive (i) the excess of the Fair Market Value of one Share on the date of exercise over (ii) the related Option exercise price. Any Tandem Stock Appreciation Right may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. Tandem Stock Appreciation Rights shall terminate and no longer be exercisable upon and to the extent of the termination or exercise of the related Option; provided that, unless the Committee otherwise determines at or after the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of Shares covered by a related Option shall not terminate until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised.

(c) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion.

(d) The Committee shall determine in its sole discretion whether payment upon the exercise of a Stock Appreciation Right, shall be made in cash, in whole Shares or other property, or any combination thereof. If payment will be made in Shares, the number of Shares shall be determined based on the Fair Market Value of a Share on the date of exercise. If the Committee elects to make full payment in Shares, no fractional Shares shall be issued and cash payments shall be made in lieu of fractional Shares. The Committee shall have sole discretion as to the timing of any payment made in cash or Shares, or a combination thereof, upon exercise of Stock Appreciation Rights. Payment may be made in a lump sum, in annual installments or may be otherwise deferred in a manner consistent with Section 409A of the Code; and the Committee shall have sole discretion to determine whether any deferred payments will accrue amounts equivalent to interest or cash dividends.

(e) Other than pursuant to Section 12.2, the Committee shall not be permitted to (i) lower the exercise price per Share of a Stock Appreciation Right after it is granted, (ii) cancel a Stock Appreciation Right when the exercise price per Share exceeds the Fair Market Value of the underlying Shares in exchange for another Award (other than in connection with Substitute Awards), and (iii) take any other action with respect to a Stock Appreciation Right that may be treated as a repricing under the rules and regulations of NYSE, without shareholder approval.

7. RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNIT AWARDS

7.1. Grants. Awards of Restricted Stock and of Restricted Stock Units may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “Restricted Stock Award” or “Restricted Stock Unit Award”, respectively). A Restricted Stock Award or Restricted Stock Unit Award shall be subject to restrictions imposed by the Committee covering a period of time or relating to achievement of performance targets, each as specified by the Committee (the “Restriction Period”). The provisions of Restricted Stock Awards and Restricted Stock Unit Awards need not be the same with respect to each recipient. The Committee has absolute discretion to determine whether any consideration (other than services) is to be received by the Company or any Affiliate as a condition precedent to the issuance of Restricted Stock or Restricted Stock Units.

7.2. Award Agreements. The terms of any Restricted Stock Award or Restricted Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan.

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7.3. Rights of Holders of Restricted Stock and Restricted Stock Units. Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares. A Participant receiving a Restricted Stock Unit Award shall not possess voting rights with respect to such Award. Any Shares or any other property (other than cash) distributed as a dividend, Dividend Equivalent (if provided under an Award) or otherwise with respect to any Restricted Stock Award (or, if granted in connection with such Award, any Restricted Stock Unit Award) as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock Award (or Restricted Stock Unit Award), except as the Committee otherwise determines. Participants receiving Restricted Stock Unit Awards may be paid upon vesting or may have such payment delayed in a manner consistent with Section 409A of the Code (and then referred to as a “Deferred Stock Unit” or “DSU”).

7.4. Minimum Vesting Period. Except in certain situations referenced below as determined by the Committee (including death, disability, a Change in Control referred to in Section 11, or grants representing payment of earned Performance Awards or other incentive compensation), Restricted Stock Awards and Restricted Stock Unit Awards subject solely to future service requirements shall have a Restriction Period of not less than three years from date of grant (but permitting vesting of up to one-third of the Award after one year with the remainder vesting on a pro-rata basis over the remainder of the Restriction Period). Restricted Stock Awards and Restricted Stock Unit Awards that are: (a) granted after August 17, 2006, and (b) subject in whole or in part to performance based vesting requirements (such as Performance Share Units), shall have a Restriction Period of not less than one year, subject to the exceptions in the preceding sentence and other than with respect to the initial year of employment. The Committee may, in its discretion either at the time of grant or at some later date, waive the minimum vesting periods imposed by this Section 7.4 and Section 8.2 below with respect to an aggregate of 5% of the Authorized Shares or in the case of death, disability or Change in Control or grants representing payment of earned Performance Awards or other incentive compensation in certain limited circumstances determined in the sole discretion of the Committee. Notwithstanding the foregoing, Substitute Awards, as well as Restricted Stock Awards, Restricted Stock Unit Awards, or DSUs granted under the Plan in lieu of previously earned, but unpaid, cash compensation (or, as elected by Directors, in lieu of Director compensation to be paid in cash), shall not be subject to this Section 7.4.

8. OTHER STOCK-BASED AWARDS

8.1. Stock and Administration. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares (“Other Stock-Based Awards”) may be granted hereunder to Participants, either alone or in addition to other Awards granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan. Other Stock-Based Awards shall be paid only in Shares. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees and Directors to whom and the time or times at which such Other Stock-Based Awards shall be made, the number of Shares to be granted pursuant to such Awards, and all other conditions of the Awards. The provisions of Other Stock-Based Awards need not be the same with respect to each recipient.

8.2. Minimum Vesting Period. Except in certain in certain situations referenced below as determined by the Committee (including death, disability, a Change in Control referred to in Section 11, or grants representing payment of earned Performance Awards or other incentive compensation), Other Stock-Based Awards subject solely to future service requirements shall have a Restriction Period of not less than three years from date of grant (but permitting vesting of up to one-third of the Award after one year with the remainder vesting on a pro-rata basis over the remainder of the Restriction Period). Other Stock-Based Awards that are: (a) granted after August 17, 2006, and (b) subject in whole or in part to performance based vesting requirements (such as Performance Share Units), shall have a Restriction Period of not less than one year, subject to the exceptions in the preceding sentence and other than with respect to the initial year of employment. Other Stock-Based Awards representing solely the right to receive shares of Common Stock at some future date specified by the Committee

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(the “Deferral Period”) shall have a Deferral Period of not less than three years from the date of grant. The Committee may, in its discretion either at the time of grant or at some later date, waive the minimum vesting periods imposed by this Section 8.2 and Section 7.4 above with respect to an aggregate of 5% of the Authorized Shares or in the case of death, disability or Change in Control or grants representing payment of earned Performance Awards or other incentive compensation in certain limited circumstances determined in the sole discretion of the Committee. Notwithstanding the foregoing, Substitute Awards, as well as Other Stock-Based Awards granted under the Plan in lieu of previously earned, but unpaid, cash compensation, shall not be subject to this Section 8.2.

8.3. Terms and Conditions. Shares (including securities convertible into Shares) subject to Awards granted under this Section 8 may be issued for no consideration or for such minimum consideration as may be required by applicable law. Shares (including securities convertible into Shares) purchased pursuant to a purchase right awarded under this Section 8 shall be purchased for such consideration as the Committee shall determine in its sole discretion.

9. PERFORMANCE AWARDS

Terms of Performance Awards. Performance Awards may be issued hereunder to Participants under Sections 5 through 8 or as a cash-only Award, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance criteria to be achieved during any performance period and the length of the performance period shall be determined by the Committee upon the grant of each Performance Award; provided, however, that a performance period shall not be longer than five years. Except as provided in Section 11 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant performance period. Performance Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance goals to be achieved for each performance period shall be conclusively determined by the Committee, with payments subject to the limits set forth in Section 10 and criteria for payment as set forth in a shareholder approved plan implementing the Section 162(m) provisions of this Plan. The amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with procedures established by the Committee and consistent with Section 409A of the Code, on a deferred basis. Performance Awards (other than Options, Freestanding Stock Appreciation Rights or Option/Tandem Stock Appreciation Rights) designed to satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code shall be subject to this Plan and the Company’s 2006 Performance Compensation Plan (or any successor plan thereto).

10. CODE SECTION 162(m) PROVISIONS

Limits. Subject to adjustment as provided in Section 12.2, no Participant may be granted (i) Options, Freestanding Stock Appreciation Rights, or Option/Tandem Stock Appreciation Rights during any fiscal year with respect to more than two million (2,000,000) Shares or (ii) Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards and/or Other Stock-Based Awards that are denominated in Shares in any fiscal year with respect to more than one million (1,000,000) Shares (the “Limitations”). In addition to the foregoing, the maximum dollar value payable to any Participant in any fiscal year with respect to Performance Awards that are valued with reference to cash or to property other than Shares is $10,000,000. If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable Limitations. The per-Participant limit described in this Section 10 shall be construed and applied consistently with Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder.

11. CHANGE IN CONTROL PROVISIONS

11.1. Impact of Change in Control on Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards and Other Stock-Based Awards. Notwithstanding any other provision of the Plan, the terms of any Award may provide in the Award Agreement evidencing the Award that, immediately prior to a

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“Change in Control” of the Company (as that term may be defined therein), (a) Options and Stock Appreciation Rights outstanding as of the date of the Change in Control shall become exercisable in full or part, (b) restrictions and deferral limitations on Restricted Stock Awards and Restricted Stock Unit Awards lapse and the Restricted Stock Awards and Restricted Stock Unit Awards become free of all restrictions and limitations and become vested, and (c) the restrictions and deferral limitations and other conditions applicable to any Other Stock-Based Awards or any other Awards shall lapse, and such Other Stock-Based Awards or such other Awards shall become free of all restrictions, limitations or conditions and become vested in full or part and transferable to the full extent of the original grant, subject in each case to any terms and conditions contained in the Award Agreement evidencing such Award, including but not limited to a condition that such treatment will apply only if the Participant remains employed on the effective date of the Change in Control or has incurred an involuntary termination of employment without cause on account of the Change in Control, as determined by the Committee in its sole discretion, within a period of up to 3 months prior to the effective date of the Change in Control. Notwithstanding any other provision of the Plan, the Committee, in its discretion, may determine that, upon the occurrence of a Change in Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and such Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change in Control over the exercise price per share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine.

11.2. Assumption of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, and Other Stock-Based Awards Upon Change in Control. In the event of a Change in Control, the successor company may assume or substitute for an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award. For the purposes of this Section 11.2, an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award shall be considered assumed or substituted for if following the Change in Control the award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change in Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the transaction constituting a Change in Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, or Other Stock-Based Award, for each Share subject thereto, will be solely common stock of the successor company substantially equal in fair market value to the per share consideration received by holders of Shares in the transaction constituting a Change in Control. The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. Notwithstanding the foregoing, on such terms and conditions as may be set forth in an Award Agreement, in the event of an involuntary termination of a Participant’s employment without cause in such successor company within the period of up to 24 months following such Change in Control, each Award held by such Participant at the time of the Change in Control shall be accelerated as described in Sections 11.1 above.

11.3. Impact of Change in Control on Performance Awards. The terms of any Performance Award may provide in the Award Agreement evidencing the Performance Award that, upon a Change in Control of the Company (as that term may be defined therein),

(a) a pro rata portion of Performance Awards shall be considered to be earned and payable based on the portion of the Performance Period completed as of the date of the Change in Control and based on performance to such date, or if performance to such date is not determinable, based on target performance, and

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(b) the remaining portion of Performance Awards shall be assumed, converted or replaced with restricted stock in the successor company’s shares (if the Award is valued by reference to a designated number of Shares) or restricted deferred compensation (for other Awards) based on the portion of the performance period not yet completed and based on target performance. Such assumed, converted or replaced portion of the Performance Award shall be restricted for the remainder of the performance period or vesting period, as applicable. If the successor company does not assume, convert or replace the remaining portion of the Performance Award as described in this Section 11.3(b), the full award shall be considered earned and payable upon consummation of the Change in Control. Notwithstanding the foregoing, the Award Agreement for a Performance Award may provide that in the event of an involuntary termination of the Participant’s employment with the Company or any Affiliate without cause on account of the Change in Control, as determined by the Committee in its sole discretion, within a period of up to 3 months prior to the effective date of the Change in Control and/or in the event of an involuntary termination of the Participant’s employment without cause in such successor company within the period of up to 24 months following such Change in Control, the vesting of the restricted stock or restricted deferred compensation, as applicable, held by such Participant at the time of the Change in Control shall be accelerated.

12. GENERALLY APPLICABLE PROVISIONS

12.1. Amendment and Modification of the Plan. The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law, including the rules and regulations of NYSE or any rule or regulation of any stock exchange or quotation system on which Shares are listed or quoted; provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s shareholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 12.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) effect an amendment for which shareholder approval is required under Section 162(m) or 422 of the Code, (e) amend any provision of Sections 5.4, 6.1(a)(i) or 6.1(e), (f) amend any Award in a manner inconsistent with Section 10, (g) increase the maximum permissible term of any Option specified by Section 5.5, or (h) accelerate vesting in a manner inconsistent with Sections 5.6, 6.1(a), 7.4, or 8.2. In addition, no amendments to, or termination of, the Plan shall in any way materially impair the rights of a Participant under any Award previously granted without such Participant’s consent.

12.2. Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, the Committee shall make equitable adjustments and other substitutions under the Plan and to Awards in the manner determined by the Committee, in its sole discretion, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number.

12.3. Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant or his or her guardian or conservator; provided, however, that the Committee may permit or provide in an Award, other than an Incentive Stock Option, for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if, with respect to such proposed transferee, the

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Company would be eligible to use a Form S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act of 1933, as amended; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

12.4. Termination of Employment. The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Affiliate (including as a Director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final.

12.5. Deferral; Dividend Equivalents. The Committee shall be authorized to establish procedures pursuant to which the payment of any Award (and any dividends or Dividend Equivalents) may be deferred in a manner consistent with Section 409A of the Code. Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares (“Dividend Equivalents”) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested.

12.6. Past Performance. Notwithstanding any other provision of the Plan to the contrary, the Committee may issue fully vested Awards in lieu of previously earned, but unpaid, cash compensation.

13. MISCELLANEOUS

13.1. Tax Withholding. The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (any such person, a “Payee”) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Affiliate shall have the right to withhold from wages or other amounts otherwise payable to such Payee such withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value), or by directing the Company to retain Shares (up to the employee’s minimum required tax withholding rate) otherwise deliverable in connection with the Award.

13.2. Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Affiliate or affect any right that the Company or any Affiliate may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan.

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13.3 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee, or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, other employee, or agent of the Company. The Company will indemnify and hold harmless each director, officer, other employee, or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning this Plan unless arising out of such person’s own fraud or bad faith.

13.4. Prospective Recipient. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient has complied with the then applicable terms and conditions of the Award and become an Employee or Director.

13.5. Cancellation of Award. Notwithstanding anything to the contrary contained herein, any or all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the Company or any Affiliate or after termination of such employment or service, violates any then applicable noncompetition, nonsolicitation, nondisclosure, or confidentiality agreement covering the Participant (or, if while employed, any comparable common law duty).

13.6. Stop Transfer Orders. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan or make any other distributions or the benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933, as amended, and the applicable requirements of any securities exchange or similar entity.

13.7. Nature of Payments. All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Affiliate, division or business unit of the Company. Any income or gain realized pursuant to Awards under the Plan constitute a special incentive payment to the Participant and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any Affiliate except as may be determined by the Committee or by the Board or board of directors of the applicable Affiliate.

13.8. Other Plans. Nothing contained in the Plan shall prevent the Board or Committee from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

13.9. Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems such limitation lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required

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under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.

13.10. Construction. All references in the Plan to “Section or Sections” are intended to refer to the Section or Sections, as the case may be, of the Plan. As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

13.11. Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

13.12. Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any other jurisdictions other than those of the State of Delaware.

13.13. Effective Date of Plan; Termination of Plan. The Plan became effective on September 21, 2004, the date that the Plan was first approved by the shareholders of the Company. Awards may be granted under the Plan at any time and from time to time on or prior to September 21, 2014, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired.

13.14. Non U.S. Employees. Awards may be granted to Participants who are non-U.S. citizens or residents employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the judgment of the Committee, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. The Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan.

13.15. Compliance with Section 409A of the Code. Except as provided in individual Award agreements initially or by amendment:

(a) this Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. To the extent that an Award or the payment, settlement or deferral thereof is subject to Section 409A of the Code, the Award shall be granted, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including regulations or other guidance issued with respect thereto.

(b) if and to the extent any portion of any payment, compensation or other benefit provided to a Participant in connection with his or her employment termination is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its

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procedures, by which determination the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Section 409A) (the “New Payment Date”), except as Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.

(c) for purposes of this Plan, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A, and any payments that are due within the “short term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requires otherwise. Neither the Company nor the Participant shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

(d) in any event, the Company makes no representations or warranty and shall have no liability to the Participant or any other person if any provisions of or payments under this Plan are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions of that section.

13.16. Captions. The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.

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EX-10.12

Exhibit 10.12

RED HAT, INC.

Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended

Form of Director Deferred Stock Unit Agreement (Vested)

Cover Sheet

This Agreement evidences the grant by Red Hat, Inc., a Delaware corporation (the “Company”), on the date set forth below (the “Grant Date”) to the person named below (the “Director” or “Participant”) of a Deferred Stock Unit Award (the “Award”) of the number of deferred stock units listed below (the “Deferred Stock Units”). Each unit represents the right to receive one share of the Company’s common stock, $.0001 par value per share (“Common Stock”). This Award is subject to the terms and conditions specified in the Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended (the “Plan”) and in the Agreement, consisting of this Cover Sheet, the attached Exhibit A and Appendix A thereto.

Director Name:

Grant Date:

Number of Deferred Stock Units:

	RED HAT, INC.
	1801 Varsity Drive Raleigh, North Carolina 27606
	By:
(Director Signature)	Name:
	Title:

By accepting this Award, the Director hereby (i) acknowledges that a copy of the Plan and a copy of the Plan prospectus have been delivered to the Director and additional copies thereof are available upon request from the Company’s Equity Compensation Department and can also be accessed electronically, (ii) acknowledges receipt of a copy of this Cover Sheet, and Exhibit A and Appendix A thereto (collectively, the “Agreement”) and accepts the Award subject to all the terms and conditions of the Plan and the Agreement; (iii) represents that the Director has read and understands the Plan, the Plan prospectus and the Agreement, and (iv) acknowledges that there are tax consequences related to the Award and that the Director should consult a tax advisor to determine his or her actual tax consequences. The Director must accept this Award electronically, within thirty (30) days following notification of the grant, pursuant to the online acceptance procedure established by the Company; otherwise, the Company may, in its sole discretion, rescind the Award in its entirety.

EXHIBIT A

RED HAT, INC.

Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended

Director Deferred Stock Unit Agreement (Vested)

Terms and Conditions

1. Grant of Deferred Stock Units.

The Award is granted pursuant to and is subject to and governed by the Plan and the terms of this Agreement. Unless otherwise defined in this Agreement, capitalized terms used herein shall have the same meaning as in the Plan. The Shares of Common Stock that are issuable after the Deferred Stock Units have been earned are referred to in this Agreement as “Shares.” The Deferred Stock Units shall be granted to the Participant without payment of consideration (other than continuing services).

2. Deferred Stock Unit Account.

The Company shall credit to a bookkeeping account (the “Account”) maintained by the Company for the Participant’s benefit the Deferred Stock Units, each of which shall be deemed to be the equivalent of one Share.

Whenever any cash dividends are declared on the Shares, on the date such dividend is paid, the Company will credit to the Account of the Participant a number of additional Deferred Stock Units equal to the result of dividing (i) the product of the total number of Deferred Stock Units credited to the Participant’s Account on the record date for such dividend and the per share amount of such dividend by (ii) the Fair Market Value of one Share, on the date such dividend is paid by the Company to the holders of Shares. The Participant shall have no other rights as a shareholder with respect to the Shares underlying the Deferred Stock Units.

3. Vesting.

The Deferred Stock Units shall be fully vested as of the Grant Date.

4. Payment of the Account.

The Company shall make a payment to the Participant in Shares as provided in Section 5 with respect to the number of Deferred Stock Units then credited to the Participant’s Account on the date of the Director’s cessation of services as a director, or if earlier, the Director’s death, disability (as defined in Section 409A of the Code (“Section 409A”)), or upon a Change in Control (as defined in Appendix A) provided that such Change in Control is a permissible distribution event under Section 409A(a)(2)(A)(v) (the “Payment Date”).

5. Form of Payment.

Payments pursuant to Section 4 shall be made in Shares equal to the number of Deferred Stock Units in the Participant’s Account on the Payment Date. Such payment shall be made as soon as practicable, but not later than 90 days, after the Payment Date.

6. Beneficiary.

In the event of the Participant’s death prior to payment of the Deferred Stock Units credited to the Participant’s Account, payment shall be made to the last person or persons designated by the Participant in writing prior to the Participant’s death (“Beneficiary”) or, if no such Beneficiary survives the Participant, such payment shall be made to the Participant’s estate.

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7. Source of Payments.

The Participant’s right to receive payment under this Agreement shall be an unfunded entitlement and shall be an unsecured claim against the general assets of the Company. The Participant has only the status of a general unsecured creditor hereunder, and this Agreement constitutes only a promise by the Company to pay the value of the Account on any required payment date.

8. Restrictions on Transfer.

(a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise encumber or dispose of any Deferred Stock Units, either voluntarily or by operation of law. Any attempt to dispose of any Deferred Stock Units in contravention of the above restriction shall be null and void and without effect.

(b) The Company shall not be required (i) to transfer on its books any of the Deferred Stock Units which have been transferred in violation of any of the provisions set forth herein or (ii) to treat as the owner of such Deferred Stock Units any transferee to whom such Deferred Stock Units have been transferred in violation of any of the provisions contained herein.

9. Adjustments for Capital Changes.

The Plan contains provisions covering the treatment of Deferred Stock Units in a number of contingencies such as stock split and mergers. Provisions in the Plan for such adjustments are hereby made applicable hereunder and are incorporated herein by reference.

10. Change in Control.

Provisions regarding a Change in Control are set forth on Appendix A.

11. Miscellaneous.

(a) Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail postage prepaid, return receipt requested, if to the Director, at the most recent address shown on the records of the Company, and if to the Company, to the Company’s principal office, attention of the Corporate Secretary.

(b) Entire Agreement; Modification. This Agreement (including the cover sheet) and the Plan constitute the entire agreement between the parties relative to the subject matter hereof, and supersede all communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded by the Committee as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law or other applicable rules, including, without limitation, the rules of the stock exchange on which the Shares are listed. If the Committee determines that the Award terms could result in adverse tax consequences to the Participant, the Committee may amend this Agreement without the consent of the Participant in order to minimize or eliminate such tax treatment.

(c) Plan Governs. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern.

(d) Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.

(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the heirs, legatees, distributees, executors and administrators of the Participant and the successors and assigns of the Company.

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(f) Participant’s Acceptance. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, receipt of this Deferred Stock Unit Agreement or Participant’s acquisition or sale of the underlying Shares. The Participant is urged to read this Agreement carefully and to consult with his or her own personal tax, legal and financial advisors regarding the terms and consequences of this Agreement and the legal and binding effect of this Agreement. By virtue of his or her acceptance of this Agreement, the Participant is deemed to have accepted and agreed to all of the terms and conditions of this Award and the provisions of the Plan, including as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award.

(g) Section 409A. This Agreement and the Deferred Stock Units are intended to comply with the requirements of Section 409A and shall be construed consistently therewith and shall be interpreted in a manner consistent with that intention. Terms defined in the Agreement shall have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. Notwithstanding any other provision of this Agreement, the Committee reserves the right, to the extent the Committee deems necessary or advisable, in its sole discretion, to unilaterally amend the Plan and/or this Agreement to ensure that all Deferred Stock Units are awarded and administered in a manner that complies with Section 409A. If and to the extent any portion of any payment, compensation or other benefit provided to the Participant in connection with termination of service is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination the Participant hereby agrees that he is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of separation from service (as determined under Section 409A (the “New Payment Date”)), except as Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule. Notwithstanding the foregoing, the Company, its Affiliates, Directors, Officers and Agents shall have no liability to the Participant, or any other party, if an Award that is intended to be compliant with Section 409A is not so compliant, or for any action taken by the Committee.

(h) Governing Law/Choice of Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without giving effect to the principles of the conflicts of laws thereof. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties, evidenced by this Award or the Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of North Carolina and agree that such litigation shall be conducted only in the courts of Wake County, North Carolina, or the federal courts for the United States for the Tenth District of North Carolina, and no other courts, where this Award is made and/or to be performed.

(i) Administrator Authority. The Committee will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Deferred Stock Units have been earned). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon Participant, the Company and all other interested persons.

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APPENDIX A

For purposes of this Agreement, the following terms shall have the assigned meanings:

“Change in Control” means the occurrence of any one of the following events:

(i) individuals who, on the Grant Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the initial public offering whose election or nomination for election was approved by a vote of at least a majority of the Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii) any “person” (as such term is defined in the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction, as defined in paragraph (iii) below, or (E) by any person of Company Voting Securities from the Company, if a majority of the Incumbent Board approves in advance the acquisition of beneficial ownership of 35% or more of Company Voting Securities by such person;

(iii) the consummation of a merger, consolidation, statutory share exchange, reorganization or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 40% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least half of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);

(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale of all or substantially all of the Company’s assets; or

(v) the occurrence of any other event that the Board determines by a duly approved resolution constitutes a Change in Control.

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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 35% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

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EX-10.13

Exhibit 10.13

RED HAT, INC.

Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended

Form of Director Deferred Stock Unit Agreement (With Vesting)

Cover Sheet

This Agreement evidences the grant by Red Hat, Inc., a Delaware corporation (the “Company”), on the date set forth below (the “Grant Date”) to the person named below (the “Director” or “Participant”) of a Deferred Stock Unit Award (the “Award”) of the number of deferred stock units listed below (the “Deferred Stock Units”). Each unit ultimately earned represents the right to receive one share of the Company’s common stock, $.0001 par value per share (“Common Stock”). This Award is subject to the terms and conditions specified in the Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended (the “Plan”) and in the Agreement, consisting of this Cover Sheet, the attached Exhibit A and Appendix A thereto.

Director Name:

Grant Date:

Number of Deferred Stock Units:

	RED HAT, INC.
	1801 Varsity Drive Raleigh, North Carolina 27606
	By:
(Director Signature)	Name:
	Title:

By accepting this Award, the Director hereby (i) acknowledges that a copy of the Plan and a copy of the Plan prospectus have been delivered to the Director and additional copies thereof are available upon request from the Company’s Equity Compensation Department and can also be accessed electronically, (ii) acknowledges receipt of a copy of this Cover Sheet, and Exhibit A and Appendix A thereto (collectively, the “Agreement”) and accepts the Award subject to all the terms and conditions of the Plan and the Agreement; (iii) represents that the Director has read and understands the Plan, the Plan prospectus and the Agreement, and (iv) acknowledges that there are tax consequences related to the Award and that the Director should consult a tax advisor to determine his or her actual tax consequences. The Director must accept this Award electronically, within thirty (30) days following notification of the grant, pursuant to the online acceptance procedure established by the Company; otherwise, the Company may, in its sole discretion, rescind the Award in its entirety.

EXHIBIT A

RED HAT, INC.

Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended

Director Deferred Stock Unit Agreement (With Vesting)

Terms and Conditions

1. Grant of Deferred Stock Units.

The Award is granted pursuant to and is subject to and governed by the Plan and the terms of this Agreement. Unless otherwise defined in this Agreement, capitalized terms used herein shall have the same meaning as in the Plan. The Shares of Common Stock that are issuable after the Deferred Stock Units have been earned are referred to in this Agreement as “Shares.” The Deferred Stock Units shall be granted to the Participant without payment of consideration (other than continuing services).

2. Deferred Stock Unit Account.

The Company shall credit to a bookkeeping account (the “Account”) maintained by the Company for the Participant’s benefit the Deferred Stock Units, each of which shall be deemed to be the equivalent of one Share.

Whenever any cash dividends are declared on the Shares, on the date such dividend is paid, the Company will credit to the Account of the Participant a number of additional Deferred Stock Units equal to the result of dividing (i) the product of the total number of Deferred Stock Units credited to the Participant’s Account on the record date for such dividend and the per share amount of such dividend by (ii) the Fair Market Value of one Share, on the date such dividend is paid by the Company to the holders of Shares. The Participant shall have no other rights as a shareholder with respect to the Shares underlying the Deferred Stock Units.

3. Vesting.

All of the Deferred Stock Units shall initially be unvested. For so long as the Participant maintains continuous service to the Company as a Director throughout the period beginning on the Grant Date and ending on the vesting date set forth below, the Deferred Stock Units shall become vested according to the schedule set forth below, subject to Section 4 hereof:

Vesting Date Number of Vested
Deferred Stock Units

Notwithstanding the foregoing, upon the Participant’s death or disability (as defined in Section 409A of the Code (“Section 409A”)), all of the Deferred Stock Units shall become fully vested.

4. Cessation of Service as a Director.

If the Participant ceases to be a member of the Board of Directors of the Company for any reason, the Deferred Stock Units that are not vested on the date of such cessation of service will be forfeited, except as provided in Section 3 and Appendix A. The Participant shall have no further rights with respect to any Deferred Stock Units that are so forfeited.

5. Payment of the Account.

The Company shall make a payment to the Participant in Shares as provided in Section 6 with respect to the number of vested Deferred Stock Units then credited to the Participant’s Account on the date of the Director’s

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cessation of services as a director, or if earlier, the Director’s death, disability (as defined in Section 409A), or upon a Change in Control (as defined in Appendix A) provided that such Change in Control is a permissible distribution event under Section 409A(a)(2)(A)(v) (the “Payment Date”).

6. Form of Payment.

Payments pursuant to Section 5 shall be made in Shares equal to the number of vested Deferred Stock Units in the Participant’s Account on the Payment Date. Such payment shall be made as soon as practicable, but not later than 90 days, after the Payment Date.

7. Beneficiary.

In the event of the Participant’s death prior to payment of the vested Deferred Stock Units credited to the Participant’s Account, payment shall be made to the last person or persons designated by the Participant in writing prior to the Participant’s death (“Beneficiary”) or, if no such Beneficiary survives the Participant, such payment shall be made to the Participant’s estate.

8. Source of Payments.

The Participant’s right to receive payment under this Agreement shall be an unfunded entitlement and shall be an unsecured claim against the general assets of the Company. The Participant has only the status of a general unsecured creditor hereunder, and this Agreement constitutes only a promise by the Company to pay the value of the Account on any required payment date.

9. Restrictions on Transfer.

(a) The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise encumber or dispose of any Deferred Stock Units, either voluntarily or by operation of law. Any attempt to dispose of any Deferred Stock Units in contravention of the above restriction shall be null and void and without effect.

(b) The Company shall not be required (i) to transfer on its books any of the Deferred Stock Units which have been transferred in violation of any of the provisions set forth herein or (ii) to treat as the owner of such Deferred Stock Units any transferee to whom such Deferred Stock Units have been transferred in violation of any of the provisions contained herein.

10. Adjustments for Capital Changes.

The Plan contains provisions covering the treatment of Deferred Stock Units in a number of contingencies such as stock split and mergers. Provisions in the Plan for such adjustments are hereby made applicable hereunder and are incorporated herein by reference.

11. Change in Control.

Provisions regarding a Change in Control are set forth on Appendix A.

12. Miscellaneous.

(a) Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail postage prepaid, return receipt requested, if to the Director, at the most recent address shown on the records of the Company, and if to the Company, to the Company’s principal office, attention of the Corporate Secretary.

(b) Entire Agreement; Modification. This Agreement (including the cover sheet) and the Plan constitute the entire agreement between the parties relative to the subject matter hereof, and supersede all communications

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between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded by the Committee as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law or other applicable rules, including, without limitation, the rules of the stock exchange on which the Shares are listed. If the Committee determines that the Award terms could result in adverse tax consequences to the Participant, the Committee may amend this Agreement without the consent of the Participant in order to minimize or eliminate such tax treatment.

(c) Plan Governs. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern.

(d) Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.

(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the heirs, legatees, distributees, executors and administrators of the Participant and the successors and assigns of the Company.

(f) Participant’s Acceptance. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, receipt of this Deferred Stock Unit Agreement or Participant’s acquisition or sale of the underlying Shares. The Participant is urged to read this Agreement carefully and to consult with his or her own personal tax, legal and financial advisors regarding the terms and consequences of this Agreement and the legal and binding effect of this Agreement. By virtue of his or her acceptance of this Agreement, the Participant is deemed to have accepted and agreed to all of the terms and conditions of this Award and the provisions of the Plan, including as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award.

(g) Section 409A. This Agreement and the Deferred Stock Units are intended to comply with the requirements of Section 409A and shall be construed consistently therewith and shall be interpreted in a manner consistent with that intention. Terms defined in the Agreement shall have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. Notwithstanding any other provision of this Agreement, the Committee reserves the right, to the extent the Committee deems necessary or advisable, in its sole discretion, to unilaterally amend the Plan and/or this Agreement to ensure that all Deferred Stock Units are awarded and administered in a manner that complies with Section 409A. If and to the extent any portion of any payment, compensation or other benefit provided to the Participant in connection with termination of service is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination the Participant hereby agrees that he is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of separation from service (as determined under Section 409A (the “New Payment Date”)), except as Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule. Notwithstanding the foregoing, the Company, its Affiliates, Directors, Officers and Agents shall have no liability to the Participant, or any other party, if an Award that is intended to be compliant with Section 409A is not so compliant, or for any action taken by the Committee.

(h) Governing Law/Choice of Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without giving effect to the principles of the conflicts of laws thereof. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties, evidenced by this Award or the Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of North Carolina and agree that such litigation shall be conducted only in the courts of Wake County, North Carolina, or the federal courts for the United States for the Tenth District of North Carolina, and no other courts, where this Award is made and/or to be performed.

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(i) Administrator Authority. The Committee will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Deferred Stock Units have been earned). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon Participant, the Company and all other interested persons.

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APPENDIX A

In the event the Director has continuously served as a director until a Change in Control event, all of the Deferred Stock Units shall become vested and shall be paid in accordance with Sections 5 and 6.

For purposes of this Agreement, the following terms shall have the assigned meanings:

“Change in Control” means the occurrence of any one of the following events:

(i) individuals who, on the Grant Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the initial public offering whose election or nomination for election was approved by a vote of at least a majority of the Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii) any “person” (as such term is defined in the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction, as defined in paragraph (iii) below, or (E) by any person of Company Voting Securities from the Company, if a majority of the Incumbent Board approves in advance the acquisition of beneficial ownership of 35% or more of Company Voting Securities by such person;

(iii) the consummation of a merger, consolidation, statutory share exchange, reorganization or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 40% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least half of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);

(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale of all or substantially all of the Company’s assets; or

(v) the occurrence of any other event that the Board determines by a duly approved resolution constitutes a Change in Control.

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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 35% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

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EX-10.14

Exhibit 10.14

RED HAT, INC.

Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended

Form of Director Restricted Stock Agreement

Cover Sheet

This Agreement evidences the grant by Red Hat, Inc., a Delaware corporation (the “Company”), on the date set forth below (the “Grant Date”) to the person named below (the “Director” or “Participant”) of a Restricted Stock Award (the “Award”) with respect to the number of shares of restricted stock listed below (the “Restricted Stock”) of the Company’s common stock, $.0001 par value per share (“Common Stock”), with a vesting start date listed below (the “Vesting Start Date”). This Award is subject to the terms and conditions specified in the Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended (the “Plan”) and in the Agreement consisting of this Cover Sheet, the attached Exhibit A and Appendix A thereto.

Director Name:

Grant Date:

Vesting Start Date:

Number of Shares of Restricted Stock:

	RED HAT, INC.
	1801 Varsity Drive Raleigh, North Carolina 27606
	By:
(Director Signature)	Name:
	Title:

By accepting this Award, the Director hereby (i) acknowledges that a copy of the Plan and a copy of the Plan prospectus have been delivered to the Director and additional copies thereof are available upon request from the Company’s Equity Compensation Department and can also be accessed electronically, (ii) acknowledges receipt of a copy of this Cover Sheet, and Exhibit A and Appendix A thereto (collectively, the “Agreement”) and accepts the Award subject to all the terms and conditions of the Plan and the Agreement; (iii) represents that the Director has read and understands the Plan, the Plan prospectus and the Agreement, and (iv) acknowledges that there are tax consequences related to the Award and that the Director should consult a tax advisor to determine his or her actual tax consequences. The Director must accept this Award electronically, within thirty (30) days following notification of the grant, pursuant to the online acceptance procedure established by the Company; otherwise, the Company may, in its sole discretion, rescind the Award in its entirety.

EXHIBIT A

RED HAT, INC.

Red Hat, Inc. 2004 Long-Term Incentive Plan, as amended

Director Restricted Stock Agreement

Terms and Conditions

1. Grant of Restricted Stock.

The Award is granted pursuant to and is subject to and governed by the Plan. Unless otherwise defined in this Agreement, capitalized terms used herein shall have the same meaning as in the Plan. The Restricted Stock shall be granted to the Participant without payment of consideration (other than continuing services).

2. Vesting.

All of the shares of Restricted Stock initially shall be unvested shares. For so long as the Participant maintains continuous service to the Company or one of its Affiliates as an Employee or Director (a “Business Relationship”) throughout the period beginning on the Grant Date and ending on the vesting date set forth below, the Restricted Stock shall become vested according to the schedule set forth below, subject to Section 3 hereof:

Vesting Date Number of Vested
Shares

Notwithstanding the foregoing, upon the Participant’s death or disability (as defined in Section 409A of the Code (“Section 409A”)), all of the Restricted Stock shall become fully vested.

3. Cessation of Business Relationship.

If the Participant’s Business Relationship ceases for any reason, the shares of Restricted Stock that were not vested on the date of such cessation of service will be forfeited, except as provided in Section 2 and Appendix A. The shares of Restricted Stock that are forfeited will be cancelled and returned to the Company. The Participant’s Business Relationship shall be deemed to have ceased on the last day of active service to the Company or any Affiliate and shall not be extended by any notice of termination period. The Participant shall have no further rights with respect to any shares of Restricted Stock that are so forfeited. Any change in the type of Business Relationship the Participant has within or among the Company and its Affiliates shall not result in the forfeiture of the Restricted Stock so long as the Participant continuously maintains a Business Relationship.

4. Procedure.

The shares of Restricted Stock under the Agreement shall be registered in the Participant’s name and held by the Company’s transfer agent in book entry format on behalf of the Participant. When the Restricted Stock vests, the Company’s transfer agent shall deliver from the shares of Restricted Stock deposited with it the number of shares which have then vested to or for the account of the Participant (or the Participant’s legal representatives, beneficiaries or heirs). The Participant agrees that any resale of the shares of Restricted Stock received upon vesting shall be made in compliance with the registration requirements of the Securities Act of 1933, as amended, or an applicable exemption therefrom, including without limitation the exemption provided by Rule 144 issued thereunder (or any successor rule).

5. Restrictions on Transfer.

(a) Until the Restricted Stock vests, as provided in Section 2 or Section 3, the Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise encumber or dispose of any Restricted Stock, either voluntarily or by operation of law. Any attempt to dispose of any Restricted Stock in contravention of the above restriction shall be null and void and without effect.

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(b) The Company shall not be required (i) to transfer on its books any of the Restricted Stock which have been transferred in violation of any of the provisions set forth herein or (ii) to treat as the owner of such Restricted Stock any transferee to whom such Restricted Stock have been transferred in violation of any of the provisions contained herein.

6. No Obligation to Continue Business Relationship.

Neither the Plan, this Agreement, nor the grant of the Restricted Stock imposes any obligation on the Company or its Affiliates to have or continue a Business Relationship with the Participant.

7. Rights as Stockholder.

Except for the restrictions on transfer and vesting provisions in this Agreement, the Participant shall have all of the rights of a stockholder of the Company with respect to the Restricted Stock, including but not limited to the right to receive dividends paid on the Restricted Stock and the right to vote the Restricted Stock.

8. Adjustments for Capital Changes.

The Plan contains provisions covering the treatment of Restricted Stock in a number of contingencies such as stock splits and mergers. Provisions in the Plan for such adjustments are hereby made applicable hereunder and are incorporated herein by reference.

9. Change in Control.

Provisions regarding a Change in Control are set forth on Appendix A.

10. Tax Matters.

The Participant understands that he or she may elect to be taxed at the time the Restricted Stock is granted rather than when and as the Restricted Stock vests by filing an election under Section 83(b) of the Code with the Internal Revenue Service and the Company within 30 days from the date of grant.

11. Miscellaneous.

(a) Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, if to the Participant, at the most recent address shown on the records of the Company, and if to the Company, to the Company’s principal office, attention of the Corporate Secretary.

(b) Entire Agreement; Modification. This Agreement (including the cover sheet) and the Plan constitute the entire agreement between the parties relative to the subject matter hereof, and supersede all communications between the parties relating to the subject matter of this Agreement. This Agreement may be modified, amended or rescinded by the Committee as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law or other applicable rules, including without limitation, the rules of the stock exchange on which the Shares are listed. If the Committee determines that the Award terms could result in adverse tax consequences to the Participant, the Committee may amend this Agreement without the consent of the Participant in order to minimize or eliminate such tax treatment.

(c) Plan Governs. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern.

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(d) Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity, legality or enforceability of any other provision.

(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the heirs, legatees, distributees, executors and administrators of the Participant and the successors and assigns of the Company.

(f) Participant’s Acceptance. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. The Participant is urged to read this Agreement carefully and to consult with his or her own personal tax, legal and financial advisors regarding the terms and consequences of this Agreement and the legal and binding effect of this Agreement. By virtue of his or her acceptance of this Agreement, the Participant is deemed to have accepted and agreed to all of the terms and conditions of this Award and the provisions of the Plan, including as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award.

(g) Section 409A. This Agreement and the Restricted Stock are intended to qualify for an exemption from the requirements of Section 409A and shall be construed consistently therewith and shall be interpreted in a manner consistent with that intention. Notwithstanding the foregoing, the Company, its Affiliates, Directors, Officers and Agents shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from Section 409A is not so exempt, or for any action taken by the Committee.

(h) Governing Law/Choice of Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without giving effect to the principles of the conflicts of laws thereof. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties, evidenced by this Award or the Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of North Carolina and agree that such litigation shall be conducted only in the courts of Wake County, North Carolina, or the federal courts for the United States for the Tenth District of North Carolina, and no other courts, where this Award is made and/or to be performed.

(i) Administrator Authority. The Committee will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon Participant, the Company and all other interested persons.

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APPENDIX A

In the event the Director has continuously served as a director until a Change in Control event, all of the Restricted Stock shall become vested.

For purposes of this Agreement, the following terms shall have the assigned meanings:

“Change in Control” means the occurrence of any one of the following events:

(i) individuals who, on the Grant Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the initial public offering whose election or nomination for election was approved by a vote of at least a majority of the Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii) any “person” (as such term is defined in the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction, as defined in paragraph (iii) below, or (E) by any person of Company Voting Securities from the Company, if a majority of the Incumbent Board approves in advance the acquisition of beneficial ownership of 35% or more of Company Voting Securities by such person;

(iii) the consummation of a merger, consolidation, statutory share exchange, reorganization or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 40% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least half of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);

(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale of all or substantially all of the Company’s assets; or

(v) the occurrence of any other event that the Board determines by a duly approved resolution constitutes a Change in Control.

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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 35% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

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EX-10.15

Exhibit 10.15

RED HAT, INC.

Senior Management Severance Plan

(Effective Date: December 22, 2008)

I. Purpose

The purpose of this Senior Management Severance Plan (the “Plan”) is to provide financial assistance to any Participant (as defined in Section II, below) whose employment with Red Hat, Inc. or any of its subsidiaries (the “Company”) is terminated under the circumstances described herein.

II. Participation

Selected Company employees shall be eligible to participate in this Plan (as a “Participant”) as long as they meet the requirements to be a Participant in this Section II.

A. For purposes of this Plan, a Participant is a Company senior executive:

1. who is designated as a Participant under this Plan by a written resolution of the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”), and

2. has executed an agreement substantially in the form set forth in Appendix A of this Plan (the “Agreement”) within ninety (90) days following the date on which such employee first meets the requirements of Section II.A.1 and who is and remains in compliance, in all material respects, with such Agreement.

B. The individuals listed on Schedule A shall become Participants immediately upon execution of the Agreement if it is executed within ninety (90) days of the effective date of this Plan.

C. A person designated as a Participant in the Plan may be removed from such Participation by vote of the Committee. Such vote shall be effective no earlier than the one year anniversary of the date on which such action is taken. Once such removal is effective the former Participant will not be entitled to benefits under the terms of the Plan unless and until again designated as a Participant in accordance with the applicable Plan terms.

III. Entitlement to Plan Benefits

A. A Participant shall be entitled to benefits under this Plan if the Board determines that the following requirements of this Section III.A have been met:

1. the Participant’s employment is terminated by the Company without Good Cause (as defined in Section III.C) or by the Participant with Good Reason (as defined in Section III.D);

2. the Participant is not entitled to benefits in connection with such employment termination (i) under the Red Hat, Inc. Senior Management Change in Control Policy or (ii) any individual agreement entered into after the Effective Date of this Plan that has not been waived by the Participant; and

3. the Participant executes and delivers to the Company a release in the form provided by the Company that becomes irrevocable prior to the sixtieth (60th) day following the Termination Date (which release shall not release entitlement to benefits under the terms of the Plan or the Agreement if the Participant is entitled to benefits under such terms).

B. For purposes of this Plan, “Termination Date” means the date on which the Participant’s employment with the Company ends.

C. For purposes of this Plan, “Good Cause” means conduct involving one or more of the following:

1. the conviction of the Participant of, or, plea of guilty or nolo contendere to, a felony;

2. the willful misconduct by the Participant resulting in material harm to the Company;

3. fraud, embezzlement, theft or dishonesty by the Participant against the Company or any subsidiary resulting in material harm to the Company;

4. repeated and continuing failure of the Participant to follow the proper and lawful directions of the Company’s Chief Executive Officer or the Board after a written demand is delivered to the Participant that specifically identifies the manner in which the Chief Executive Officer or the Board believes that the Participant has failed to follow such instructions;

5. the Participant’s current alcohol or prescription drug abuse affecting work performance, or current illegal use of drugs regardless of the effect on work performance;

6. material violation of the Company’s Code of Conduct by the Participant that causes harm to the Company; or

7. the Participant’s material breach of any term of the Agreement, or any other applicable confidentiality and/or non-competition agreements with the Company.

Notwithstanding the foregoing, a termination for Good Cause shall not have occurred unless (i) the Company gives written notice to the Participant of the Company’s intention to terminate the Participant’s employment within sixty (60) days after the Board of Directors has knowledge that an event constituting Good Cause has occurred, specifying in reasonable detail the circumstances constituting Good Cause and (ii) there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board (excluding the Participant if the Participant is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Participant and the Participant is given an opportunity, together with legal counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Participant has engaged the conduct described above and specifying the particulars thereof in detail.

D. For purposes of this Plan, “Good Reason” means one of the following:

1. a material reduction in the Participant’s rate of annual base salary, other than an across-the-board reduction applicable to all Covered Executives of not more than 10%;

2. a reduction in the Participant’s individual annual target bonus opportunity, other than an across-the-board reduction applicable to all Participants of not more than 10%;

3. a significant and substantial reduction of the Participant’s responsibilities and authority, or a material adverse change in the Participant’s reporting relationship (e.g. not reporting directly to the Company’s Chief Executive Officer); or

4. any requirement of the Company that the Participant be based anywhere more than fifty (50) miles from the Participant’s primary office location and in a new office location that is a greater distance from the Participant’s principal residence.

Notwithstanding the foregoing, a termination for Good Reason shall not have occurred unless the Participant gives written notice to the Company of the Participant’s intention to terminate employment within sixty (60) days after the occurrence of the event constituting Good Reason, specifying in reasonable detail the circumstances constituting Good Reason, and the Company has failed within thirty (30) days after receipt of such notice to cure the circumstances constituting Good Reason and the Participant terminates employment within six (6) months of the end of such thirty (30) day period.

IV. Severance Payments

A. A Participant entitled to benefits under this Plan (and who has complied with Section III.A.3) shall receive the following:

1. A lump sum payment equaling the amount set forth on Schedule A; and

2. A lump sum payment of an amount equal to one hundred percent (100%) of the premiums required for twelve (12) months of continuation of the Participant’s (and his or her eligible dependents’) health, dental, and vision coverage (as provided under the continuation health coverage rules of COBRA).

B. Except as required by Section VII.F., the payments under Section IV.A. shall be made on or before the seventy-fifth (75^th) day following the Termination Date; provided that if the seventy-fifth (75^th) day following the Termination Date falls in a calendar year subsequent to the calendar year of the Termination Date, the payment shall be made no earlier than the first day of that subsequent calendar year.

C. Except as otherwise explicitly provided herein, in an individual agreement or by Company policy or under the terms of the applicable plan document, all participation by the Participant in Company benefit programs, other than participation in its health, dental and vision coverage if a COBRA election is made, shall end on the Termination Date. No contribution to the Company’s retirement programs may be made from or with respect to the amounts payable under this Plan.

V. Continued Vesting and Exercise of Equity Compensation Awards

A. Equity Compensation. Except with respect to equity awards with performance-based vesting which are subject to the provisions of Section V.B. below, each Participant who is entitled to benefits under Section IV of this Plan shall continue to vest (to the extent unvested) in each equity award outstanding on the Termination Date, until the earlier of (i) the one-hundred eightieth (180th) day after the Participant’s Termination Date, or (ii) expiration of the award (based on its original term).

B. Awards with Performance-Based Vesting. Each Participant who is entitled to receive benefits under Section IV of this Plan will be treated, for purposes of earning Performance Share Units or other equity awards which vest on the basis of individual or Company performance with respect to any performance segment which has not been completed as of the Participant’s Termination Date, as continuing to be a Company employee until the earliest of (i) the one-hundred eightieth (180^th) day after the Participant’s Termination Date (ii) ten (10) days after the Committee determines whether performance has been achieved for the performance segment during which the Termination Date occurs, and (iii) expiration of the award (based on its original term); provided that the earning of such Performance Share Units or other equity awards which vest on the basis of individual or Company performance shall depend on the performance requirements being met as provided under any applicable agreement.

C. Exercise Period. Any equity award that is a stock option or stock appreciation right shall continue to be exercisable during the period described in Section V. A. or V. B., as applicable, and thereafter under the terms of the award as if the Participant’s employment terminated on the last date of such period, provided, however, that this extension does not override any general treatment under the applicable equity incentive plan in connection with a change in control or other corporate transaction (such as a general cashing out of the equity awards).

D. Recoupment. In compliance with any applicable trading blackouts and other similar restrictions, Participants may exercise stock options or stock appreciation rights or dispose of other equity awards that vest or become exercisable under Section V only if they sign (or have signed) the release required by Section III.A.3 and it becomes enforceable against them. If a Participant exercises or disposes of equity awards covered by Section V and does not comply with Section III.A.3, the Committee may require payment to the Company as follows with respect to any incremental stock options, stock appreciation rights, or other equity awards that, under Section V, became vested or exercisable or had their exercise period extended or with respect to which the Participant was treated as a continuing employee under Section V.B.:

1. For stock options, the gain equaling the excess, if any, of the fair market value on the exercise date (as determined under the applicable equity incentive plan) of the shares received on exercise over the exercise price paid for such shares, without regard to any market price increase or decrease after exercise (or, if higher, the proceeds received on disposition of the shares).

2. For stock appreciation rights, the fair market value of the shares received on the date of exercise or the amount of cash received on exercise (or, if higher, the proceeds received on disposition of the shares).

3. For restricted stock, the fair market value of the shares as of their date of vesting (or, if higher, the proceeds received on disposition of the shares).

4. For restricted stock units or equivalent equity, the fair market value of the shares issued to the Participant (or, if higher, the proceeds received on disposition of the shares); and

5. For any other form of equity award, such amount as the Committee may determine, applying similar principles.

Payment is due in cash or cash equivalents within ten (10) days after the Committee provides notice to a Participant that it is enforcing this Section. Any equity awards not already vested or exercised will then be immediately forfeited.

Payment will be calculated on a gross basis, without reduction for taxes or commissions. The Committee may, but is not required to, accept retransfer of shares in lieu of cash payments. This provision supplements and does not supersede the recoupment provision in Section 8(a) of the Agreement (relating to violations of restrictive covenants).

VI. Employee Retirement Income Security Act

The Plan constitutes an unfunded severance benefits plan that is intended to be a welfare benefit plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), subject to Part 4 and 5 of Title I of ERISA.

A. The “Plan Administrator” shall be one or more individuals appointed by the Company or, if no individual is so appointed, the Company shall be the Plan Administrator and these responsibilities shall be implemented by the Committee. The Plan Administrator shall be the “administrator” within the meaning of Section 3(16) of ERISA and the Named Fiduciary for purposes of Section 402 of ERISA.

B. The Plan Administrator shall have full power and discretionary authority to administer the Plan in accordance with its terms and subject to the requirements of applicable law. The Plan Administrator shall have the authority and responsibility to: (i) construe the terms of the Plan, including the authority to remedy any omissions, ambiguities or inconsistencies in the provisions of the Plan, (ii) resolve all questions of fact under the Plan, including, without limitation, questions concerning eligibility, participation and benefits and all other related or incidental matters, and (iii) establish such procedures for the Plan as it deems advisable, including the establishment of a claims procedure consistent with Section 503 of ERISA.

C. The Plan Administrator’s decisions and determinations (including determinations of the meaning and reference of terms used in the Plan) shall be conclusive and binding upon all Participants and their beneficiaries, heirs and assigns, in the absence of clear and convincing evidence that the Plan Administrator acted in a manner that was arbitrary and capricious.

VII. Miscellaneous

A. Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postage prepaid, return receipt requested, if to the Participant, to the address set forth on the cover sheet or at the most recent address shown on the records of the Company, and if to the Company, to the Company’s principal office, attention of the Corporate Secretary (or, if the Participant is the Corporate Secretary, to the Chief Executive Officer).

B. Amendment and Termination. This Plan and the benefits described herein or set forth on Schedule A may be amended or terminated by the Committee at any time; provided, however, that no such amendment or termination shall take effect

earlier than twelve (12) months following the date the amendment or termination is adopted by the Committee, other than any amendment that is determined by the Committee, in its sole discretion, (i) to be necessary or appropriate to minimize or eliminate adverse tax treatment to Participants under Code Section 409A, or (ii) to have no material adverse effect on Participants.

Notwithstanding the foregoing, the Committee may reduce the benefits under Section IV.A.1 (and the terms of Schedule A) by up to fifty percent (50%) without the foregoing twelve (12) month delay if the Committee determines that, as a result of a substantially adverse change in the Company’s financial condition or in the results of the Company’s operation (other than solely a decline in the price of the Company’s common stock), it is in the Company’s overall best interest to reduce the severance payments. The reduction can apply to any or all Participants. The Committee must make its determination in good faith and set out its conclusions and their basis in writing. Any reduction under this paragraph shall be treated as a reduction covered by Section 3(d) of the Agreement (relating to a reduction in the noncompetition period under the Agreement).

C. No Mitigation. A Participant shall not be required to mitigate the amount of any payment provided for in this Plan by seeking other employment or otherwise and shall not be required to offset against such payment any payments he or she may receive from further employment.

D. No Fiduciary or Employment Relationship. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind or fiduciary relationship or contract for employment between the Company and any employee, and nothing in this Plan shall affect the right of the Company to terminate the employment of any employee for any reason whatsoever

E. Delegation. To the extent permitted by applicable law, the Board may delegate any or all of its powers under this Plan to one or more committees or subcommittees of the Board. All references in this Plan to the “Board” shall mean the Board or a committee of the Board to the extent that the Board’s powers or authority under this Plan have been delegated to such committee. All references in this Plan to a “written resolution” of the Board shall mean a written resolution of the Board or a committee of the Board to the extent that the Board’s powers or authority under this Plan have been delegated to such committee.

F. Taxation. Any payment provided for hereunder shall be paid net of any applicable withholding required under foreign, federal, state or local law. If and to the extent any portion of any payment, compensation or other benefit provided to a Participant in connection with his separation from service (as defined in Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A” of the “Code”) is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and he or she is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in

accordance with its procedures, by which determination he or she, by accepting benefits hereunder, agree that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the earlier of (i) the day that is six months plus one day after the date of separation from service (as determined under Section 409A or (ii) the tenth (10^th) day after the date of death (either, the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to him or her during the period between the date of separation from service and the New Payment Date shall be paid in a lump sum on such New Payment Date. For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A, and any payments that are due within the “short term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requires otherwise. Neither the Company nor any Participant shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent permitted or required by Section 409A. The Company intends that all actions under the Plan comply with Section 409A and other applicable law. This Plan is intended to comply with the provisions of Section 409A and the Plan must, to the extent practicable, be construed in accordance therewith. Terms defined in the Plan will have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. Notwithstanding the foregoing, to the extent that the Plan or any payment or benefit hereunder were determined not to comply with Section 409A, then neither the Company, the Administrator, nor its or their designees or agents shall be liable to the Participants or any other person for any actions, decisions, or determinations made in good faith.

G. Conflict with Other Severance Policy or Agreements. The terms of this Plan supersede all severance provisions of any agreement executed between each Participant and the Company including, but not limited to, offer letters, individual employment agreements, and any other policy or program of the Company, with the exception of the Senior Management Change in Control Severance Policy.

H. Severability. The invalidity, illegality or unenforceability of any provision of this Plan shall in no way affect the validity, legality or enforceability of any other provision.

I. Successors and Assigns. This Plan shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

J. Governing Law. To the extent not preempted by ERISA, this Plan shall be governed by and construed in accordance with the laws of the State of North Carolina (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding that is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the State of North Carolina (or, if appropriate, a federal court located within the State of North Carolina), and the Company and the Participant each consent to the exclusive jurisdiction of such a court.

Schedule A

Participants (Section II.B)	Multiplier
Paul J. Cormier		1.75
Charles E. Peters, Jr.		1.75
Michael R. Cunningham		1.75
Alex Pinchev		1.75

Severance Payments (Section IV. A.1.)

The Severance Payment for any Participant under Section IV.A.1. shall equal the Participant’s Base Salary ¹ times the Multiplier.

¹  Base Salary shall be determined by annualizing the rate of base salary paid to the Participant on his or her Termination Date without taking into account any reduction in such base salary that would constitute good Reason under III.D.1.

Appendix – The Agreement

CONFIDENTIAL

EXECUTIVE AGREEMENT

This Agreement (the “Agreement”) is made between Red Hat, Inc., a Delaware corporation (collectively with each of its subsidiaries, the “Company”), and [            ] an executive-level employee of the Company who has been selected by the Compensation Committee of the Company for participation in the Red Hat, Inc. Senior Management Severance Plan (the “Severance Plan”) (the “Executive”) as of              , 20      (the “Effective Date”).

In consideration of the Company’s adoption of the Severance Plan under which Executive may become entitled to Severance Plan benefits, and in satisfaction of a condition of Executive’s participation in such Severance Plan, the Company and Executive agree as follows:

1. Acknowledgment.

Executive acknowledges that Executive’s undertakings and commitments and the restrictions set forth in this Agreement, including in particular the non-compete and non-solicitation undertaking contained herein are a material inducement for the Company to create and maintain the Severance Plan and a requirement for Executive to become eligible as a participant in the Severance Plan. Executive acknowledges that he/she has received a copy of the Severance Plan and has had the opportunity to discuss its terms with the Company. Without regard to whether Executive ultimately receives benefits under the Severance Plan, Executive undertakes to fully comply with the provisions hereof and agrees that breach of these provisions will cause significant financial and other damages to the Company, including loss of strategic advantages.

2. Non-Solicitation.

(a) During Executive’s employment with the Company and for a period of twelve (12) months thereafter, Executive shall not, for himself/herself or any entity, directly or indirectly: (i) solicit or cause to solicit for the purpose of diverting, taking away or disrupting, or of attempting to divert, take away or disrupt, the Company’s relationship or business with any person or entity who, at any time during the six (6) months preceding such action was or is a client, customer or business partner of the Company, or prospective client, customer or business partner of the Company; (ii) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or engagement with the Company; or (iii) hire, recruit or engage as an independent contractor, or attempt to hire, recruit or engage as an independent contractor, any person who was employed or otherwise engaged by the Company within six (6) months prior to such action.

(b) If Executive violates the provisions of this Section 2, Executive shall continue to be bound by the restrictions set forth in this Section 2 for an additional period equal to the aggregate period of such violation.

3. Non-Competition.

(a) Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(1) “Restricted Business” is defined as a software or software-related business that competes with the Company. “Restricted Business” includes, but is not limited to, the following companies: Oracle Corp., Novell, Inc., Microsoft Corp, Sun Microsystems Inc., IBM (International Business Machines Corp.), Citrix Systems, Inc., VMware, Inc. and/or rPath, Inc.

(2) “Restricted Territory” is defined as: Anywhere within the United States where the Company has clients and/or has marketed its products or services at the time Executive leaves employment with the Company.

(b) Noncompete Period.

(1) During Executive’s employment with the Company and for a period of twelve (12) months thereafter (the “Non-compete Period”), within the Restricted Territory, Executive shall not, for himself or any entity, be engaged in or provide to a Restricted Business any services similar to or related to the services Executive performed for or with the Company and related to any product or service line that competes with any Company product or service line existing or planned as of Executive’s termination from employment with the Company: (i) about which Executive had access to operational, financial, or strategic information while employed with the Company; or (ii) for which Executive was responsible and/or with which Executive was involved; or (iii) about which Executive was informed during Executive’s employment with the Company.

(2) At the request of Executive, following a confidential consultation, the Company will provide its good faith view as to whether a proposed relationship Executive may wish to pursue appears likely to violate this Section, provided that such determination does not prevent the Company from proceeding under this provision if the services to be provided by Executive change, the product or service line at the Restricted Business becomes subject to this Section, or the information provided to the Company was incomplete or incorrect.

(3) Notwithstanding the foregoing portions of this Section 3, it shall not be a violation of this section for Executive to engage in the practice of law, either at a law firm or with another entity (as long as he or she satisfies his or her professional obligations to keep and not use the confidences and Confidential Information of the Company and as long as his or her employment does not include non-legal duties that may assist a Restricted Business in competing with the Company).

(c) Executive will be treated as “engaged” in a Restricted Business if he or she provides services thereto as an employee, consultant, independent contractor, agent, or other representative or he or she owns an equity interest in the business (except for passive ownership, directly or indirectly, of not more than 1% of the outstanding stock of a publicly-held company and of not more than 5% of the outstanding stock of a private company).

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(d) Effects of Changes to the Severance Plan:

(1) Subject to Section 3(d)(3), if the severance payment applicable to Executive, as described in Section IV.A.1 of the Severance Plan on the Effective Date, is reduced by at least 25%, then the Non-compete Period shall be reduced by the same percentage as the reduction in the severance payment applicable to Executive.

(2) Subject to Section 3(d)(3), if any of the periods of continued vesting or extended exercisability of equity compensation awards applicable to Executive, as described in Section V.A., V.B., and V.C. of the Severance Plan, is reduced by at least 25%, then the Non-Compete Period shall be reduced by the same percentage as the reduction in the applicable period.

(3) The Non-Compete Period will not be reduced:

(i) under Section 3(d)(1) if the reduction in severance payment results in Executive’s termination for Good Reason (because severance will then be based on the pre-reduction base salary) or if Executive agrees in writing to a reduction in base salary,

(ii) under Section 3(d)(2) if the reason for the reduced period is any generally applicable treatment under the relevant equity incentive plan in connection with a change in control or other corporate transaction (such as a general cashing out of the equity awards), or

(iii) under either Section 3(d)(1) or (d)(2) if Executive does not qualify for severance under Section III.A.1 (because his/her employment ends for a different reason).

(e) If Executive violates the provisions of this Section 3, Executive shall continue to be bound by the restrictions set forth in this Section 3 for an additional period equal to the aggregate period of such violation.

3A. Alternate Restrictive Covenants. [FOR USE ONLY IN NC/VA AGREEMENTS:

(a) Non-Solicitation.

(1) If paragraph (a) of the non-solicitation provision in Section 2 of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable because it spans too long a period of time, then it shall be replaced as follows:

During Executive’s employment with the Company and for a period of nine (9) months thereafter, Executive shall not, for himself/herself or any entity, directly or indirectly: (i) solicit

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or cause to solicit, divert or take away, or attempt to divert or take away any person or entity who, at any time during the six (6) months preceding such action was or is a client, customer or business partner of the Company or prospective client, customer or business partner of the Company; (ii) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or engagement with the Company; or (iii) hire, or recruit or attempt to hire, or engage or attempt to engage as an independent contractor, any person who was employed or otherwise engaged by the Company within six (6) months prior to such action.

(2) If both the above paragraph and paragraph (a) of the non-solicitation provision in Section 2 of this Agreement are found by a court of competent jurisdiction to be invalid or unenforceable because it spans too long a period of time, then it shall be replaced as follows:

During Executive’s employment with the Company and for a period of six (6) months thereafter, Executive shall not, for himself/herself or any entity, directly or indirectly: (i) solicit or cause to solicit, divert or take away, or attempt to divert or take away any person or entity who, at any time during the six (6) months preceding such action was or is a client, customer or business partner of the Company or prospective client, customer or business partner of the Company; (ii) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or engagement with the Company; or (iii) hire, or recruit or attempt to hire, or engage or attempt to engage as an independent contractor, any person who was employed or otherwise engaged by the Company within six (6) months prior to such action.

(b) Non-Competition.

(1) If paragraph (b)(1) of the non-competition provision in Section 3 of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable because it spans too long a period of time, then it shall be replaced as follows: During Executive’s employment with the Company and for a period of nine (9) months thereafter, within the Restricted Territory, Executive shall not, for himself or any entity, be engaged in or provide to a Restricted Business any services similar to or related to the services Executive performed for or with the Company and related to any product or service line that competes with any Company product or service line existing or planned as of Executive’s termination from employment with the Company: (i) about which Executive had access to operational, financial, or strategic information while employed with the Company; or (ii) for which Executive was responsible and/or with which Executive was involved; or (iii) about which Executive was informed during Executive’s employment with the Company.

(2) If both the above paragraph and paragraph (b)(1) of the non-competition provision in Section 3 of this Agreement are found by a court of competent jurisdiction to be invalid or unenforceable because they span too long a period of time, then paragraph (b)(1) of Section 3 of this Agreement shall be replaced as follows:

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During Executive’s employment with the Company and for a period of six (6) months thereafter, within the Restricted Territory, Executive shall not, for himself or any entity, be engaged in or provide to a Restricted Business any services similar to or related to the services Executive performed for or with the Company and related to any product or service line that competes with any Company product or service line existing or planned as of Executive’s termination from employment with the Company: (i) about which Executive had access to operational, financial, or strategic information while employed with the Company; or (ii) for which Executive was responsible and/or with which Executive was involved; or (iii) about which Executive was informed during Executive’s employment with the Company.]

4. Confidential Information.

(a) Confidential Information. Executive agrees at all times, both during and after the term of his or her employment with the Company, to hold in the strictest confidence, and not to use (except for the benefit of the Company at the Company’s direction) or disclose (without the written authorization of the Chief Executive Officer (CEO) or the Chairman of the Board of Directors of the Company (“Board”)), regardless of when disclosed to Executive, any and all technical data, trade secrets, know-how or other confidential or proprietary information of the Company, including without limitation any and all information related to the products, product plans, technologies, inventions, mask works, ideas, processes, formulas, source and object codes, computer programs, data bases, other works of authorship, improvements, discoveries, developments, designs and techniques, research, developmental or experimental work, customer and business partner lists, employee lists, business plans, sales or marketing plans or results, markets, prices and costs, financial information, or other subject matter pertaining to any business of the Company or any of its licensors, customers, business partners, consultants or customers (collectively, “Confidential Information”). Executive understands that Confidential Information further includes, but is not limited to, information pertaining to any aspect of the Company’s business which is either information not known (or known as a result of a wrongful act of Executive or of others who were under confidentiality obligations as to the item or items involved) by actual or potential competitors of the Company or other third parties not under confidentiality obligations to the Company, or is otherwise proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. Executive further understands that Confidential Information does not include (i) any of the foregoing items which is or has become publicly and widely known and made generally available through no wrongful act of Executive or of others who were under confidentiality obligations as to the item or items involved, (ii) disclosure or use of Confidential Information that in good faith is determined to be required or appropriate to advance the best interests of the Company in connection with Executive’s work as an employee of the Company and is not inconsistent with any lawful request or direction that Executive may receive from the Board or a committee or other representative of the Board, (iii) disclosure of Confidential Information when required by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order Executive to divulge, disclose or make accessible such information; provided, however, that prior to any such disclosure Executive must notify the Company’s General Counsel (or, if Executive is General Counsel, the Chief Executive Officer) of such requirement sufficiently in advance to allow the Company a reasonable opportunity to take any action that it determines appropriate to protect such

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Confidential Information and Executive agrees to cooperate with the Company in good faith in taking any such action, or (iv) disclosure of Confidential Information to Executive’s spouse, attorney and/or personal tax and financial advisors as reasonably necessary or appropriate to advance Executive’s tax, financial and other personal planning (each an “Exempt Person”); provided, however, that prior to any disclosure of Confidential Information to an Exempt Person Executive will inform such Exempt Person of Executive’s obligations hereunder and of their obligation to protect such Confidential Information to the same extent and Executive understands that any disclosure or use of any Confidential Information by an Exempt Person shall be deemed to be a breach of this Section 4 by Executive.

(b) Former Employer Information. Executive agrees that he or she does not possess, has not brought, and will not bring to the Company, nor use or disclose in the course of the performance of his or her duties at the Company, any inventions, technical data, trade secrets, know-how or other confidential or proprietary information of any former employer or third party without the written authorization of such employer or third party. Executive represents that his or her performance of all terms of this Agreement or any other agreement related to his or her employment with the Company has not breached and will not breach any agreement to keep in confidence the inventions, technical data, trade secrets, know-how or other confidential or proprietary information of any former employer or third party acquired by Executive prior or subsequent to the commencement of his or her employment with the Company.

(c) Third Party Information. Executive recognizes that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and/or to use it only for certain limited purposes (“Third Party Information”). Executive agrees to hold all such Third Party Information in the strictest confidence and not to disclose it to any person or entity (other than Company personnel who need to know such information in connection with their work for the Company) or to use it except as necessary in carrying out Executive’s work for the Company consistent with the Company’s agreement with such third party.

5. Assignment of Inventions and Original Works of Authorship

(a) Inventions and Original Works Assigned to the Company. During the term of Executive’s employment with the Company, Executive will promptly disclose to the Company, will hold in trust for the sole right and benefit of the Company and does hereby assign to the Company, all rights to and interests in inventions, developments, discoveries, techniques, modifications, improvements, technology, trade secrets, computer programs, mask works, know-how, processes, concepts, methods, systems, specifications, algorithms, designs, formulas, original works of authorship, or any other intellectual property rights whatsoever, whether or not patentable or registrable under copyright, trademark or similar laws or subject to analogous protection (“Inventions”) that Executive may, during employment with the Company, solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, (a) that relate to the Company’s past, present or demonstrated or reasonably foreseeable future business or research, whether or not developed during normal working hours, or (b) that are developed with the use or aid of any Company equipment, supplies or facilities, or

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(c) that use or are based on or developed from any Confidential Information of the Company or Third Party Information, or (d) that result from any work, service or duty Executive performs with the Company (collectively, the “Assigned Inventions”). Executive agrees and represents that any Invention that would fall within the definition of Assigned Inventions but for having been conceived or developed or reduced to practice, or caused to be conceived or developed or reduced to practice during employment but before the Effective Date shall also be hereby assigned and treated as an Assigned Invention. Any assignment hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral” or the like. Executive further acknowledges that all Assigned Inventions are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by his or her salary. Executive agrees not to allow any Invention that was conceived, developed, made or reduced to practice prior to his or her employment with the Company, belongs solely to Executive or belongs to Executive jointly with another, and relates in any way to any of the Company’s proposed businesses and products (a “Prior Invention”) to be incorporated into any product, process, technology or machine of the Company. If in the course of Executive’s employment with the Company, Executive incorporates (or has previously incorporated) into a Company product, process, technology or machine a Prior Invention, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made, modify, make derivative works of, use, sell and otherwise distribute or exploit such Prior Invention as part of or in connection with such product, process, technology or machine. Notwithstanding the foregoing, Executive understands that this Agreement will not be deemed to require assignment of any Invention whose assignment to the Company pursuant to this Agreement would be expressly prohibited by a specifically applicable state law, regulation, rule or public policy of the State of North Carolina or the law of the jurisdiction in which Executive is primarily employed.

(b) Maintenance of Records. Executive agrees to keep and maintain adequate and current written records of all Assigned Inventions during the term of his or her employment with the Company, in the format specified by the Company. The records will be available to and remain the sole property of the Company at all times. Executive agrees not to remove such records from the Company’s place of business except as expressly permitted in writing by an officer of the Company. Executive agrees to return all such records (including any copies thereof) to the Company at the time of termination of his or her employment with the Company.

(c) Enforcement of Intellectual Property Rights. Executive agrees that, whenever requested by the Company, he or she shall assist the Company or its designee to secure the Company’s, or its designee’s, rights in the Assigned Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company or its designee of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments and the taking of all such other acts (including appearances as a witness) which the Company or its designee shall deem necessary in order to apply for, perfect, obtain, maintain, review, restore, enforce, defend and transfer such rights, or if not transferable, waive such rights, and in order to assign and convey to the Company or its designee, and any successors, assigns and nominees thereof and to

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further evidence, record and perfect the sole and exclusive rights, title and interest in and to such Assigned Inventions, and any copyrights, patents, trademarks, mask work rights, moral rights or other intellectual property rights relating thereto. Executive further agrees that his or her obligation to execute or cause to be executed, when it is in his or her power to do so, any such instruments or papers or to take such other acts shall continue after the termination of this Agreement until the expiration of the last such intellectual property right to expire in any country of the world. If the Company or its designee is unable because of Executive’s mental or physical incapacity or unavailability or for any other reason to secure Executive’s signature to apply for or to pursue any application for any United States or foreign patents, copyright, mask works or other registrations covering Assigned Inventions, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in his or her behalf and stead to execute and file any such applications and any documents and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent, copyright or other registrations thereon with the same legal force and effect as if originally executed by Executive. Executive hereby waives and irrevocably quitclaims to the Company or its designee any and all claims, of any nature whatsoever, which Executive now or hereafter has for infringement of any and all proprietary rights assigned to the Company or such designee pursuant to the terms of this Agreement.

6. Non-Disparagement.

Executive understands and agrees that, as a condition for his or her eligibility to participate in the Severance Plan, he or she agrees not to make any false, disparaging or derogatory statements to any media outlet, industry group, financial institution or current or former employee, consultant, client or customer of the Company regarding the Company or any of its directors, officers, employees, agents or representatives or about the Company’s business affairs or financial condition; provided, however, that nothing herein shall prevent Executive from making truthful disclosures to any governmental entity or in any litigation or arbitration.

7. Severance Plan Ineligibility.

If, while Executive is employed by the Company, the Company determines that he or she no longer will be eligible for benefits under the Severance Plan, he or she shall cease to be bound by the post-employment restrictive covenants described in Sections 2 and 3 of this Agreement provided that nothing in this sentence eliminates such restrictions if the lack of eligibility is because Executive does not qualify for severance (such as on a voluntary resignation without Good Reason as defined in the Severance Plan).

8. Miscellaneous.

(a) Equitable and Other Remedies. The restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and are considered by Executive to be reasonable for such purpose. If Executive violates the provisions of Sections 2 or 3, Executive must promptly repay the amounts, if any, previously received under Sections IV and V of the Severance Plan (with the repayment of the equity compensation to be accomplished in any manner reasonably determined by the Company). In addition, Executive

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agrees that he or she is subject to the recoupment provisions of Section V.D. of the Severance Plan. Section Executive acknowledges and agrees that the repayment and recoupment provisions in the two preceding sentences are not provisions for liquidated damages. Executive agrees that any breach of this Agreement is likely to cause the Company substantial and irrevocable damage that is difficult to measure and that money damages will be insufficient. Therefore, in the event of any such breach or threatened breach, Executive agrees that the Company, in addition to such other remedies that may be available (including in this Section 8(a)), shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Agreement, in addition to and cumulative with any other remedy that the Company may have at law or in equity. Executive hereby waives the adequacy of a remedy at law as a defense to any such equitable relief.

(b) Disclosure of this Agreement. Executive and Company each hereby authorizes the other to notify customers of the Company, any of Executive’s future employers, potential employers or service recipients, and, for a reasonable business purpose, others, of the terms and existence of this Agreement and Executive’s continuing obligations to the Company thereunder.

(c) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any entity with which, or into which, the Company may be merged or that may succeed to the Company’s assets or business; provided, however, that the obligations of Executive are personal and shall not be assigned by him or her. Executive expressly consents to be bound by the provisions of this Agreement for the benefit of the Company or any subsidiary or affiliate thereof to whose employ Executive may be transferred without the necessity that this Agreement be re-signed at the time of such transfer.

(d) Interpretation. If any restriction set forth in Section 2 or Section 3 is found by any court of competent jurisdiction to be unenforceable for any reason, including, but not limited to, because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to apply to the maximum extent possible, such as only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. [For use only in MA/VA Agreements.]

(e) Severability. In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

(f) Survival. This Agreement shall continue in full force and effect following the cessation of Executive’s employment with the Company for any reason.

(g) Waivers. No delay or omission by the Company in exercising any right under this Agreement will operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.

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(h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the [State of North Carolina or the Commonwealth of Virginia/Massachusetts] (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding that is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the [State of North Carolina or the Commonwealth of Virginia/Massachusetts] (or, if appropriate, a federal court located within the [State of North Carolina or the Commonwealth of Virginia/ Massachusetts]), and the Company and Executive each consents to the exclusive jurisdiction of such a court. The Company and Executive each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement or to any claim of forum non conveniens.

(i) Effect on Other Agreements; Amendment. The terms of the Severance Plan and this Agreement supersede all severance provisions of any agreement executed between Executive and the Company including, but not limited to, offer letters, individual employment agreements, and any other policy or program of the Company, with the exception of the Senior Management Change in Control Severance Policy. Except to the extent provided in the preceding sentence, this Agreement does not supersede any prior written Agreement between Executive and the Company relating to the subject matter of this Agreement, including, but not limited to, any Noncompetition, Confidentiality, and Assignment of Inventions Agreement previously executed by Executive. Such previously executed agreements are not expressly modified hereby and shall remain in full force and effect. This Agreement may not be modified, changed or discharged in whole or in part, except by an agreement in writing signed by Executive and the Company. Executive agrees that any change or changes in his/her duties, salary or compensation after the signing of this Agreement shall not affect the validity or scope of this Agreement.

(j) Termination Certificate. Executive agrees to execute the Termination Certificate attached as Exhibit A upon termination.

(k) Captions. The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND THE SEVERANCE PLAN AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

Signatures on Page Following

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	RED HAT, INC.
Date:	By:
	[EXECUTIVE]
Date:	(Signature)

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EXHIBIT A

to

Executive Agreement

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, memoranda specifications, drawings, blueprints, sketches, materials, flow charts, equipment, other documents or property, or reproductions of any of the foregoing items belonging to Red Hat, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”).

I further certify that I have complied with all the terms of the Company’s Executive Agreement signed by me, including the reporting of any inventions (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the Executive Agreement, I will preserve as confidential all technical data, trade secrets, know-how or other confidential or proprietary information of the Company, including without limitation any and all information related to the products, product plans, technologies, inventions, mask works, ideas, processes, formulas, source and object codes, computer programs, data bases, other works of authorship, improvements, discoveries, developments, designs and techniques, research, developmental or experimental work, customer and business partner lists, employee lists, business plans, sales or marketing plans or results, markets, prices and costs, financial information, or other subject matter pertaining to any business of the Company or any of its licensors, customers, business partners, consultants or customers.

Date:                     

NOTE: THIS IS A TEMPLATE WHICH IS TO BE SIGNED ONLY UPON TERMINATION

Executive Signature

Printed or Typed Name

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EX-10.16

Exhibit 10.16

CONFIDENTIAL

EXECUTIVE AGREEMENT

This Agreement (the “Agreement”) is made between Red Hat, Inc., a Delaware corporation (collectively with each of its subsidiaries, the “Company”), and [            ] an executive-level employee of the Company who has been selected by the Compensation Committee of the Company for participation in the Red Hat, Inc. Senior Management Severance Plan (the “Severance Plan”) (the “Executive”) as of              , 20      (the “Effective Date”).

In consideration of the Company’s adoption of the Severance Plan under which Executive may become entitled to Severance Plan benefits, and in satisfaction of a condition of Executive’s participation in such Severance Plan, the Company and Executive agree as follows:

1. Acknowledgment.

Executive acknowledges that Executive’s undertakings and commitments and the restrictions set forth in this Agreement, including in particular the non-compete and non-solicitation undertaking contained herein are a material inducement for the Company to create and maintain the Severance Plan and a requirement for Executive to become eligible as a participant in the Severance Plan. Executive acknowledges that he/she has received a copy of the Severance Plan and has had the opportunity to discuss its terms with the Company. Without regard to whether Executive ultimately receives benefits under the Severance Plan, Executive undertakes to fully comply with the provisions hereof and agrees that breach of these provisions will cause significant financial and other damages to the Company, including loss of strategic advantages.

2. Non-Solicitation.

(a) During Executive’s employment with the Company and for a period of twelve (12) months thereafter, Executive shall not, for himself/herself or any entity, directly or indirectly: (i) solicit or cause to solicit for the purpose of diverting, taking away or disrupting, or of attempting to divert, take away or disrupt, the Company’s relationship or business with any person or entity who, at any time during the six (6) months preceding such action was or is a client, customer or business partner of the Company, or prospective client, customer or business partner of the Company; (ii) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or engagement with the Company; or (iii) hire, recruit or engage as an independent contractor, or attempt to hire, recruit or engage as an independent contractor, any person who was employed or otherwise engaged by the Company within six (6) months prior to such action.

(b) If Executive violates the provisions of this Section 2, Executive shall continue to be bound by the restrictions set forth in this Section 2 for an additional period equal to the aggregate period of such violation.

3. Non-Competition.

(a) Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(1) “Restricted Business” is defined as a software or software-related business that competes with the Company. “Restricted Business” includes, but is not limited to, the following companies: Oracle Corp., Novell, Inc., Microsoft Corp, Sun Microsystems Inc., IBM (International Business Machines Corp.), Citrix Systems, Inc., VMware, Inc. and/or rPath, Inc.

(2) “Restricted Territory” is defined as: Anywhere within the United States where the Company has clients and/or has marketed its products or services at the time Executive leaves employment with the Company.

(b) Noncompete Period.

(1) During Executive’s employment with the Company and for a period of twelve (12) months thereafter (the “Non-compete Period”), within the Restricted Territory, Executive shall not, for himself or any entity, be engaged in or provide to a Restricted Business any services similar to or related to the services Executive performed for or with the Company and related to any product or service line that competes with any Company product or service line existing or planned as of Executive’s termination from employment with the Company: (i) about which Executive had access to operational, financial, or strategic information while employed with the Company; or (ii) for which Executive was responsible and/or with which Executive was involved; or (iii) about which Executive was informed during Executive’s employment with the Company.

(2) At the request of Executive, following a confidential consultation, the Company will provide its good faith view as to whether a proposed relationship Executive may wish to pursue appears likely to violate this Section, provided that such determination does not prevent the Company from proceeding under this provision if the services to be provided by Executive change, the product or service line at the Restricted Business becomes subject to this Section, or the information provided to the Company was incomplete or incorrect.

(3) Notwithstanding the foregoing portions of this Section 3, it shall not be a violation of this section for Executive to engage in the practice of law, either at a law firm or with another entity (as long as he or she satisfies his or her professional obligations to keep and not use the confidences and Confidential Information of the Company and as long as his or her employment does not include non-legal duties that may assist a Restricted Business in competing with the Company).

(c) Executive will be treated as “engaged” in a Restricted Business if he or she provides services thereto as an employee, consultant, independent contractor, agent, or other representative or he or she owns an equity interest in the business (except for passive ownership, directly or indirectly, of not more than 1% of the outstanding stock of a publicly-held company and of not more than 5% of the outstanding stock of a private company).

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(d) Effects of Changes to the Severance Plan:

(1) Subject to Section 3(d)(3), if the severance payment applicable to Executive, as described in Section IV.A.1 of the Severance Plan on the Effective Date, is reduced by at least 25%, then the Non-compete Period shall be reduced by the same percentage as the reduction in the severance payment applicable to Executive.

(2) Subject to Section 3(d)(3), if any of the periods of continued vesting or extended exercisability of equity compensation awards applicable to Executive, as described in Section V.A., V.B., and V.C. of the Severance Plan, is reduced by at least 25%, then the Non-Compete Period shall be reduced by the same percentage as the reduction in the applicable period.

(3) The Non-Compete Period will not be reduced:

(i) under Section 3(d)(1) if the reduction in severance payment results in Executive’s termination for Good Reason (because severance will then be based on the pre-reduction base salary) or if Executive agrees in writing to a reduction in base salary,

(ii) under Section 3(d)(2) if the reason for the reduced period is any generally applicable treatment under the relevant equity incentive plan in connection with a change in control or other corporate transaction (such as a general cashing out of the equity awards), or

(iii) under either Section 3(d)(1) or (d)(2) if Executive does not qualify for severance under Section III.A.1 (because his/her employment ends for a different reason).

(e) If Executive violates the provisions of this Section 3, Executive shall continue to be bound by the restrictions set forth in this Section 3 for an additional period equal to the aggregate period of such violation.

3A. Alternate Restrictive Covenants. [FOR USE ONLY IN NC/VA AGREEMENTS:

(a) Non-Solicitation.

(1) If paragraph (a) of the non-solicitation provision in Section 2 of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable because it spans too long a period of time, then it shall be replaced as follows:

During Executive’s employment with the Company and for a period of nine (9) months thereafter, Executive shall not, for himself/herself or any entity, directly or indirectly: (i) solicit

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or cause to solicit, divert or take away, or attempt to divert or take away any person or entity who, at any time during the six (6) months preceding such action was or is a client, customer or business partner of the Company or prospective client, customer or business partner of the Company; (ii) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or engagement with the Company; or (iii) hire, or recruit or attempt to hire, or engage or attempt to engage as an independent contractor, any person who was employed or otherwise engaged by the Company within six (6) months prior to such action.

(2) If both the above paragraph and paragraph (a) of the non-solicitation provision in Section 2 of this Agreement are found by a court of competent jurisdiction to be invalid or unenforceable because it spans too long a period of time, then it shall be replaced as follows:

During Executive’s employment with the Company and for a period of six (6) months thereafter, Executive shall not, for himself/herself or any entity, directly or indirectly: (i) solicit or cause to solicit, divert or take away, or attempt to divert or take away any person or entity who, at any time during the six (6) months preceding such action was or is a client, customer or business partner of the Company or prospective client, customer or business partner of the Company; (ii) solicit, induce or attempt to induce, any employee or independent contractor of the Company to terminate his or her employment or engagement with the Company; or (iii) hire, or recruit or attempt to hire, or engage or attempt to engage as an independent contractor, any person who was employed or otherwise engaged by the Company within six (6) months prior to such action.

(b) Non-Competition.

(1) If paragraph (b)(1) of the non-competition provision in Section 3 of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable because it spans too long a period of time, then it shall be replaced as follows: During Executive’s employment with the Company and for a period of nine (9) months thereafter, within the Restricted Territory, Executive shall not, for himself or any entity, be engaged in or provide to a Restricted Business any services similar to or related to the services Executive performed for or with the Company and related to any product or service line that competes with any Company product or service line existing or planned as of Executive’s termination from employment with the Company: (i) about which Executive had access to operational, financial, or strategic information while employed with the Company; or (ii) for which Executive was responsible and/or with which Executive was involved; or (iii) about which Executive was informed during Executive’s employment with the Company.

(2) If both the above paragraph and paragraph (b)(1) of the non-competition provision in Section 3 of this Agreement are found by a court of competent jurisdiction to be invalid or unenforceable because they span too long a period of time, then paragraph (b)(1) of Section 3 of this Agreement shall be replaced as follows:

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During Executive’s employment with the Company and for a period of six (6) months thereafter, within the Restricted Territory, Executive shall not, for himself or any entity, be engaged in or provide to a Restricted Business any services similar to or related to the services Executive performed for or with the Company and related to any product or service line that competes with any Company product or service line existing or planned as of Executive’s termination from employment with the Company: (i) about which Executive had access to operational, financial, or strategic information while employed with the Company; or (ii) for which Executive was responsible and/or with which Executive was involved; or (iii) about which Executive was informed during Executive’s employment with the Company.]

4. Confidential Information.

(a) Confidential Information. Executive agrees at all times, both during and after the term of his or her employment with the Company, to hold in the strictest confidence, and not to use (except for the benefit of the Company at the Company’s direction) or disclose (without the written authorization of the Chief Executive Officer (CEO) or the Chairman of the Board of Directors of the Company (“Board”)), regardless of when disclosed to Executive, any and all technical data, trade secrets, know-how or other confidential or proprietary information of the Company, including without limitation any and all information related to the products, product plans, technologies, inventions, mask works, ideas, processes, formulas, source and object codes, computer programs, data bases, other works of authorship, improvements, discoveries, developments, designs and techniques, research, developmental or experimental work, customer and business partner lists, employee lists, business plans, sales or marketing plans or results, markets, prices and costs, financial information, or other subject matter pertaining to any business of the Company or any of its licensors, customers, business partners, consultants or customers (collectively, “Confidential Information”). Executive understands that Confidential Information further includes, but is not limited to, information pertaining to any aspect of the Company’s business which is either information not known (or known as a result of a wrongful act of Executive or of others who were under confidentiality obligations as to the item or items involved) by actual or potential competitors of the Company or other third parties not under confidentiality obligations to the Company, or is otherwise proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. Executive further understands that Confidential Information does not include (i) any of the foregoing items which is or has become publicly and widely known and made generally available through no wrongful act of Executive or of others who were under confidentiality obligations as to the item or items involved, (ii) disclosure or use of Confidential Information that in good faith is determined to be required or appropriate to advance the best interests of the Company in connection with Executive’s work as an employee of the Company and is not inconsistent with any lawful request or direction that Executive may receive from the Board or a committee or other representative of the Board, (iii) disclosure of Confidential Information when required by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order Executive to divulge, disclose or make accessible such information; provided, however, that prior to any such disclosure Executive must notify the Company’s General Counsel (or, if Executive is General Counsel, the Chief Executive Officer) of such requirement sufficiently in advance to allow the Company a reasonable opportunity to take any action that it determines appropriate to protect such

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Confidential Information and Executive agrees to cooperate with the Company in good faith in taking any such action, or (iv) disclosure of Confidential Information to Executive’s spouse, attorney and/or personal tax and financial advisors as reasonably necessary or appropriate to advance Executive’s tax, financial and other personal planning (each an “Exempt Person”); provided, however, that prior to any disclosure of Confidential Information to an Exempt Person Executive will inform such Exempt Person of Executive’s obligations hereunder and of their obligation to protect such Confidential Information to the same extent and Executive understands that any disclosure or use of any Confidential Information by an Exempt Person shall be deemed to be a breach of this Section 4 by Executive.

(b) Former Employer Information. Executive agrees that he or she does not possess, has not brought, and will not bring to the Company, nor use or disclose in the course of the performance of his or her duties at the Company, any inventions, technical data, trade secrets, know-how or other confidential or proprietary information of any former employer or third party without the written authorization of such employer or third party. Executive represents that his or her performance of all terms of this Agreement or any other agreement related to his or her employment with the Company has not breached and will not breach any agreement to keep in confidence the inventions, technical data, trade secrets, know-how or other confidential or proprietary information of any former employer or third party acquired by Executive prior or subsequent to the commencement of his or her employment with the Company.

(c) Third Party Information. Executive recognizes that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and/or to use it only for certain limited purposes (“Third Party Information”). Executive agrees to hold all such Third Party Information in the strictest confidence and not to disclose it to any person or entity (other than Company personnel who need to know such information in connection with their work for the Company) or to use it except as necessary in carrying out Executive’s work for the Company consistent with the Company’s agreement with such third party.

5. Assignment of Inventions and Original Works of Authorship

(a) Inventions and Original Works Assigned to the Company. During the term of Executive’s employment with the Company, Executive will promptly disclose to the Company, will hold in trust for the sole right and benefit of the Company and does hereby assign to the Company, all rights to and interests in inventions, developments, discoveries, techniques, modifications, improvements, technology, trade secrets, computer programs, mask works, know-how, processes, concepts, methods, systems, specifications, algorithms, designs, formulas, original works of authorship, or any other intellectual property rights whatsoever, whether or not patentable or registrable under copyright, trademark or similar laws or subject to analogous protection (“Inventions”) that Executive may, during employment with the Company, solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, (a) that relate to the Company’s past, present or demonstrated or reasonably foreseeable future business or research, whether or not developed during normal working hours, or (b) that are developed with the use or aid of any Company equipment, supplies or facilities, or

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(c) that use or are based on or developed from any Confidential Information of the Company or Third Party Information, or (d) that result from any work, service or duty Executive performs with the Company (collectively, the “Assigned Inventions”). Executive agrees and represents that any Invention that would fall within the definition of Assigned Inventions but for having been conceived or developed or reduced to practice, or caused to be conceived or developed or reduced to practice during employment but before the Effective Date shall also be hereby assigned and treated as an Assigned Invention. Any assignment hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral” or the like. Executive further acknowledges that all Assigned Inventions are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by his or her salary. Executive agrees not to allow any Invention that was conceived, developed, made or reduced to practice prior to his or her employment with the Company, belongs solely to Executive or belongs to Executive jointly with another, and relates in any way to any of the Company’s proposed businesses and products (a “Prior Invention”) to be incorporated into any product, process, technology or machine of the Company. If in the course of Executive’s employment with the Company, Executive incorporates (or has previously incorporated) into a Company product, process, technology or machine a Prior Invention, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made, modify, make derivative works of, use, sell and otherwise distribute or exploit such Prior Invention as part of or in connection with such product, process, technology or machine. Notwithstanding the foregoing, Executive understands that this Agreement will not be deemed to require assignment of any Invention whose assignment to the Company pursuant to this Agreement would be expressly prohibited by a specifically applicable state law, regulation, rule or public policy of the State of North Carolina or the law of the jurisdiction in which Executive is primarily employed.

(b) Maintenance of Records. Executive agrees to keep and maintain adequate and current written records of all Assigned Inventions during the term of his or her employment with the Company, in the format specified by the Company. The records will be available to and remain the sole property of the Company at all times. Executive agrees not to remove such records from the Company’s place of business except as expressly permitted in writing by an officer of the Company. Executive agrees to return all such records (including any copies thereof) to the Company at the time of termination of his or her employment with the Company.

(c) Enforcement of Intellectual Property Rights. Executive agrees that, whenever requested by the Company, he or she shall assist the Company or its designee to secure the Company’s, or its designee’s, rights in the Assigned Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company or its designee of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments and the taking of all such other acts (including appearances as a witness) which the Company or its designee shall deem necessary in order to apply for, perfect, obtain, maintain, review, restore, enforce, defend and transfer such rights, or if not transferable, waive such rights, and in order to assign and convey to the Company or its designee, and any successors, assigns and nominees thereof and to

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further evidence, record and perfect the sole and exclusive rights, title and interest in and to such Assigned Inventions, and any copyrights, patents, trademarks, mask work rights, moral rights or other intellectual property rights relating thereto. Executive further agrees that his or her obligation to execute or cause to be executed, when it is in his or her power to do so, any such instruments or papers or to take such other acts shall continue after the termination of this Agreement until the expiration of the last such intellectual property right to expire in any country of the world. If the Company or its designee is unable because of Executive’s mental or physical incapacity or unavailability or for any other reason to secure Executive’s signature to apply for or to pursue any application for any United States or foreign patents, copyright, mask works or other registrations covering Assigned Inventions, then Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Executive’s agent and attorney in fact, to act for and in his or her behalf and stead to execute and file any such applications and any documents and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent, copyright or other registrations thereon with the same legal force and effect as if originally executed by Executive. Executive hereby waives and irrevocably quitclaims to the Company or its designee any and all claims, of any nature whatsoever, which Executive now or hereafter has for infringement of any and all proprietary rights assigned to the Company or such designee pursuant to the terms of this Agreement.

6. Non-Disparagement.

Executive understands and agrees that, as a condition for his or her eligibility to participate in the Severance Plan, he or she agrees not to make any false, disparaging or derogatory statements to any media outlet, industry group, financial institution or current or former employee, consultant, client or customer of the Company regarding the Company or any of its directors, officers, employees, agents or representatives or about the Company’s business affairs or financial condition; provided, however, that nothing herein shall prevent Executive from making truthful disclosures to any governmental entity or in any litigation or arbitration.

7. Severance Plan Ineligibility.

If, while Executive is employed by the Company, the Company determines that he or she no longer will be eligible for benefits under the Severance Plan, he or she shall cease to be bound by the post-employment restrictive covenants described in Sections 2 and 3 of this Agreement provided that nothing in this sentence eliminates such restrictions if the lack of eligibility is because Executive does not qualify for severance (such as on a voluntary resignation without Good Reason as defined in the Severance Plan).

8. Miscellaneous.

(a) Equitable and Other Remedies. The restrictions contained in this Agreement are necessary for the protection of the business and goodwill of the Company and are considered by Executive to be reasonable for such purpose. If Executive violates the provisions of Sections 2 or 3, Executive must promptly repay the amounts, if any, previously received under Sections IV and V of the Severance Plan (with the repayment of the equity compensation to be accomplished in any manner reasonably determined by the Company). In addition, Executive

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agrees that he or she is subject to the recoupment provisions of Section V.D. of the Severance Plan. Section Executive acknowledges and agrees that the repayment and recoupment provisions in the two preceding sentences are not provisions for liquidated damages. Executive agrees that any breach of this Agreement is likely to cause the Company substantial and irrevocable damage that is difficult to measure and that money damages will be insufficient. Therefore, in the event of any such breach or threatened breach, Executive agrees that the Company, in addition to such other remedies that may be available (including in this Section 8(a)), shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of this Agreement, in addition to and cumulative with any other remedy that the Company may have at law or in equity. Executive hereby waives the adequacy of a remedy at law as a defense to any such equitable relief.

(b) Disclosure of this Agreement. Executive and Company each hereby authorizes the other to notify customers of the Company, any of Executive’s future employers, potential employers or service recipients, and, for a reasonable business purpose, others, of the terms and existence of this Agreement and Executive’s continuing obligations to the Company thereunder.

(c) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any entity with which, or into which, the Company may be merged or that may succeed to the Company’s assets or business; provided, however, that the obligations of Executive are personal and shall not be assigned by him or her. Executive expressly consents to be bound by the provisions of this Agreement for the benefit of the Company or any subsidiary or affiliate thereof to whose employ Executive may be transferred without the necessity that this Agreement be re-signed at the time of such transfer.

(d) Interpretation. If any restriction set forth in Section 2 or Section 3 is found by any court of competent jurisdiction to be unenforceable for any reason, including, but not limited to, because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to apply to the maximum extent possible, such as only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. [For use only in MA/VA Agreements.]

(e) Severability. In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

(f) Survival. This Agreement shall continue in full force and effect following the cessation of Executive’s employment with the Company for any reason.

(g) Waivers. No delay or omission by the Company in exercising any right under this Agreement will operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion is effective only in that instance and will not be construed as a bar to or waiver of any right on any other occasion.

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(h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the [State of North Carolina or the Commonwealth of Virginia/Massachusetts] (without reference to the conflicts of laws provisions thereof). Any action, suit, or other legal proceeding that is commenced to resolve any matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the [State of North Carolina or the Commonwealth of Virginia/Massachusetts] (or, if appropriate, a federal court located within the [State of North Carolina or the Commonwealth of Virginia/ Massachusetts]), and the Company and Executive each consents to the exclusive jurisdiction of such a court. The Company and Executive each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement or to any claim of forum non conveniens.

(i) Effect on Other Agreements; Amendment. The terms of the Severance Plan and this Agreement supersede all severance provisions of any agreement executed between Executive and the Company including, but not limited to, offer letters, individual employment agreements, and any other policy or program of the Company, with the exception of the Senior Management Change in Control Severance Policy. Except to the extent provided in the preceding sentence, this Agreement does not supersede any prior written Agreement between Executive and the Company relating to the subject matter of this Agreement, including, but not limited to, any Noncompetition, Confidentiality, and Assignment of Inventions Agreement previously executed by Executive. Such previously executed agreements are not expressly modified hereby and shall remain in full force and effect. This Agreement may not be modified, changed or discharged in whole or in part, except by an agreement in writing signed by Executive and the Company. Executive agrees that any change or changes in his/her duties, salary or compensation after the signing of this Agreement shall not affect the validity or scope of this Agreement.

(j) Termination Certificate. Executive agrees to execute the Termination Certificate attached as Exhibit A upon termination.

(k) Captions. The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND THE SEVERANCE PLAN AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

Signatures on Page Following

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	RED HAT, INC.
Date:	By:
	[EXECUTIVE]
Date:	(Signature)

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EXHIBIT A

to

Executive Agreement

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, memoranda specifications, drawings, blueprints, sketches, materials, flow charts, equipment, other documents or property, or reproductions of any of the foregoing items belonging to Red Hat, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”).

I further certify that I have complied with all the terms of the Company’s Executive Agreement signed by me, including the reporting of any inventions (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the Executive Agreement, I will preserve as confidential all technical data, trade secrets, know-how or other confidential or proprietary information of the Company, including without limitation any and all information related to the products, product plans, technologies, inventions, mask works, ideas, processes, formulas, source and object codes, computer programs, data bases, other works of authorship, improvements, discoveries, developments, designs and techniques, research, developmental or experimental work, customer and business partner lists, employee lists, business plans, sales or marketing plans or results, markets, prices and costs, financial information, or other subject matter pertaining to any business of the Company or any of its licensors, customers, business partners, consultants or customers.

Date:                     

NOTE: THIS IS A TEMPLATE WHICH IS TO BE SIGNED ONLY UPON TERMINATION

Executive Signature

Printed or Typed Name

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EX-10.17

Exhibit 10.17

EXECUTION COPY

December 23, 2008

James M. Whitehurst

c/o Red Hat, Inc.

1801 Varsity Drive,

Raleigh, NC 27606

Dear Jim:

To ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, and to make certain other agreed changes, Red Hat, Inc., a Delaware corporation (the “Company”), and you hereby agree to amend the employment agreement dated as of December 19, 2007 by and between the Company and you (the “Agreement”) as follows:

1. Section 5.2 of the Agreement is amended by inserting the following at the end:

“Any payments or expenses provided in this Section 5.2 shall be paid in accordance with Section 6.6.C.”

2. Section 6.2.A(1) of the Agreement is amended by replacing the second through fourth sentences in the second paragraph (starting “The receipt of any severance benefits”) with the following:

“The receipt of any severance benefits provided for under this Agreement or otherwise shall be dependent upon Executive’s delivery to the Company of an effective general release of claims in a form substantially in the form attached hereto as Exhibit A, with such future changes as may be reasonably determined by the Company in order to reflect changes in applicable law, within sixty (60) days following the date of Executive’s termination of employment, and benefits shall be paid or commence no later than thirty (30) days after such release becomes effective; provided, however, that if the last day of the sixty (60) day period falls in the calendar year following the year of Executive’s date of termination, the severance payments shall be paid or commence no earlier than January 1 of such subsequent calendar year. The date on which Executive’s release of claims becomes effective shall be referred to as the “Effective Release Date.” The continued receipt of any severance benefits hereunder shall also be dependent upon Executive’s compliance with the terms of the Company’s form of Employee Inventions Assignment and Restrictive Obligations Agreement, which agreement was signed by Executive in connection with the commencement of his employment, as such agreement may be amended from time to time.”

3. Section 6.2.A(2) of the Agreement is amended by revising the first sentence to say:

“That portion of any stock award previously granted to Executive by the Company during the Employment Term which is still outstanding but unvested on Executive’s date of termination of employment and which would otherwise have vested during the subsequent eighteen (18) month period (other than those subject to performance conditions (other than continued service) not satisfied as of the date of termination) had Executive’s employment continued for an additional eighteen (18) months, will immediately vest as of Executive’s date of termination of employment, provided that, absent the Compensation Committee’s contrary determination, the portion of the stock award incrementally vesting or having extended exercisability under this Section 6.2.A(2) may not be exercised or, if in the form of shares of the Company’s stock, may not be sold, unless and until Executive’s Effective Release Date and will expire or be forfeited immediately if the period required for release expires without a release becoming effective.”

4. Section 6.2.A(2) of the Agreement is amended by inserting the following at the end of the first sentence:

With respect to any performance-based stock awards (including but not limited to performance share units (“PSUs”)), Executive shall be treated as continuing employment through the end of any performance periods or segments thereof ending within the eighteen (18) month period following the date of termination and shall earn those performance-based stock awards based on the performance criteria prescribed by the awards, with vesting or distribution due as otherwise provided under such awards. In addition to the preceding sentence, Executive shall have any rights provided under the terms of the performance-based stock awards to additional pro rata vesting or exercisability that would have been provided under the terms of such awards had Executive been terminated without Cause, or had he resigned for Good Reason, at the end of the eighteen (18) month period.

5. Section 6.5(A)(1) of the Agreement is amended by deleting the period at the end of the first paragraph and inserting the following:

“, provided, however, that, if the termination without Cause precedes the occurrence of a Change of Control, (i) the foregoing compensation will instead be paid in equal installments over an eighteen (18) month period following the Effective Release Date in accordance with the Company’s standard payroll policies and procedures and in a manner not inconsistent with Section 6.6 hereof and (ii) any payments due after such Change of Control will be paid in a lump sum no later than ten (10) days following the Change of Control.”

6. Section 6.5(A)(1) of the Agreement is amended by replacing the second sentence in the second paragraph (starting “The receipt of any severance benefits”) with the following:

“The receipt of any severance benefits provided for under this Agreement or otherwise shall be dependent upon Executive’s delivery to the Company of an effective general release of claims in a form satisfactory to the Company, within sixty (60) days following the date of Executive’s termination of employment, and benefits shall be paid or commence no later than thirty (30) days after such release becomes effective; provided, however, that if the last day of the sixty (60) day period falls in the calendar year following the year of Executive’s date of termination, the severance payments shall be paid or commence no earlier than January 1 of such subsequent calendar year.”

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7. Section 6.5(A)(2) of the Agreement is replaced with the following:

“(2) Stock Awards. Any stock award previously granted to Executive by the Company during the Employment Term which is still outstanding but unvested on Executive’s date of termination of employment (including the restricted stock from which outstanding PSUs were converted pursuant to Executive’s Performance Share Unit Agreement) will immediately vest as of Executive’s date of termination of employment, provided that, absent the Compensation Committee’s contrary determination, the portion of the stock award incrementally vesting under this sentence may not be exercised or, if in the form of shares of the Company’s stock, may not be sold, unless and until Executive’s Effective Release Date and will expire or be forfeited immediately if the period required for release expires without a release becoming effective.

8. Section 6.5(C), last paragraph, second sentence, shall be amended by replacing “Treasury Regulations 1.409A-3(a)(4) and 1.409A-3(i)(5)” with “Treasury Regulation 1.409A-3(i)(5).”

9. Section 6.6 shall be amended to read as follows:

“Effect of Section 409A of the Code.

A. If and to the extent any portion of any payment, compensation or other benefit provided to Executive in connection with Executive’s separation from service (as defined in Section 409A of Code is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination Executive hereby agrees that he is bound, such portion of the payment, compensation or other benefit shall not be paid before the earlier of (i) the day that is six months plus one day after the date of separation from service (as determined under Section 409A) or (ii) the tenth (10^th) day after the date of Executive’s death (as applicable, the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of separation from service and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.

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B. For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A, and any payments that are due within the “short term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requires otherwise. Neither the Company nor Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A. This Agreement is intended to comply with the provisions of Section 409A and the Agreement shall, to the extent practicable, be construed in accordance therewith. Terms defined in the Agreement shall have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A. The Company and Executive agree to cooperate in good faith to avoid taxation of Executive under Section 409A of the Code.

C. Payments with respect to reimbursements of business expenses, relocation expenses or arbitration expenses shall be made on or before the last day of the calendar year following the calendar year in which the relevant expense is incurred. The amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year.

Except as modified by this letter or by other intervening amendments, all other terms and conditions of the Agreement shall remain in full force and effect. This letter may be executed in counterparts, each of which shall be deemed to be an original, and all of which shall constitute one and the same document.

RED HAT, INC.
By:	/s/ Michael R. Cunningham
	Michael R. Cunningham
	General Counsel

Acknowledged and agreed:

/s/ James M. Whitehurst

James M. Whitehurst

December 23, 2008

Date

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EX-10.18

Exhibit 10.18

EMPLOYEE INVENTIONS ASSIGNMENT

AND RESTRICTIVE OBLIGATIONS AGREEMENT

As an employee of Red Hat, Inc., a Delaware corporation (the “Company”) and in consideration of the offer of employment made to me by the Company, I agree to the following:

1. Confidentiality Undertaking

A. Confidential Information. I agree at all times, both during and after the term of my employment with the Company, to hold in the strictest confidence, and not to use (except for the benefit of the Company at the Company’s direction) or disclose (without the written authorization of an officer of the Company), regardless of when disclosed to me, any and all technical data, trade secrets, know-how or other confidential or proprietary information of the Company, including without limitation any and all information related to the products, product plans, technologies, inventions, mask works, ideas, processes, formulas, source and object codes, computer programs, data bases, other works of authorship, improvements, discoveries, developments, designs and techniques, research, developmental or experimental work, customer and business partner lists, employee lists, business plans, sales or marketing plans or results, markets, prices and costs, financial information, or other subject matter pertaining to any business of the Company or any of its licensors, customers, business partners, consultants or customers (collectively, “Confidential Information”). I understand that Confidential Information further includes, but is not limited to, information pertaining to any aspect of the Company’s business which is either information not known (or known as a result of a wrongful act of mine or of others who were under confidentiality obligations as to the item or items involved) by actual or potential competitors of the Company or other third parties not under confidentiality obligations to the Company, or is otherwise proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. I further understand that Confidential Information does not include (i) any of the foregoing items which has become publicly and widely known and made generally available through no wrongful act of mine or of others who were under confidentiality obligations as to the item or items involved, (ii) disclosure or use of Confidential Information that in good faith is determined to be required or appropriate to advance the best interests of the Company in connection with my work as an employee of the Company and is not inconsistent with any lawful request or direction that I may receive from the Board of Directors of the Company (“Board”) or a committee or other representative of the Board, (iii) disclosure of Confidential Information when required by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order me to divulge, disclose or make accessible such information; provided, however, that prior to any such disclosure I shall notify the Company’s General Counsel of such requirement sufficiently in advance to allow the Company a reasonable opportunity to take any action that it determines appropriate to protect such Confidential Information and I agree to cooperate with the Company in good faith in taking any such action, or (iv) disclosure of Confidential

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Information to my spouse, attorney and/or personal tax and financial advisors as reasonably necessary or appropriate to advance my tax, financial and other personal planning (each an “Exempt Person”); provided, however, that prior to any disclosure of Confidential Information to an Exempt Person I will inform such Exempt Person of my obligations hereunder and of their obligation to protect such Confidential Information to the same extent and I understand that any disclosure or use of any Confidential Information by an Exempt Person shall be deemed to be a breach of this Section 1.A. by me.

B. Former Employer Information. I agree that I do not possess, have not brought, and will not bring to the Company, nor use or disclose in the course of the performance of my duties at the Company, any inventions, technical data, trade secrets, know-how or other confidential or proprietary information of any former employer or third party without the written authorization of such employer or third party. I represent that my performance of all terms of this Agreement or any other agreement related to my employment with the Company has not breached and will not breach any agreement to keep in confidence the inventions, technical data, trade secrets, know-how or other confidential or proprietary information of any former employer or third party acquired by me prior or subsequent to the commencement of my employment with the Company.

C. Third Party Information. I recognize that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information and/or to use it only for certain limited purposes (“Third Party Information”). I agree to hold all such Third Party Information in the strictest confidence and not to disclose it to any person or entity (other than Company personnel who need to know such information in connection with their work for the Company) or to use it except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such third party.

2. Assignment of Inventions and Original Works of Authorship

A. Inventions and Original Works Retained by Me. If applicable, I have attached hereto, as Exhibit A, a list describing all inventions, developments, discoveries, techniques, modifications, improvements, technology, trade secrets, computer programs, mask works, know-how, processes, concepts, methods, systems, specifications, algorithms, designs, formulas, original works of authorship, or any other intellectual property rights whatsoever, whether or not patentable or registrable under copyright, trademark or similar laws or subject to analogous protection (collectively, “Inventions”) that (i) were conceived, developed, made or reduced to practice prior to my employment with the Company, (ii) belong solely to me or belong to me jointly with another, (iii) relate in any way to any of the Company’s proposed businesses and products, and (iv) are not assigned to the Company hereunder (collectively, the “Prior Inventions”). If no such list is attached, I represent that there are no Prior Inventions. I agree not to allow any Prior Invention to be incorporated into any product, process, technology or machine of the Company. If in the course of my employment with the Company, I incorporate into a Company product, process, technology or machine a Prior Invention, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made, modify, make derivative works of, use, sell and otherwise distribute or exploit such Prior Invention as part of or in connection with such product, process, technology or machine.

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B. Inventions and Original Works Assigned to the Company. During the term of my employment with the Company, I will promptly disclose to the Company, hold in trust for the sole right and benefit of the Company and hereby assign to the Company, all rights to and interests in Inventions which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, (a) that relate to the Company’s past, present or demonstrated or reasonably foreseeable future business or research, whether or not developed during normal working hours, or (b) that are developed with the use or aid of any Company equipment, supplies or facilities, or (c) that use or are based on or developed from any Confidential Information of the Company or Third Party Information, or (d) that result from any work, service or duty I perform with the Company (collectively, the “Assigned Inventions”). Any assignment hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral” or the like. I further acknowledge that all Assigned Inventions are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by my salary. Notwithstanding the foregoing, I understand that this Agreement will not be deemed to require assignment of any Invention whose assignment to the Company pursuant to this Agreement would be expressly prohibited by a specifically applicable state law, regulation, rule or public policy of the State of North Carolina.

C. Maintenance of Records. I agree to keep and maintain adequate and current written records of all Assigned Inventions during the term of my employment with the Company, in the format specified by the Company. The records will be available to and remain the sole property of the Company at all times. I agree not to remove such records from the Company’s place of business except as expressly permitted in writing by an officer of the Company. I agree to return all such records (including any copies thereof) to the Company at the time of termination of my employment with the Company.

D. Enforcement of Intellectual Property Rights. I agree that, whenever requested by the Company, I shall assist the Company or its designee to secure the Company’s, or its designee’s, rights in the Assigned Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company or its designee of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments and the taking of all such other acts (including appearances as a witness) which the Company or its designee shall deem necessary in order to apply for, perfect, obtain, maintain, review, restore, enforce, defend and transfer such rights, or if not transferable, waive such rights, and in order to assign and convey to the Company or its designee, and any successors, assigns and nominees thereof and to further evidence, record and perfect the sole and exclusive rights, title and interest in and to such Assigned Inventions, and any copyrights, patents, trademarks, mask work rights, moral rights or other intellectual property rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instruments or papers or to take such other acts shall continue after the termination of this Agreement until the expiration of the last such intellectual property right to expire in any country of the world. If the Company or its designee is unable because of my mental or physical incapacity or unavailability or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents, copyright, mask works or other registrations covering Assigned Inventions, then I hereby irrevocably designate and appoint the Company and its duly

3

authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and any documents and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent, copyright or other registrations thereon with the same legal force and effect as if originally executed by me. I hereby waive and irrevocably quitclaim to the Company or its designee any and all claims, of any nature whatsoever, which I now or hereafter have for infringement of any and all proprietary rights assigned to the Company or such designee pursuant to the terms of this Agreement.

3. Conflicting Employment. I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation, consulting or other business activity related to the past, present or demonstrated or reasonably foreseeable future business of the Company, nor will I engage in any other activities that conflict with my obligations to the Company. I am not now an employee, director, officer or consultant of a for-profit organization and I agree not to accept any position of this nature during the term of my employment without the prior written consent of the Company.

4. Returning Company Documents. I agree that, upon termination of my responsibilities as an employee of the Company, I will deliver to the Company (and will not keep in my possession or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, memoranda, specifications, drawings, blueprints, sketches, materials, flow charts, equipment, other documents or property, or reproductions of any of the foregoing items belonging to the Company, its subsidiaries, affiliates, successors, or assigns and any and all materials embodying Inventions, Confidential Information or Third Party Information. I further agree that I have no expectation of privacy with respect to the Company’s telecommunications, networking or information processing systems (including without limitation, stored computer files, email messages and voice messages) and any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, all of which are subject to monitoring and/or inspection by Company personnel at any time with or without notice. In the event of the termination of my employment, I agree to sign and deliver to the Company the “Termination Certification” attached hereto as Exhibit B, however, my failure to sign and deliver the Termination Certificate shall in no way diminish my continuing obligations under this Agreement.

5. Non-Competition Provisions. During the period commencing on the date hereof and ending on the expiration of one (1) year following the termination of my employment with the Company for any reason, whether with or without cause, I shall not either directly or indirectly own, manage, operate, join, advise, control or otherwise engage or participate in or be connected as an officer, employee, partner, investor, creditor, guarantor, advisor, or consultant in, or on behalf of, myself or any other person or entity that competes against or is in any way engaged in any business the Company is engaged in or preparing to become engaged in prior to or on the date of the termination of my employment; provided, however, that a passive ownership interest of 1% or less in any publicly or privately held company shall not constitute a competitive activity.

6. Non-Solicitation and Non-Hire of Employees. For the period commencing on the date hereof and ending on the expiration of one (1) year following the termination of my employment with the Company for any reason, whether with or without cause, I shall not either directly or indirectly solicit, induce, recruit, encourage or otherwise endeavor to cause or attempt to cause any employee or consultant of the Company to terminate their

4

relationship with the Company. Furthermore, I shall not either directly or indirectly hire or cause to have hired any individual who either is an employee of the Company at the time that the employment offer is made or was an employee of the Company at any time during the six-month period preceding the time that the employment offer is made. The Company acknowledges and agrees that this Section 6 does not apply to my personal secretary.

7. Non-Solicitation of Customers. For the period commencing on the date hereof and ending on the expiration of one (1) year following the termination of my employment with the Company for any reason, whether with or without cause, I shall not either directly or indirectly solicit, induce, recruit, encourage or otherwise endeavor to cause or attempt to cause any past, current or prospective customer of the Company, to cease doing business in whole or in part with the Company or to change or alter in any adverse way the business relationship such customer has with the Company.

8. Non-Disparagement. For a period of one (1) year immediately following the termination of my employment, for any reason or no reason, I agree and represent that I shall not make any statement disparaging the Company, any officer, director, employee or other service provider for the Company, or any product or service offered by the Company, and the Company agrees and represents that its then serving executive officers and/or members of its Board of Directors shall not make any statement disparaging me.

9. No Conflicting Agreement. I represent that my performance of all the terms of this Agreement and my employment with the Company does not and will not breach any (i) agreement, written or oral, I have entered into, or will enter into with any third party, including without limitation any agreement to keep in confidence proprietary or confidential information acquired by me in confidence or in trust prior to commencement of my employment with the Company or (ii) any duty, restriction, adjudication, injunction or finding of any kind by any court or agency by which I may be bound. I agree not to enter into any written or oral agreement that conflicts with the provisions of this Agreement.

10. Notification of New Employer. I hereby agree to notify any future employer of my rights and obligations under this Agreement. If I should fail to so notify any future employer, I hereby consent to such notification being made by the Company.

11. General Provisions

A. No Employment Rights. I agree that my employment with the Company is “at will,” but subject to the terms and conditions of the employment agreement between me and the Company dated as of December 19, 2007 (the “Employment Agreement”). Either the Company or I may terminate this relationship without notice at any time, for any reason or no reason, with or without cause.

B. Period Governed. I understand and agree that this Agreement is in effect and binding from the first date of my employment with the Company.

C. Governing Law. This Agreement will be governed by and construed according to the laws of the State of North Carolina, as such laws are applied to agreements entered into and to be performed entirely within North Carolina between North Carolina residents. I hereby expressly consent to the personal jurisdiction of and venue in the state courts located in Wake County, North Carolina.

D. Remedies. I acknowledge that I will have access to Confidential Information of the Company and that any breach or threatened breach of this Agreement by me may cause the Company irreparable harm and any remedy at law for any such breach or threatened

5

breach is and will be inadequate to remedy such irreparable harm, and therefore I agree that the Company will be entitled to seek extraordinary relief in court, including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions without the necessity of posting a bond or other security and in addition to and without prejudice to any other rights or remedies that the Company may have for any such breach or threatened breach.

E. Advice of Counsel. I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

F. Entire Agreement. This Agreement and the Employment Agreement set forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions and communications between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the party to be charged. No waiver by the Company of any breach of this Agreement shall operate as a waiver of any preceding or succeeding breach and no waiver by the Company of any right under this Agreement will be construed as a waiver of any other right. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

G. Severability/Legal Fees. If one or more of the provisions in this Agreement are deemed void by law, then the remaining provisions will continue in full force and effect. If any of the provisions contained in Sections 5 through 7 of this Agreement are for any reason held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with applicable law. In the event any action is brought to enforce the terms of this Agreement, the prevailing party shall be entitled to recover their reasonable attorneys’ fees and costs.

H. Survival. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

I. Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns. Notwithstanding the foregoing, this Agreement is personal to me and may not be assigned by me without the prior written consent of the Company.

/s/ James M. Whitehurst

James M. Whitehurst

Date January 1, 2008

6

EXHIBIT A

to

Employee Invention Assignment and Nondisclosure Agreement

LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP

Title of Invention/Work of Authorship Date Identifying Number or Brief Description

7

EXHIBIT B

to

Employee Invention Assignment and Nondisclosure Agreement

TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, memoranda specifications, drawings, blueprints, sketches, materials, flow charts, equipment, other documents or property, or reproductions of any of the foregoing items belonging to Red Hat, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”).

I further certify that I have complied with all the terms of the Company’s Employee Inventions Assignment and Restrictive Obligations Agreement signed by me, including the reporting of any inventions (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the Employee Inventions Assignment and Restrictive Obligations Agreement, I will preserve as confidential all technical data, trade secrets, know-how or other confidential or proprietary information of the Company, including without limitation any and all information related to the products, product plans, technologies, inventions, mask works, ideas, processes, formulas, source and object codes, computer programs, data bases, other works of authorship, improvements, discoveries, developments, designs and techniques, research, developmental or experimental work, customer and business partner lists, employee lists, business plans, sales or marketing plans or results, markets, prices and costs, financial information, or other subject matter pertaining to any business of the Company or any of its licensors, customers, business partners, consultants or customers.

Date:

NOTE: THIS IS A TEMPLATE WHICH IS TO BE SIGNED ONLY UPON TERMINATION

Employee Signature

Printed or Typed Name

8

EX-10.34

Exhibit 10.34

Red Hat, Inc.

2010 Non-Employee Director Compensation Plan

Adopted August 8, 2012 (amended and restated effective January 1, 2013)

Cash Compensation
Basic Retainer:	Each non-employee director of the Board of Directors shall receive an annual cash retainer of $50,000.
Lead Director Retainer:	The non-employee director who serves as Lead Director, in addition to the Basic Retainer, shall receive an annual cash retainer of $30,000.
Chairman’s Retainer:	The non-employee director who serves as chairman of the Board of Directors, in addition to the Basic Retainer, shall receive an annual cash retainer of $50,000.
Committee Member Retainer:	Except as provided below, each non-employee director member of a standing committee, in addition to the Basic Retainer, shall receive an annual cash retainer of: Audit Committee Members: $20,000 Compensation Committee Members: $15,000 Nominating Committee Members: $7,500
Committee Chair Retainer:	Each non-employee director member (other than the Lead Director or the chairman) of a standing committee who serves as the chair of a committee, in lieu of the Committee Member Retainer (described above), shall receive an annual cash retainer of: Audit Committee Chair: $40,000 Compensation Committee Chair: $30,000 Nominating Committee Chair: $15,000
	Should the Lead Director or chairman also serve as a Committee Chair, said individual shall receive the Committee Member Retainer and not the Committee Chair Retainer for the committee on which such individual serves as chair.
Payment of Cash Compensation:	All cash compensation shall be accrued in equal quarterly amounts on February 15, May 15, August 15 and November 15.
Deferred Stock Units in Lieu of Cash:	Each non-employee director may elect, prior to the beginning of the calendar year (or otherwise as determined by the General Counsel), to receive all or a portion of any cash retainer payment in deferred stock units (“DSUs”) pursuant to the Corporation’s 2004 Long-Term Incentive Plan, as amended. The number of DSUs to be received is determined by dividing the portion of the cash compensation with respect to which the election is made by the closing price of the Corporation’s common stock (on such U.S. national exchange on which said stock principally trades) on the date the cash compensation is accrued or, in the event that such day is not a

1

	business day, then on the first business day following that date. DSUs shall be issued in whole units and rounded up to the nearest whole unit. The DSUs issued in lieu of cash are fully vested upon issuance. DSUs will be settled in shares of the Corporation’s common stock (“Shares”) upon termination of the DSU holder’s Board service.
Equity Compensation
Initial Equity Award:	On the next regularly scheduled grant date for employees following initial election or appointment to the Board of Directors, the Corporation will grant to each new non-employee director of the Corporation a restricted stock award for a number of Shares determined by dividing $300,000 by the closing price of the Corporation’s common stock (on such U.S. national exchange on which said stock principally trades) on the date of such grant or, in the event that such day is not a business day, then on the first business day following that date. Restricted stock shall be issued in whole shares and rounded up to the nearest whole share. One-third of the number of shares of restricted stock shall vest on each anniversary of the initial grant date over three years.
Deferred Stock Units in Lieu of Initial Restricted Stock Award:	Election by a non-employee director to receive DSUs on a one-for-one basis in lieu of such director’s initial restricted stock award is not permissible, unless specifically approved by the Board of Directors or a committee thereof in advance of the initial election or appointment of such non-employee director.
Annual Equity Award:	Annually, in July on the regularly scheduled grant date for employees, each non-employee director will receive an annual equity grant. Such grant will be a restricted stock award for a number of Shares determined by dividing $250,000 by the closing price of the Corporation’s common stock (on such U.S. national exchange on which said stock principally trades) on the date of such grant. Restricted stock shall be issued in whole shares and rounded up to the nearest whole share. The shares of restricted stock shall vest on the first anniversary of the initial grant date. If at the time of the annual equity grant a non-employee director has not served as such for a full 12 months, then the grant to that non-employee director will be prorated based on the number of months that the non-employee director has served on the Board of Directors as of the grant date.
Deferred Stock Units in Lieu of Annual Restricted Stock Award:	Each non-employee director may elect, prior to the beginning of the calendar year (or otherwise as determined by the General Counsel), to receive DSUs on a one-for-one basis in lieu of such director’s annual restricted stock award pursuant to the Corporation’s 2004 Long-Term Incentive Plan, as amended. The DSUs will vest on the same basis as the restricted stock award. Vested DSUs will be settled in Shares upon termination of the DSU holder’s Board service.

2

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

The following is a list that includes our subsidiaries as of February 28, 2014

Entity Name	Jurisdiction
Gluster, Inc.	Delaware, USA
Gluster Software India Pvt. Ltd.	India - Bangalore
Makara, Inc.	Delaware, USA
ManageIQ, Inc.	Delaware, USA
PT. Red Hat Indonesia	Indonesia
Qumranet, Inc.	Delaware, USA
Red Hat (Switzerland) Sàrl	Switzerland
Red Hat AB	Sweden
Red Hat ApS	Denmark
Red Hat Asia Pacific Pte Ltd	Singapore
Red Hat Asia Pacific Pty Ltd	Australia
Red Hat B.V.	Netherlands
Red Hat, bvba	Belgium
Red Hat Brasil Limitada	Brazil
Red Hat Canada Limited	Canada
Red Hat Chile Limitada	Chile
Red Hat Colombia S.A.S	Colombia
Red Hat Czech, s.r.o.	Czech Republic
Red Hat de Argentina SA	Argentina
Red Hat France SARL	France
Red Hat FZ-LLC	United Arab Emirates - Dubai
Red Hat GmbH	Germany
Red Hat India Pvt. Ltd.	India - Mumbai
Red Hat Israel Ltd.	Israel
Red Hat KK	Japan
Red Hat Limited	Ireland
Red Hat Middleware LLC	Delaware, USA
Red Hat New Zealand Limited	New Zealand
Red Hat Poland sp.zo.o	Poland
Red Hat Professional Consulting, Inc.	Georgia, USA
Red Hat S.L.	Spain
Red Hat S.R.L.	Italy
Red Hat S de RL de CV	Mexico
Red Hat SA I, LLC	Delaware, USA
Red Hat SA II, LLC	Delaware, USA
Red Hat Software (Beijing) Co., Ltd.	China
Red Hat Software Services (India) Pvt. Ltd.	India - Pune
Red Hat UK Limited	United Kingdom
Red Hat Yazılım Servisleri A.S.	Turkey
RH Financial Holdings, Inc.	Delaware, USA
RH Subsidiary, Inc.	Delaware, USA
Round Pond	Ireland
RP EMEA Holdings I, LLC	Delaware, USA
RP EMEA Holdings II, LLC	Delaware, USA
RP EMEA Partners	Delaware, USA
Varsity Gateway LLC	Delaware, USA
Varsity Gateway, Inc.	Delaware, USA

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-184088, 333-178332, 333-153680, 333-137904, 333-135273, 333-121507, 333-112557, 333-71912, 333-59306, 333-55968, 333-45980, 333-45042, 333-37884, 333-96163, 333-88159 and 333-171021) and Form S-3 (No. 333-135323) of Red Hat, Inc. of our report dated April 24, 2014 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

April 24, 2014

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF JAMES M. WHITEHURST, PRESIDENT AND

CHIEF EXECUTIVE OFFICER, PURSUANT TO RULE 13a-14(a)/RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, James M. Whitehurst, certify that:

1. I have reviewed this Annual Report on Form 10-K of Red Hat, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 24, 2014

By:	/S/    JAMES M. WHITEHURST
	James M. Whitehurst President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHARLES E. PETERS, JR., EXECUTIVE VICE PRESIDENT AND

CHIEF FINANCIAL OFFICER, PURSUANT TO RULE 13a-14(a)/RULE 15d-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Charles E. Peters, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Red Hat, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 24, 2014

By:	/S/    CHARLES E. PETERS, JR.
	Charles E. Peters, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF JAMES M. WHITEHURST, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, AND CHARLES E. PETERS, JR., EXECUTIVE VICE PRESIDENT AND

CHIEF FINANCIAL OFFICER, PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Red Hat, Inc. (“Red Hat”), that, to his knowledge, the Annual Report of Red Hat on Form 10-K for the year ended February 28, 2014 (the “Report”), as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) of the Securities and Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Red Hat.

Date: April 24, 2014
	By:	/S/    JAMES M. WHITEHURST
		James M. Whitehurst President and Chief Executive Officer (Principal Executive Officer)
Date: April 24, 2014
	By:	/S/    CHARLES E. PETERS, JR.
		Charles E. Peters, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer)

XML

Derivative Instruments (Tables)

12 Months Ended

Feb. 28, 2014

Summary of Effects of Derivative Instruments

The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of February 28, 2014 and for the year then ended (in thousands):

							Year ended February 28, 2014
	As of February 28, 2014						Classification of  Gain (Loss) Recognized in Income  on Derivatives	Amount of  Gain (Loss) Recognized in Income on Derivatives
	Balance Sheet Classification	Fair Value			Notional Value
Assets—foreign currency forward contracts not designated as hedges	Other current assets	$	134		$	24,790	Other income (expense), net	$	1,147
Liabilities—foreign currency forward contracts not designated as hedges	Accounts payable and accrued expenses		(15	)		3,546	Other income (expense), net		(2,697	)
TOTAL		$	119		$	28,336		$	(1,550	)

The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of February 28, 2013 and for the year then ended (in thousands):

							Year ended February 28, 2013
	As of February 28, 2013						Classification of  Gain (Loss) Recognized in Income  on Derivatives	Amount of  Gain (Loss) Recognized in Income on Derivatives
	Balance Sheet Classification	Fair Value			Notional Value
Assets—foreign currency forward contracts not designated as hedges	Other current assets	$	280		$	36,214	Other income (expense), net	$	1,309
Liabilities—foreign currency forward contracts not designated as hedges	Accounts payable and accrued expenses		(219	)		29,328	Other income (expense), net		(1,695	)
TOTAL		$	61		$	65,542		$	(386	)

XML

Reconciliation of Numerators and Denominators of Earnings Per Share Calculation (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended																12 Months Ended
	Feb. 28, 2014		Nov. 30, 2013		Aug. 31, 2013		May 31, 2013		Feb. 28, 2013		Nov. 30, 2012		Aug. 31, 2012		May 31, 2012		Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Earnings Per Share [Line Items]
Net income, basic and diluted	$ 45,068		$ 52,025		$ 40,808		$ 40,391		$ 42,973		$ 34,765		$ 35,005		$ 37,461		$ 178,292	$ 150,204	$ 146,626
Weighted average common shares outstanding	189,604		189,514		189,437		191,114		193,207		193,374		193,064		192,947		189,920	193,147	193,151
Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares																	2,116	2,657	3,300
Diluted shares	191,712		191,365		191,432		192,969		195,133		195,666		195,795		195,937		192,036	195,804	196,451
Net income per share-diluted	$ 0.24	[1]	$ 0.27	[1]	$ 0.21	[1]	$ 0.21	[1]	$ 0.22	[1]	$ 0.18	[1]	$ 0.18	[1]	$ 0.19	[1]	$ 0.93	$ 0.77	$ 0.75

[1] Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

XML

Consideration Paid for Acquisition of Business (Detail) (Gluster, USD $) In Thousands, unless otherwise specified	1 Months Ended
	Oct. 07, 2011
Gluster
Business Acquisition [Line Items]
Cash consideration paid to and/or on behalf of holders of Gluster stock and vested options	$ 135,906
Fair value of unvested employee share-based awards assumed and attributed to pre-combination services	1,244	[1]
Total	$ 137,150

[1] The total fair value, as of October 7, 2011, of all assumed nonvested share-based awards was $14.5 million, of which $1.2 million has been attributed to pre-acquisition employee services and accordingly has been recognized as consideration transferred. The remaining $13.3 million of fair value will be recognized as compensation expense over the remaining vesting period.

XML

Accumulated Other Comprehensive Loss (Tables)

12 Months Ended

Feb. 28, 2014

Summary of Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss was comprised of the following (in thousands):

	February 28, 2014			February 28, 2013
Accumulated loss from foreign currency translation adjustment	$	(4,823	)	$	(8,768	)
Accumulated unrealized gain, net of tax, on available-for-sale securities		364			801
Accumulated other comprehensive loss	$	(4,459	)	$	(7,967	)

XML

Schedule of Unaudited Quarterly Results (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended																12 Months Ended
	Feb. 28, 2014		Nov. 30, 2013		Aug. 31, 2013		May 31, 2013		Feb. 28, 2013		Nov. 30, 2012		Aug. 31, 2012		May 31, 2012		Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Quarterly Financial Information [Line Items]
Subscriptions	$ 351,492		$ 342,770		$ 326,692		$ 315,817		$ 302,784		$ 294,186		$ 278,800		$ 272,571		$ 1,336,771	$ 1,148,341	$ 965,575
Training and services	48,905		53,766		47,731		47,442		45,101		49,420		43,795		42,160		197,844	180,476	167,528
Total subscription and training and services revenue	400,397		396,536		374,423		363,259		347,885		343,606		322,595		314,731		1,534,615	1,328,817	1,133,103
Gross profit	339,861		336,109		318,843		307,202		294,280		290,488		274,737		268,712		1,302,015	1,128,217	954,555
Income from operations	59,300		60,792		55,574		56,623		50,231		49,919		49,980		50,908		232,289	201,038	199,913
Interest income	2,037		1,579		1,527		1,502		1,861		1,936		2,154		2,294		6,645	8,245	8,418
Other income (expense), net	282		(440)		1,196		(424)		(32)		(730)		(656)		1,887		614	469	(322)
Net income, basic and diluted	$ 45,068		$ 52,025		$ 40,808		$ 40,391		$ 42,973		$ 34,765		$ 35,005		$ 37,461		$ 178,292	$ 150,204	$ 146,626
Basic	$ 0.24	[1]	$ 0.27	[1]	$ 0.22	[1]	$ 0.21	[1]	$ 0.22	[1]	$ 0.18	[1]	$ 0.18	[1]	$ 0.19	[1]	$ 0.94	$ 0.78	$ 0.76
Diluted	$ 0.24	[1]	$ 0.27	[1]	$ 0.21	[1]	$ 0.21	[1]	$ 0.22	[1]	$ 0.18	[1]	$ 0.18	[1]	$ 0.19	[1]	$ 0.93	$ 0.77	$ 0.75
Basic	189,604		189,514		189,437		191,114		193,207		193,374		193,064		192,947		189,920	193,147	193,151
Diluted	191,712		191,365		191,432		192,969		195,133		195,666		195,795		195,937		192,036	195,804	196,451

[1] Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

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Schedule of Prepaid Expense, Including Sales Commission (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items]
Deferred commissions	$ 80,987	$ 62,159
Professional services	12,827	13,172
Taxes	13,012	10,743
Insurance	1,207	1,547
Other	10,354	6,800
Prepaid expenses	$ 118,387	$ 94,421

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Summary of Consideration Transferred in Connection With Acquisition (Parenthetical) (Detail) (Gluster, USD $) In Millions, unless otherwise specified	1 Months Ended
	Oct. 07, 2011
Gluster
Business Acquisition [Line Items]
Business combination total nonvested share based awards assumed	$ 14.5
Pre-acquisition employee services nonvested share-based awards	1.2
Business combination compensation expense recognized of assumed nonvested share based awards	$ 13.3

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Reconciliation of Statutory Federal Income Tax Rates to Provision for Income Taxes (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014		Feb. 28, 2013		Feb. 29, 2012
Schedule of Effective Tax Rate Reconciliation [Line Items]
Effective rate	25.60%		28.40%		29.50%
Provision at federal statutory rate, 35%	$ 83,842		$ 73,413		$ 72,803
State tax, net of federal tax benefit	3,169	[1]	907	[1]	3,070	[1]
Foreign rate differential	(10,817)		(7,034)		(7,631)
Israel tax holiday	(1,901)	[2]	(1,806)	[2]	(1,447)	[2]
Foreign dividend	623		5,787		3,721
Nondeductible items	2,157		2,141		2,923
Research tax credit	(3,070)		(5,348)		(2,357)
Foreign tax credit	(11,878)		(7,852)		(10,830)
Domestic production activities deduction	(4,973)
Other	4,104		(660)		1,131
Net provision for income taxes	$ 61,256		$ 59,548		$ 61,383

[1] During the year ended February 28, 2013, the Company amended its state income tax returns for prior years, which resulted in a reduction of state tax, net of federal tax benefit, of $3.4 million.

[2] The Company qualifies for a tax holiday in Israel which began during the fiscal year ended February 28, 2011 and is scheduled to terminate as of the fiscal year ending February 29, 2020. The tax holiday provides for an exemption from income tax in the first two years, and for a reduced rate of taxation on income generated in Israel for the subsequent eight years. The financial impact of this holiday for the year ended February 28, 2014 was a $1.9 million reduction in the Company's provision for income taxes, which increased the Company's diluted earnings per share by $0.01.

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Commitments and Contingencies - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	1 Months Ended	12 Months Ended
	Jun. 30, 2013	Feb. 28, 2014 Facility	Feb. 28, 2013 Facility	Feb. 29, 2012
Commitments and Contingencies [Line Items]
Loss on sublease	$ 2,200	$ 2,171	$ 3,142
Number of facility subleased		1
Depreciation expense		45,169	38,818	31,623
Number of facilities to be exited			2
Leasehold Improvements
Commitments and Contingencies [Line Items]
Depreciation expense			$ 2,900

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Segment Reporting (Tables)

12 Months Ended

Feb. 28, 2014

Summary of Revenue, Income (Loss) from Operations, Total Assets and Total Cash, Cash Equivalents and Available-for-Sale Investment Securities by Geographic Segment

The following summarizes revenue from unaffiliated customers, income (loss) from operations, total cash, cash equivalents and available-for-sale investment securities and total assets by geographic segment at and for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	Americas		EMEA		Asia Pacific		Corporate(1)			Total
	Year ended February 28, 2014
Revenue from unaffiliated customers	$	974,655	$	352,935	$	207,025	$	—		$	1,534,615
Income (loss) from operations	$	199,254	$	94,949	$	51,860	$	(113,774	)	$	232,289
Cash, cash equivalents and available-for-sale investment securities	$	808,830	$	517,397	$	161,202	$	—		$	1,487,429
Total assets	$	2,153,828	$	703,929	$	248,862	$	—		$	3,106,619

	Year ended February 28, 2013
Revenue from unaffiliated customers	$	855,214	$	284,922	$	188,681	$	—		$	1,328,817
Income (loss) from operations	$	181,136	$	72,440	$	46,160	$	(98,698	)	$	201,038
Cash, cash equivalents and available-for-sale investment securities	$	825,906	$	370,174	$	122,293	$	—		$	1,318,373
Total assets	$	2,068,879	$	534,093	$	210,688	$	—		$	2,813,660

	Year ended February 29, 2012
Revenue from unaffiliated customers	$	716,033	$	257,603	$	159,467	$	—		$	1,133,103
Income (loss) from operations	$	165,278	$	74,581	$	39,321	$	(79,267	)	$	199,913
Cash, cash equivalents and available-for-sale investment securities	$	887,256	$	299,703	$	73,394	$	—		$	1,260,353
Total assets	$	1,898,897	$	424,542	$	167,660	$	—		$	2,491,099

(1) Amounts represent share-based compensation expense for each of the three fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, which was not allocated to geographic segments.

Summary of Revenue from Unaffiliated Customers

The following table lists, for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, revenue from unaffiliated customers in the U.S., the Company’s country of domicile, and revenue from foreign countries (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
U.S., the Company’s country of domicile	$	848,053	$	753,898	$	622,608
Foreign		686,562		574,919		510,495
Total revenue from unaffiliated customers	$	1,534,615	$	1,328,817	$	1,133,103

Summary of Tangible Long-Lived Assets

Total tangible long-lived assets located in the U.S., the Company’s country of domicile, and similar tangible long-lived assets held outside the U.S. are summarized in the following table for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	As of February 28, 2014		As of February 28, 2013		As of February 29, 2012
U.S., the Company’s country of domicile	$	137,356	$	105,029	$	63,069
Foreign		36,561		36,557		28,996
Total tangible long-lived assets	$	173,917	$	141,586	$	92,065

Summary of Subscription Revenue and Services by Technology Classes

The following table, for each of the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, provides further detail, by type, of our subscription and services revenues. Infrastructure-related offerings subscription revenue includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Enterprise Virtualization. Subscription revenue generated from our Application development-related and other emerging technology offerings includes Red Hat JBoss Middleware, Red Hat Storage Server and Red Hat cloud offerings such as OpenStack and OpenShift (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Subscription revenue:
Infrastructure-related offerings	$	1,171,103	$	1,027,983	$	870,315
Application Development-related and other emerging technology offerings		165,668		120,358		95,260
Total subscription revenue		1,336,771		1,148,341		965,575
Training and services revenue:
Consulting services		145,191		129,363		116,573
Training		52,653		51,113		50,955
Total training and services revenue		197,844		180,476		167,528
Total revenue	$	1,534,615	$	1,328,817	$	1,133,103

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Accounts Receivable (Tables)

12 Months Ended

Feb. 28, 2014

Activities In Allowance For Doubtful Accounts

Activity in the Company’s allowance for doubtful accounts for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is presented in the following table (in thousands):

	Balance  at beginning of period		Charged to (recovery  of) expense			Adjustments (1)			Balance at end of period
2012	$	1,379	$	989		$	(491	)	$	1,877
2013	$	1,877	$	(102	)	$	(436	)	$	1,339
2014	$	1,339	$	841		$	(194	)	$	1,986

(1) Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable.

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Reconciliation of Statutory Federal Income Tax Rates to Provision for Income Taxes (Parenthetical) (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Schedule of Effective Tax Rate Reconciliation [Line Items]
Federal statutory rate	35.00%	35.00%	35.00%
ISRAEL
Schedule of Effective Tax Rate Reconciliation [Line Items]
Tax holiday scheduled to terminate	February 29, 2020
Tax holiday exemption period	2 years
Reduced rate of income tax period	8 years
Reduction in the provision for income taxes	$ 1.9
Increase in diluted earnings per share	$ 0.01
North Carolina
Schedule of Effective Tax Rate Reconciliation [Line Items]
Reduction of state tax	$ 3.4

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Summary of Subscription and Services Revenue by Technology Classes (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 28, 2014	Nov. 30, 2013	Aug. 31, 2013	May 31, 2013	Feb. 28, 2013	Nov. 30, 2012	Aug. 31, 2012	May 31, 2012	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Revenue from External Customer [Line Items]
Subscription revenue	$ 351,492	$ 342,770	$ 326,692	$ 315,817	$ 302,784	$ 294,186	$ 278,800	$ 272,571	$ 1,336,771	$ 1,148,341	$ 965,575
Training and services revenue	48,905	53,766	47,731	47,442	45,101	49,420	43,795	42,160	197,844	180,476	167,528
Total revenue	400,397	396,536	374,423	363,259	347,885	343,606	322,595	314,731	1,534,615	1,328,817	1,133,103
Infrastructure Related Subscriptions
Revenue from External Customer [Line Items]
Subscription revenue									1,171,103	1,027,983	870,315
Applications Development Related and Other Emerging Technology Subscriptions
Revenue from External Customer [Line Items]
Subscription revenue									165,668	120,358	95,260
Consulting Services
Revenue from External Customer [Line Items]
Training and services revenue									145,191	129,363	116,573
Training Services
Revenue from External Customer [Line Items]
Training and services revenue									$ 52,653	$ 51,113	$ 50,955

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Schedule of U.S and Foreign Components of Income Before Provision for Income Taxes (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Schedule of Income Before Income Tax [Line Items]
U.S.	$ 135,371	$ 130,560	$ 147,148
Foreign	104,177	79,192	60,861
Income before provision for income taxes	$ 239,548	$ 209,752	$ 208,009

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Summary Of Outstanding And Exercisable Stock Options (Detail) (USD $)	12 Months Ended
	Feb. 28, 2014
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Number Outstanding	376,621
Options Outstanding Weighted Average Remaining Contractual Life	3 years 7 months 6 days
Options Outstanding Weighted Average Exercise Price	$ 40.75
Number Exercisable	133,881
Options Exercisable Weighted Average Exercise Price	$ 32.08
Range One
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Prices	$ 0.00
Exercise Prices	$ 10.00
Number Outstanding	52,214
Options Outstanding Weighted Average Remaining Contractual Life	4 years 7 months 6 days
Options Outstanding Weighted Average Exercise Price	$ 1.85
Number Exercisable	32,588
Options Exercisable Weighted Average Exercise Price	$ 1.70
Range Two
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Prices	$ 10.01
Exercise Prices	$ 20.00
Number Outstanding	7,157
Options Outstanding Weighted Average Remaining Contractual Life	1 year
Options Outstanding Weighted Average Exercise Price	$ 16.24
Number Exercisable	7,157
Options Exercisable Weighted Average Exercise Price	$ 16.24
Range Three
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Prices	$ 20.01
Exercise Prices	$ 30.00
Number Outstanding	20,773
Options Outstanding Weighted Average Remaining Contractual Life	7 months 6 days
Options Outstanding Weighted Average Exercise Price	$ 27.51
Number Exercisable	20,773
Options Exercisable Weighted Average Exercise Price	$ 27.51
Range Four
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Prices	$ 30.01
Exercise Prices	$ 40.00
Number Outstanding	24,813
Options Outstanding Weighted Average Remaining Contractual Life	1 year 7 months 6 days
Options Outstanding Weighted Average Exercise Price	$ 39.37
Number Exercisable	19,350
Options Exercisable Weighted Average Exercise Price	$ 39.36
Range Five
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Prices	$ 40.01
Exercise Prices	$ 50.00
Number Outstanding	115,623
Options Outstanding Weighted Average Remaining Contractual Life	4 years
Options Outstanding Weighted Average Exercise Price	$ 44.31
Number Exercisable	19,857
Options Exercisable Weighted Average Exercise Price	$ 45.13
Range Six
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Prices	$ 50.01
Number Outstanding	156,041
Options Outstanding Weighted Average Remaining Contractual Life	3 years 9 months 18 days
Options Outstanding Weighted Average Exercise Price	$ 54.23
Number Exercisable	34,156
Options Exercisable Weighted Average Exercise Price	$ 55.45

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Summary of Changes in Goodwill (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended								12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012	Feb. 29, 2012 Gluster	Feb. 28, 2014 ManageIQ, Inc.		Feb. 28, 2013 ManageIQ, Inc.	Dec. 21, 2012 ManageIQ, Inc.	Feb. 28, 2013 Other Acquisitions
Goodwill [Line Items]
Goodwill, beginning balance	$ 690,911	$ 591,563	$ 463,673					$ 79,910
Final purchase price allocation adjustment	3,164				(3,164)	[1]
Acquisition of goodwill				126,716			83,074		17,462
Impact of foreign currency fluctuations	(317)
Impact of foreign currency fluctuations and other adjustments		(1,188)	1,174
Goodwill, ending balance	$ 687,430	$ 690,911	$ 591,563					$ 79,910	$ 17,500

[1] The final measurement period adjustment of $3.2 million was not significant relative to the total consideration paid for ManageIQ and, therefore, the final adjustment has not been retrospectively applied to the Company's Consolidated Balance Sheet as of February 28, 2013. If the Company had applied the adjustment retrospectively, the Deferred tax assets, net balance on the Company's Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million higher and the Goodwill balance on its Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million lower.

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Investments Measured at Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014		Feb. 28, 2013
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	$ 1,043,781		$ 1,020,210
Gross Unrealized Gains	1,325		1,668
Gross Unrealized Losses	(840)	[1]	(370)	[2]
Aggregate Fair Value	1,044,266		1,021,508
Cash Equivalent Marketable Securities	203,579		190,219
Short-term Marketable Securities	335,387		392,381
Long-term Marketable Securities	505,300		438,908
Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	178,280		143,680
Aggregate Fair Value	178,280		143,680
Cash Equivalent Marketable Securities	178,280		143,680
Interest-bearing Deposits
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	86,937		123,518
Aggregate Fair Value	86,937	[3]	123,518	[4]
Short-term Marketable Securities	86,937		123,518
Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	37,643		54,483
Aggregate Fair Value	37,643	[3]	54,483	[4]
Cash Equivalent Marketable Securities	25,299		39,498
Short-term Marketable Securities	12,344		14,985
U.S. Agencies Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	279,657		360,060
Gross Unrealized Gains	12		136
Gross Unrealized Losses	(620)	[1]	(203)	[2]
Aggregate Fair Value	279,049	[3]	359,993	[4]
Cash Equivalent Marketable Securities			7,041
Short-term Marketable Securities	56,314		54,485
Long-term Marketable Securities	222,735		298,467
Corporate Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	381,446		311,561
Gross Unrealized Gains	1,279		1,262
Gross Unrealized Losses	(209)	[1]	(132)	[2]
Aggregate Fair Value	382,516	[3]	312,691	[4]
Short-term Marketable Securities	131,612		172,250
Long-term Marketable Securities	250,904		140,441
Foreign Government Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost	79,818		26,902
Gross Unrealized Gains	34		2
Gross Unrealized Losses	(11)	[1]	(35)	[2]
Aggregate Fair Value	79,841	[3]	26,869	[4]
Short-term Marketable Securities	48,180		26,869
Long-term Marketable Securities	31,661
Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Amortized Cost			6
Gross Unrealized Gains			268
Aggregate Fair Value			274
Short-term Marketable Securities			$ 274

[1] As of February 28, 2014, there were $0.2 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

[2] As of February 28, 2013, there were less than $0.1 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

[3] Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company's Consolidated Balance Sheet at February 28, 2014 in addition to $443.2 million of cash.

[4] Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company's Consolidated Balance Sheet at February 28, 2013, in addition to $296.9 million of cash.

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Gross and Net Deferred Tax Asset and Liability Positions (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Components Of Deferred Tax Assets And Liabilities [Line Items]
Current	$ 120,028
Non-current	17,206
Current	12,434
Non-current	37,092
Net deferred tax asset	87,708	88,273
Net current deferred tax asset	108,264	88,765
Net non-current deferred tax asset, recorded in Other assets, net	7,655	5,226
Net current deferred tax liability, recorded in Other current obligations	(670)
Net non-current deferred tax liability, recorded in Other long-term obligations	(27,541)
Net deferred tax asset	87,708	88,273
Domestic
Components Of Deferred Tax Assets And Liabilities [Line Items]
Current	108,678
Non-current	9,125
Current	8,753
Non-current	35,522
Net deferred tax asset	73,528
Net current deferred tax asset	99,925
Net non-current deferred tax liability, recorded in Other long-term obligations	(26,397)
Net deferred tax asset	73,528
Foreign Tax
Components Of Deferred Tax Assets And Liabilities [Line Items]
Current	11,350
Non-current	8,081
Current	3,681
Non-current	1,570
Net deferred tax asset	14,180
Net current deferred tax asset	8,339
Net non-current deferred tax asset, recorded in Other assets, net	7,655
Net current deferred tax liability, recorded in Other current obligations	(670)
Net non-current deferred tax liability, recorded in Other long-term obligations	(1,144)
Net deferred tax asset	$ 14,180

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Share-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 113,774	$ 98,698	$ 79,267
Cost of Revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	11,793	9,433	7,880
Sales and Marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	40,322	32,906	25,060
Research and Development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	34,194	29,647	21,570
General and Administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 27,465	$ 26,712	$ 24,757

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Summary of Tax Years Subject to Examination (Detail)	12 Months Ended
	Feb. 28, 2014
Domestic
Income Tax Examination [Line Items]
Years Subject to Income Tax Examination	1994 - Present
North Carolina
Income Tax Examination [Line Items]
Years Subject to Income Tax Examination	1999 - Present
Ireland
Income Tax Examination [Line Items]
Years Subject to Income Tax Examination	2008 - Present
Japan
Income Tax Examination [Line Items]
Years Subject to Income Tax Examination	2012 - Present	[1]

[1] The Company has been examined for income tax for years through February 28, 2011. A tax examination was concluded in fiscal 2012 with no significant adjustments resulting. However, the statute of limitations remains open for five years.

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Total Fair Value of Stock Options Recognized (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total fair value of stock options recognized	$ 2,139	$ 2,791	$ 3,104

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013
Income Taxes [Line Items]
Operating loss carryforwards beginning expiration date	Feb. 29, 2016
Research tax credit carryforwards beginning expiration date	Feb. 28, 2018
Cumulative undistributed earnings of non-U.S. subsidiaries	$ 296.4
Unrecognized tax benefits that would affect the tax rate	49.7	45.3
Accrued Interest and Penalties Related to Unrecognized Tax Benefit	6.0	4.2
Domestic
Income Taxes [Line Items]
Net operating loss carryforward	23.5
Research tax credit carryforwards	30.6
U.S. State
Income Taxes [Line Items]
Net operating loss carryforward	114.5
Research tax credit carryforwards	10.5
U.S. State | Stock Based Compensation
Income Taxes [Line Items]
Net operating loss carryforward	$ 55.5

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Summary of Accounts Payable and Accrued Expenses (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Accounts Payable and Accrued Liabilities [Line Items]
Accounts payable	$ 18,326	$ 27,096
Accrued wages and other compensation related expenses	100,474	72,912
Accrued other trade payables	40,998	38,595
Accrued income and other taxes payable	19,253	15,111
Accrued other	417	488
Accounts payable and accrued expenses	$ 179,468	$ 154,202

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

12 Months Ended

Feb. 28, 2014

Assets and Liabilities Measured at Fair Value on a Recurring Basis

NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2014 (in thousands):

	As of February 28, 2014			Quoted Prices  In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Money markets (1)	$	178,280		$	178,280	$	—		$	—
Available-for-sale securities (1):
Interest-bearing deposits		86,937			—		86,937			—
Commercial paper		37,643			—		37,643			—
U.S. agency securities		279,049			—		279,049			—
Corporate securities		382,516			—		382,516			—
Foreign government securities		79,841			—		79,841			—
Foreign currency derivatives (2)		134			—		134			—
Liabilities:
Foreign currency derivatives (3)		(15	)		—		(15	)		—
Total	$	1,044,385		$	178,280	$	866,105		$	—

(1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2014 in addition to $443.2 million of cash.

(2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2014.

(3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2014.

The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2013 (in thousands):

	As of February 28, 2013			Quoted Prices  In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Money markets (1)	$	143,680		$	143,680	$	—		$	—
Available-for-sale securities (1):
Interest-bearing deposits		123,518			—		123,518			—
Commercial paper		54,483			—		54,483			—
U.S. agency securities		359,993			—		359,993			—
Corporate securities		312,691			—		312,691			—
Foreign government securities		26,869			—		26,869			—
Equity securities (1)		274			274		—			—
Foreign currency derivatives (2)		280			—		280			—
Liabilities:
Foreign currency derivatives (3)		(219	)		—		(219	)		—
Total	$	1,021,569		$	143,954	$	877,615		$	—

(1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2013, in addition to $296.9 million of cash.

(2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2013.

(3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2013.

The following table represents the Company’s investments measured at fair value as of February 28, 2014 (in thousands):

	Amortized Cost		Gross Unrealized					Aggregate Fair Value		Balance Sheet Classification
										Cash Equivalent Marketable Securities		Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses(1)
Money markets	$	178,280	$	—	$	—		$	178,280	$	178,280	$	—	$	—
Interest-bearing deposits		86,937		—		—			86,937		—		86,937		—
Commercial paper		37,643		—		—			37,643		25,299		12,344		—
U.S. agency securities		279,657		12		(620	)		279,049		—		56,314		222,735
Corporate securities		381,446		1,279		(209	)		382,516		—		131,612		250,904
Foreign government securities		79,818		34		(11	)		79,841		—		48,180		31,661
Total	$	1,043,781	$	1,325	$	(840	)	$	1,044,266	$	203,579	$	335,387	$	505,300

(1) As of February 28, 2014, there were $0.2 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

The following table summarizes the stated maturities of the Company’s investment in available-for-sale securities at February 28, 2014 (in thousands):

	Total		Less than 1 Year		2-3 Years		4-5 Years		More than 5 Years
Maturity of short and long term available-for-sale securities	$	840,687	$	335,387	$	337,189	$	168,111	$	—

The following table represents the Company’s investments measured at fair value as of February 28, 2013 (in thousands):

	Amortized Cost		Gross Unrealized					Aggregate Fair Value		Balance Sheet Classification
										Cash Equivalent Marketable Securities		Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses(1)
Money markets	$	143,680	$	—	$	—		$	143,680	$	143,680	$	—	$	—
Interest-bearing deposits		123,518		—		—			123,518		—		123,518		—
Commercial paper		54,483		—		—			54,483		39,498		14,985		—
U.S. agency securities		360,060		136		(203	)		359,993		7,041		54,485		298,467
Corporate securities		311,561		1,262		(132	)		312,691		—		172,250		140,441
Foreign government securities		26,902		2		(35	)		26,869		—		26,869		—
Equity securities		6		268		—			274		—		274		—
Total	$	1,020,210	$	1,668	$	(370	)	$	1,021,508	$	190,219	$	392,381	$	438,908

(1) As of February 28, 2013, there were less than $0.1 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

XML

Summary Of Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 28, 2014 Location	Feb. 28, 2013	Feb. 29, 2012
Significant Accounting Policies [Line Items]
Subscription period, minimum (years)	1 year
Subscription period, maximum (years)	3 years
Renewal period, minimum (years)	1 year
Renewal period, maximum (years)	3 years
Cash and cash equivalents maturity period (in months)	3 months
Estimated useful life of internal use computer software	5 years
Total advertising expense	$ 53.4	$ 42.7	$ 29.2
Number of locations of offices	80
Minimum
Significant Accounting Policies [Line Items]
Property Plant And Equipment Useful Life	3 years
Maximum
Significant Accounting Policies [Line Items]
Property Plant And Equipment Useful Life	15 years
North America
Significant Accounting Policies [Line Items]
Customer credit term	30 days
EMEA
Significant Accounting Policies [Line Items]
Standard credit term, minimum	30 days
Standard credit term, maximum	45 days
Asia Pacific
Significant Accounting Policies [Line Items]
Standard credit term, minimum	30 days
Standard credit term, maximum	60 days
Furniture and Fixtures
Significant Accounting Policies [Line Items]
Property Plant And Equipment Useful Life	7 years
Computer Equipment | Minimum
Significant Accounting Policies [Line Items]
Property Plant And Equipment Useful Life	3 years
Computer Equipment | Maximum
Significant Accounting Policies [Line Items]
Property Plant And Equipment Useful Life	4 years
Computer Software
Significant Accounting Policies [Line Items]
Property Plant And Equipment Useful Life	5 years
Leasehold Improvements
Significant Accounting Policies [Line Items]
Property Plant And Equipment Estimated Useful Lives	Over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease

XML

Commitments and Contingencies (Tables)

12 Months Ended

Feb. 28, 2014

Schedule Of Future Minimum Lease Payments Required Under Operating Leases

As of February 28, 2014, the Company leased office space and certain equipment under various non-cancelable operating leases. Future minimum lease payments required under the operating leases at February 28, 2014 are as follows (in thousands):

Fiscal Year	Operating Leases
2015	$	27,977
2016		26,247
2017		23,785
2018		16,372
2019		13,354
Thereafter		86,789
Total minimum lease payments	$	194,524

Rent Expense Under Operating Leases

Rent expense under operating leases for the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012 is provided in the following table (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total operating lease expense	$	29,472	$	26,830	$	24,434

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Schedule of Deferred Tax Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Components Of Deferred Income Tax Assets And Liabilities [Line Items]
Foreign net operating loss carryforwards	$ 4,016	$ 7,629
Domestic net operating loss carryforwards	8,650	12,227
Domestic credit carryforwards	24,045	29,062
Share-based compensation	32,478	26,781
Deferred revenue	49,749	43,066
Foreign deferred royalty expenses	8,396	6,000
Other	10,599	8,299
Total deferred tax assets	137,933	133,064
Valuation allowance for deferred tax assets	(699)	(659)
Total deferred tax assets, net of valuation allowance	137,234	132,405
Goodwill	5,163	2,971
Fixed and intangible assets	28,283	23,905
Compensation accruals	12,738	9,124
Other	3,342	8,132
Total deferred tax liabilities	49,526	44,132
Net deferred tax asset	$ 87,708	$ 88,273

XML

Intrinsic Value Of Service - Based Awards (Parenthetical) (Detail)	12 Months Ended
	Feb. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual forfeitures rate	10.00%
Service Based Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual forfeitures rate	10.00%

XML

Prepaid Expenses (Tables)

12 Months Ended

Feb. 28, 2014

Schedule of Prepaid Expenses, Including Sales Commissions

Prepaid expenses, including sales commissions, were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Deferred commissions	$	80,987	$	62,159
Professional services		12,827		13,172
Taxes		13,012		10,743
Insurance		1,207		1,547
Other		10,354		6,800
Prepaid expenses	$	118,387	$	94,421

XML

Tangible and Identifiable Intangible Assets and Liabilities Based on Management's Assessment of Acquisition Date Fair value of Assets Acquired and Liabilities Assumed (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012	Feb. 28, 2011	Dec. 21, 2012 ManageIQ, Inc.	Oct. 07, 2011 Gluster, Inc.
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Identifiable intangible assets (see detail below)		$ 30,600			$ 17,340	$ 6,800
Cash					222	696
Accounts receivable					570	321
Fixed assets					69	454
Deferred tax assets, net					6,610	3,263
Other assets					155	1,093
Accrued liabilities					(262)	(1,872)
Deferred revenue					(132)	(321)
Goodwill	687,430	690,911	591,563	463,673	79,910	126,716
Total consideration allocated					$ 104,482	$ 137,150

XML

Schedule of Amortization Expense (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014
Finite-Lived Intangible Assets [Line Items]
2015	$ 29,293
2016	22,727
2017	20,146
2018	16,238
2019	12,740
Thereafter	22,617
Total amortization expense	$ 123,761

XML

Summary of Stated Maturities of Investment in Debt Securities (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014
Schedule Of Marketable Securities [Line Items]
Total	$ 840,687
Less than 1 Year	335,387
2-3 Years	337,189
4-5 Years	168,111
More than 5 Years

XML

Schedule Of Property And Equipment At Cost (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Property, Plant and Equipment [Line Items]
Computer equipment	$ 137,570	$ 127,741
Software, including software developed for internal use	112,348	108,644
Furniture and fixtures	28,007	19,271
Leasehold improvements	96,410	58,443
Property and equipment - in progress	8,877	17,472
Property and equipment	383,212	331,571
Less: accumulated depreciation	(209,295)	(189,985)
Property and equipment, net	$ 173,917	$ 141,586	$ 92,065

XML

Other Long-Term Obligations (Tables)

12 Months Ended

Feb. 28, 2014

Other Long-Term Obligations

Other long-term obligations were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Accrued income taxes	$	45,645	$	32,530
Deferred rent credits		10,879		9,299
Net non-current deferred tax liability		27,541		5,718
Other		938		774
Other long-term obligations	$	85,003	$	48,321

XML

Summary of Significant Accounting Policies

12 Months Ended

Feb. 28, 2014

Summary of Significant Accounting Policies

NOTE 2—Summary of Significant Accounting Policies

Basis of presentation

The accompanying Consolidated Financial Statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation. There are no significant foreign exchange restrictions on the Company’s foreign subsidiaries.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from such estimates.

Revenue recognition

The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on either a signed contract with the end customer, a click-through contract on the Company’s website whereby the customer agrees to the Company’s standard subscription terms, signed or click-through distribution contracts with original equipment manufacturers (“OEMs”) and other resellers, or, in the case of individual training seats, through receipt of payment which indicates acceptance of the Company’s training agreement terms.

Subscription revenue

Subscription revenue is comprised of direct and indirect sales of subscriptions relating to Red Hat enterprise technologies. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement for the purchase of a subscription, subscription services are made available to the customer and the customer is billed. The deferred revenue amount is recognized as revenue ratably over the life of the subscription. Red Hat enterprise technologies are generally offered with either one or three-year base subscription periods; the majority of the Company’s subscriptions have one-year terms. Under these subscription agreements, renewal rates are generally specified for one or three-year renewal terms. Subscriptions generally entitle the end user to the technology itself and post-contract customer support, generally consisting of varying levels of support services as well as access to security errata, fixes, functionality enhancements to the technology and upgrades to new versions of the technologies, each on a when-and-if-available basis, during the term of the subscription. The Company sells its offerings through two principal channels: (1) direct, which includes sales by the Company’s sales force as well as web store sales, and (2) indirect, which includes distributors, resellers, systems integrators and OEMs. The Company recognizes revenue from the sale of Red Hat enterprise technologies ratably over the period of the subscription beginning on the commencement date of the subscription agreement.

Subscription arrangements with large enterprise customers often have contracts with multiple elements (e.g., software technology, support, training, consulting and other services). The Company allocates revenue to each element of the arrangement based on vendor-specific objective evidence of each element’s fair value when the Company can demonstrate sufficient evidence of the fair value of at least those elements that are undelivered. The fair value of each element in multiple element arrangements is created by either (i) providing the customer with the ability during the term of the arrangement to renew that element at the same rate paid for the element included in the initial term of the agreement or (ii) selling the element on a stand-alone basis.

Training and services revenue

Training and services revenue is comprised of revenue for consulting, engineering and customer training and education services. Consulting services consist of time-based arrangements, and revenue is recognized as these services are performed. Engineering services represent revenue earned under fixed fee arrangements with the Company’s OEM partners and other customers to provide for significant modification and customization of Red Hat enterprise technologies. The Company recognizes revenue for these fixed fee engineering services using the percentage of completion basis of accounting, provided the Company has the ability to make reliable estimates of progress towards completion, the fee for such services is fixed or determinable and collection of the resulting receivable is probable. Under the percentage of completion method, earnings under the contract are recognized based on the progress toward completion as estimated using the ratio of labor hours incurred to total expected project hours. Changes in estimates are recognized in the period in which they are known. Revenue for customer training and education services is recognized on the dates the services are complete.

Deferred selling costs

Deferred commissions are the incremental costs that are directly associated with non-cancelable subscription contracts with customers and consist of sales commissions paid to the Company’s sales force. The commissions are deferred and amortized over a period that approximates the period of the subscription term. The commission payments are paid in full subsequent to the month in which the customer’s service commences. The deferred commission amounts are recoverable through the future revenue streams under the non-cancelable customer contracts. In addition, the Company has the ability and intent under the commission plans with its sales force to recover commissions previously paid to its sales force in the event that customers breach the terms of their subscription agreements and do not fully pay for their subscription agreements. Deferred commissions are included in prepaid expenses on the accompanying Consolidated Balance Sheets. Amortization of deferred commissions is included in sales and marketing expense in the accompanying Consolidated Statements of Operations.

Goodwill and other long-lived assets

Goodwill

The Company tests goodwill for impairment annually. For the years ended February 28, 2014 and February 28, 2013, the Company applied its test for goodwill impairment as permitted by ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying value. The outcome of these qualitative tests determines whether it is necessary for a company to perform the two-step goodwill impairment test as required in years prior to the adoption of ASU 2011-08.

After considering such qualitative factors as macroeconomic conditions, actual or anticipated changes to cost factors (for example, selling and delivery), overall financial performance and other Company-specific factors, such as potential changes in strategy, the Company determined that it was not more likely than not that any impairment to goodwill had occurred during the years ended February 28, 2014 and February 28, 2013. Consequently, the Company was not required to perform the remaining two-step quantitative goodwill impairment test.

Other long-lived assets

The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate that an impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets.

For the years ended February 28, 2014, February 28, 2013 and February 29, 2012, no significant impairment losses related to the Company’s long-lived assets were identified.

Cash and cash equivalents

The Company considers highly liquid investments purchased with a maturity period of three months or less at the date of purchase to be cash equivalents.

Accounts receivable and allowance for doubtful accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. See NOTE 4—Accounts Receivable for further discussion on accounts receivable balances.

Fair value measurements

Fair value is defined as the exchange price that would be received for the purchase of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair market values. Liquid investments with effective maturities of three months or less from the balance sheet date (that is, time remaining on the day of purchase) are classified as cash equivalents. Investments with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than twelve months from the balance sheet date are classified as long-term investments. The Company’s Level 1 financial instruments are valued using quoted prices in active markets for identical instruments. The Company’s Level 2 financial instruments, including derivative instruments, are valued using quoted prices for identical instruments in less active markets or using other observable market inputs for comparable instruments.

Unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Upon realization, such amounts are reclassified from accumulated other comprehensive income to other income, net. Realized gains and losses and other than temporary impairments, if any, are reflected in the statements of operations as other income, net. The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary. The vast majority of the Company’s investments are priced by pricing vendors. These pricing vendors use the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs. In the event observable inputs are not available, the Company assesses other factors to determine the security’s market value, including broker quotes or model valuations. Independent price verifications of all holdings are performed by pricing vendors which are then reviewed by the Company. In the event a price fails a pre-established tolerance check, it is researched so that the Company can assess the cause of the variance to determine what the Company believes is the appropriate fair market value. See NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion on fair value measurements.

The Company minimizes its credit risk associated with investments by investing primarily in investment grade, liquid securities. The Company’s policy is designed to limit exposures to any one issuer depending on credit quality. Periodic evaluations of the relative credit standing of those issuers are considered in the Company’s investment strategy.

Internal use software

The Company capitalizes costs related to the development of internal use software for its website, enterprise resource planning system and systems management applications. The Company amortizes the costs of computer software developed for internal use on a straight-line basis over an estimated useful life of five years. The carrying value of internal use software is included in property and equipment on the Company’s Consolidated Balance Sheets.

Capitalized software costs

Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. As a result of the Company’s practice of releasing source code that it has developed on a weekly basis for unrestricted download on the Internet, there is generally no passage of time between achievement of technological feasibility and the availability of the Company’s product for general release. Therefore, at February 28, 2014 and February 28, 2013, the Company had no internally developed capitalized software costs for products to be sold to third parties.

Property and equipment

Property and equipment is primarily comprised of furniture, computer equipment, computer software and leasehold improvements, which are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: furniture and fixtures, seven years; computer equipment, three to four years; computer software, five years; leasehold improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. Expenditures for maintenance and repairs are charged to operations as incurred; major expenditures for renewals and betterments are capitalized and depreciated. Property and equipment acquired under capital leases are depreciated over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease.

Share-based compensation

The Company measures share-based compensation cost at grant date, based on the estimated fair value of the award and recognizes the cost over the employee’s requisite service period typically on a straight-line basis, net of estimated forfeitures. The Company estimates the fair value of stock options using the Black-Scholes-Merton valuation model. The fair value of nonvested share awards, nonvested share units and performance share units (“PSUs”) are measured at their underlying closing share price on the date of grant. The Company’s share-based compensation is described further in NOTE 13—Share-based Awards.

Sales and marketing expenses

Sales and marketing expenses consist of costs, including salaries, sales commissions and related expenses, such as travel, of all personnel involved in the sales and marketing process. Sales and marketing expenses also include costs of advertising, sales lead generation programs, cooperative marketing arrangements and trade shows. Payments made to resellers or other customers are recognized as a reduction of revenue unless the Company (i) receives an identifiable benefit (goods or services) in exchange for such payments that is sufficiently separable from the purchase of the Company’s products and (ii) the Company can reasonably estimate the fair value of the benefit identified. Advertising costs are expensed as incurred.

Advertising expense totaled $53.4 million, $42.7 million and $29.2 million for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively.

Research and development expenses

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new software products, significant enhancements to existing software products, and the portion of costs of development of internal use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

Income taxes

The Company accounts for income taxes using the liability method in which deferred tax assets or liabilities are recognized for the temporary differences between financial reporting and tax bases of the Company’s assets and liabilities and for tax carryforwards at enacted statutory tax rates in effect for the years in which the differences are expected to reverse.

The Company continues to assess the realizability of its deferred tax assets, which primarily consist of share-based compensation expense deductions, tax credit carryforwards and deferred revenue. In assessing the realizability of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The Company continues to maintain a valuation allowance against its deferred tax assets with respect to certain foreign net operating loss (“NOL”) carryforwards.

With respect to foreign earnings, it is the Company’s policy to invest the earnings of foreign subsidiaries indefinitely outside the U.S. From time to time, however, the Company may remit a portion of these earnings to the extent it incurs no additional U.S. tax and it is otherwise feasible.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in (i) calculating its income tax expense, deferred tax assets and deferred tax liabilities, (ii) determining any valuation allowance recorded against deferred tax assets and (iii) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. The Company’s income tax expense and deferred taxes are described further in NOTE 11—Income Taxes.

Foreign currency translation

The Euro has been determined to be the primary functional currency for the Company’s European operations and local currencies have been determined to be the functional currencies for the Company’s Asia Pacific and Latin American operations, with the exception of the Company’s operations in Mexico, where the functional currency is the U.S. dollar. Foreign exchange gains and losses, which result from the process of remeasuring foreign currency transactions into the appropriate functional currency, are included in other income, net in the Company’s Consolidated Statements of Operations.

The impact of changes in foreign currency exchange rates resulting from the translation of foreign currency financial statements into U.S. dollars for financial reporting purposes is included in other comprehensive income, which is a separate component of stockholders’ equity. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average rates for the period.

Customers and credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, investments and trade receivables. The Company primarily places its cash, cash equivalents and investments with high-credit quality financial institutions which invest predominantly in U.S. government instruments, investment grade corporate bonds and certificates of deposit guaranteed by banks which are members of the Federal Deposit Insurance Corporation. Cash deposits are primarily in financial institutions in the U.S. and the United Kingdom. However, cash for monthly operating costs of international operations are deposited in banks outside the U.S.

The Company performs credit evaluations to reduce credit risk and generally requires no collateral from its customers. Management estimates the allowance for uncollectible accounts based on their historical experience and credit evaluation. The Company’s standard credit terms are net 30 days in North America, net 30 to 45 days in EMEA (Europe, Middle East and Africa) and Latin America, and range from net 30 to net 60 days in Asia Pacific.

Net income per common share

The Company computes basic net income per common share by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares and dilutive potential common share equivalents then outstanding. Potential common share equivalents consist of shares issuable upon the exercise of stock options or vesting of share-based awards.

Segment reporting

The Company is organized primarily on the basis of three geographic business units: the Americas (U.S., Latin America and Canada), EMEA (Europe, Middle East and Africa) and Asia Pacific. These business units are aggregated into one reportable segment due to the similarity in nature of products and services provided, financial performance economic characteristics (e.g., revenue growth and gross margin), methods of production and distribution and customer classes (e.g., distributors, resellers and enterprise).

The Company has offices in more than 80 locations around the world. The Company manages its international business on an Americas-wide, EMEA-wide and Asia Pacific-wide basis. See NOTE 20—Segment Reporting for further discussion.

Recent accounting pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), to eliminate diversity in practice of presenting unrecognized tax benefits as a liability or presenting unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances by requiring that an unrecognized tax benefit be presented in the financial statements as a reduction to deferred tax assets excluding certain exceptions. ASU 2013-11 is effective prospectively for the Company in the first quarter of its fiscal year ending February 28, 2015. The Company does not believe that this updated standard will have a material impact on its consolidated financial statements.

In March 2013, the FASB issued Accounting Standards Update No. 2013-05, Foreign Currency Matters (Topic 830)—Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”), which requires a parent entity to release a related foreign entity’s cumulative translation adjustment into net income only if its sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-05 is effective prospectively for the Company in the first quarter of its fiscal year ending February 28, 2015. The Company does not believe that this updated standard will have a material impact on its consolidated financial statements.

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Segment Reporting - Additional Information (Detail)	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Segment Reporting Information [Line Items]
Number of individual customers from which the Company generated 10% or greater revenue	0		0
Foreign | Minimum
Segment Reporting Information [Line Items]
Percentage of revenue from individual foreign country	10.00%	10.00%	10.00%
U.S. | Sales Revenue, Net
Segment Reporting Information [Line Items]
Percentage of revenue		11.00%

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Property And Equipment - Additional Information (Detail)	12 Months Ended
	Feb. 28, 2014
Minimum
Property, Plant and Equipment [Line Items]
Useful lives of property and equipment	3 years
Maximum
Property, Plant and Equipment [Line Items]
Useful lives of property and equipment	15 years

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Employee Benefit Plans (Tables)

12 Months Ended

Feb. 28, 2014

Schedule of Defined Benefit Plans Disclosures

The Company has the option to make contributions to the plans and contributed to the plans for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total contributions to employee benefit plans	$	17,613	$	14,695	$	11,377

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Accumulated Other Comprehensive Loss

12 Months Ended

Feb. 28, 2014

Accumulated Other Comprehensive Loss

NOTE 22—Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss was comprised of the following (in thousands):

	February 28, 2014			February 28, 2013
Accumulated loss from foreign currency translation adjustment	$	(4,823	)	$	(8,768	)
Accumulated unrealized gain, net of tax, on available-for-sale securities		364			801
Accumulated other comprehensive loss	$	(4,459	)	$	(7,967	)

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Other Long-Term Obligations

12 Months Ended

Feb. 28, 2014

Other Long-Term Obligations

NOTE 21—Other Long-Term Obligations

Other long-term obligations were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Accrued income taxes	$	45,645	$	32,530
Deferred rent credits		10,879		9,299
Net non-current deferred tax liability		27,541		5,718
Other		938		774
Other long-term obligations	$	85,003	$	48,321

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Total Fair Value Of Service/Performance-Based Awards Recognized (Detail) (Performance Share Units, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Performance Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total fair value of performance-based awards recognized	$ 19,185	$ 19,447	$ 14,345

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Pro Forma Consolidated Financial Information (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Feb. 28, 2013	Feb. 29, 2012
Business Acquisition, Pro Forma Information [Line Items]
Revenue	$ 1,329,780	$ 1,134,679
Net income and diluted net income	$ 136,459	$ 125,387
Basic net income per common share	$ 0.71	$ 0.65
Diluted net income per common share	$ 0.70	$ 0.64

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Assets and Liabilities Measured at Fair Value on a Recurring Basis (Tables)

12 Months Ended

Feb. 28, 2014

Fair Value of Assets and Liabilities Acquired

The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2014 (in thousands):

	As of February 28, 2014			Quoted Prices  In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Money markets (1)	$	178,280		$	178,280	$	—		$	—
Available-for-sale securities (1):
Interest-bearing deposits		86,937			—		86,937			—
Commercial paper		37,643			—		37,643			—
U.S. agency securities		279,049			—		279,049			—
Corporate securities		382,516			—		382,516			—
Foreign government securities		79,841			—		79,841			—
Foreign currency derivatives (2)		134			—		134			—
Liabilities:
Foreign currency derivatives (3)		(15	)		—		(15	)		—
Total	$	1,044,385		$	178,280	$	866,105		$	—

(1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2014 in addition to $443.2 million of cash.

(2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2014.

(3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2014.

The following table summarizes the composition and fair value hierarchy of the Company’s financial assets and liabilities at February 28, 2013 (in thousands):

	As of February 28, 2013			Quoted Prices  In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Money markets (1)	$	143,680		$	143,680	$	—		$	—
Available-for-sale securities (1):
Interest-bearing deposits		123,518			—		123,518			—
Commercial paper		54,483			—		54,483			—
U.S. agency securities		359,993			—		359,993			—
Corporate securities		312,691			—		312,691			—
Foreign government securities		26,869			—		26,869			—
Equity securities (1)		274			274		—			—
Foreign currency derivatives (2)		280			—		280			—
Liabilities:
Foreign currency derivatives (3)		(219	)		—		(219	)		—
Total	$	1,021,569		$	143,954	$	877,615		$	—

(1) Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company’s Consolidated Balance Sheet at February 28, 2013, in addition to $296.9 million of cash.

(2) Included in Other current assets in the Company’s Consolidated Balance Sheet at February 28, 2013.

(3) Included in Accounts payable and accrued expenses in the Company’s Consolidated Balance Sheet at February 28, 2013.

Investments Measured at Fair Value

The following table represents the Company’s investments measured at fair value as of February 28, 2014 (in thousands):

	Amortized Cost		Gross Unrealized					Aggregate Fair Value		Balance Sheet Classification
										Cash Equivalent Marketable Securities		Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses(1)
Money markets	$	178,280	$	—	$	—		$	178,280	$	178,280	$	—	$	—
Interest-bearing deposits		86,937		—		—			86,937		—		86,937		—
Commercial paper		37,643		—		—			37,643		25,299		12,344		—
U.S. agency securities		279,657		12		(620	)		279,049		—		56,314		222,735
Corporate securities		381,446		1,279		(209	)		382,516		—		131,612		250,904
Foreign government securities		79,818		34		(11	)		79,841		—		48,180		31,661
Total	$	1,043,781	$	1,325	$	(840	)	$	1,044,266	$	203,579	$	335,387	$	505,300

(1) As of February 28, 2014, there were $0.2 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

The following table represents the Company’s investments measured at fair value as of February 28, 2013 (in thousands):

	Amortized Cost		Gross Unrealized					Aggregate Fair Value		Balance Sheet Classification
										Cash Equivalent Marketable Securities		Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses(1)
Money markets	$	143,680	$	—	$	—		$	143,680	$	143,680	$	—	$	—
Interest-bearing deposits		123,518		—		—			123,518		—		123,518		—
Commercial paper		54,483		—		—			54,483		39,498		14,985		—
U.S. agency securities		360,060		136		(203	)		359,993		7,041		54,485		298,467
Corporate securities		311,561		1,262		(132	)		312,691		—		172,250		140,441
Foreign government securities		26,902		2		(35	)		26,869		—		26,869		—
Equity securities		6		268		—			274		—		274		—
Total	$	1,020,210	$	1,668	$	(370	)	$	1,021,508	$	190,219	$	392,381	$	438,908

(1) As of February 28, 2013, there were less than $0.1 million of accumulated unrealized losses related to investments that have been in a continuous unrealized loss position for 12 months or longer.

Summary of Stated Maturities of Investment in Debt Securities

The following table summarizes the stated maturities of the Company’s investment in available-for-sale securities at February 28, 2014 (in thousands):

	Total		Less than 1 Year		2-3 Years		4-5 Years		More than 5 Years
Maturity of short and long term available-for-sale securities	$	840,687	$	335,387	$	337,189	$	168,111	$	—

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Unaudited Quarterly Results

12 Months Ended

Feb. 28, 2014

Unaudited Quarterly Results

NOTE 23—Unaudited Quarterly Results

Below are unaudited condensed quarterly results for the year ended February 28, 2014:

	Year ended February 28, 2014 Unaudited
	4th Quarter		3rd Quarter			2nd Quarter		1st Quarter
	(in thousands, except per share data)
Revenue:
Subscriptions	$	351,492	$	342,770		$	326,692	$	315,817
Training and services		48,905		53,766			47,731		47,442
Total subscription and training and services revenue	$	400,397	$	396,536		$	374,423	$	363,259
Gross profit	$	339,861	$	336,109		$	318,843	$	307,202
Income from operations	$	59,300	$	60,792		$	55,574	$	56,623
Interest income	$	2,037	$	1,579		$	1,527	$	1,502
Other income (expense), net	$	282	$	(440	)	$	1,196	$	(424	)
Net income, basic and diluted	$	45,068	$	52,025		$	40,808	$	40,391
Net income per common share (1):
Basic	$	0.24	$	0.27		$	0.22	$	0.21
Diluted	$	0.24	$	0.27		$	0.21	$	0.21
Weighted average shares outstanding:
Basic		189,604		189,514			189,437		191,114
Diluted		191,712		191,365			191,432		192,969

(1) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

Below are unaudited condensed quarterly results for the year ended February 28, 2013:

	Year ended February 28, 2013 Unaudited
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(in thousands, except per share data)
Revenue:
Subscriptions	$	302,784		$	294,186		$	278,800		$	272,571
Training and services		45,101			49,420			43,795			42,160
Total subscription and training and services revenue	$	347,885		$	343,606		$	322,595		$	314,731
Gross profit	$	294,280		$	290,488		$	274,737		$	268,712
Income from operations	$	50,231		$	49,919		$	49,980		$	50,908
Interest income	$	1,861		$	1,936		$	2,154		$	2,294
Other income (expense), net	$	(32	)	$	(730	)	$	(656	)	$	1,887
Net income, basic and diluted	$	42,973		$	34,765		$	35,005		$	37,461
Net income per common share (1):
Basic	$	0.22		$	0.18		$	0.18		$	0.19
Diluted	$	0.22		$	0.18		$	0.18		$	0.19
Weighted average shares outstanding:
Basic		193,207			193,374			193,064			192,947
Diluted		195,133			195,666			195,795			195,937

(1) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Feb. 28, 2014

Basis of presentation

Basis of presentation

The accompanying Consolidated Financial Statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation. There are no significant foreign exchange restrictions on the Company’s foreign subsidiaries.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from such estimates.

Revenue recognition

Revenue recognition

The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on either a signed contract with the end customer, a click-through contract on the Company’s website whereby the customer agrees to the Company’s standard subscription terms, signed or click-through distribution contracts with original equipment manufacturers (“OEMs”) and other resellers, or, in the case of individual training seats, through receipt of payment which indicates acceptance of the Company’s training agreement terms.

Subscription revenue

Subscription revenue is comprised of direct and indirect sales of subscriptions relating to Red Hat enterprise technologies. Accounts receivable and deferred revenue are recorded at the time a customer enters into a binding subscription agreement for the purchase of a subscription, subscription services are made available to the customer and the customer is billed. The deferred revenue amount is recognized as revenue ratably over the life of the subscription. Red Hat enterprise technologies are generally offered with either one or three-year base subscription periods; the majority of the Company’s subscriptions have one-year terms. Under these subscription agreements, renewal rates are generally specified for one or three-year renewal terms. Subscriptions generally entitle the end user to the technology itself and post-contract customer support, generally consisting of varying levels of support services as well as access to security errata, fixes, functionality enhancements to the technology and upgrades to new versions of the technologies, each on a when-and-if-available basis, during the term of the subscription. The Company sells its offerings through two principal channels: (1) direct, which includes sales by the Company’s sales force as well as web store sales, and (2) indirect, which includes distributors, resellers, systems integrators and OEMs. The Company recognizes revenue from the sale of Red Hat enterprise technologies ratably over the period of the subscription beginning on the commencement date of the subscription agreement.

Subscription arrangements with large enterprise customers often have contracts with multiple elements (e.g., software technology, support, training, consulting and other services). The Company allocates revenue to each element of the arrangement based on vendor-specific objective evidence of each element’s fair value when the Company can demonstrate sufficient evidence of the fair value of at least those elements that are undelivered. The fair value of each element in multiple element arrangements is created by either (i) providing the customer with the ability during the term of the arrangement to renew that element at the same rate paid for the element included in the initial term of the agreement or (ii) selling the element on a stand-alone basis.

Training and services revenue

Training and services revenue is comprised of revenue for consulting, engineering and customer training and education services. Consulting services consist of time-based arrangements, and revenue is recognized as these services are performed. Engineering services represent revenue earned under fixed fee arrangements with the Company’s OEM partners and other customers to provide for significant modification and customization of Red Hat enterprise technologies. The Company recognizes revenue for these fixed fee engineering services using the percentage of completion basis of accounting, provided the Company has the ability to make reliable estimates of progress towards completion, the fee for such services is fixed or determinable and collection of the resulting receivable is probable. Under the percentage of completion method, earnings under the contract are recognized based on the progress toward completion as estimated using the ratio of labor hours incurred to total expected project hours. Changes in estimates are recognized in the period in which they are known. Revenue for customer training and education services is recognized on the dates the services are complete.

Deferred selling costs

Deferred selling costs

Deferred commissions are the incremental costs that are directly associated with non-cancelable subscription contracts with customers and consist of sales commissions paid to the Company’s sales force. The commissions are deferred and amortized over a period that approximates the period of the subscription term. The commission payments are paid in full subsequent to the month in which the customer’s service commences. The deferred commission amounts are recoverable through the future revenue streams under the non-cancelable customer contracts. In addition, the Company has the ability and intent under the commission plans with its sales force to recover commissions previously paid to its sales force in the event that customers breach the terms of their subscription agreements and do not fully pay for their subscription agreements. Deferred commissions are included in prepaid expenses on the accompanying Consolidated Balance Sheets. Amortization of deferred commissions is included in sales and marketing expense in the accompanying Consolidated Statements of Operations.

Goodwill and other long-lived assets

Goodwill and other long-lived assets

Goodwill

The Company tests goodwill for impairment annually. For the years ended February 28, 2014 and February 28, 2013, the Company applied its test for goodwill impairment as permitted by ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying value. The outcome of these qualitative tests determines whether it is necessary for a company to perform the two-step goodwill impairment test as required in years prior to the adoption of ASU 2011-08.

After considering such qualitative factors as macroeconomic conditions, actual or anticipated changes to cost factors (for example, selling and delivery), overall financial performance and other Company-specific factors, such as potential changes in strategy, the Company determined that it was not more likely than not that any impairment to goodwill had occurred during the years ended February 28, 2014 and February 28, 2013. Consequently, the Company was not required to perform the remaining two-step quantitative goodwill impairment test.

Other long-lived assets

The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate that an impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets.

For the years ended February 28, 2014, February 28, 2013 and February 29, 2012, no significant impairment losses related to the Company’s long-lived assets were identified.

Cash and cash equivalents

Cash and cash equivalents

The Company considers highly liquid investments purchased with a maturity period of three months or less at the date of purchase to be cash equivalents.

Accounts receivable and allowance for doubtful accounts

Accounts receivable and allowance for doubtful accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. See NOTE 4—Accounts Receivable for further discussion on accounts receivable balances.

Fair value measurements

Fair value measurements

Fair value is defined as the exchange price that would be received for the purchase of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s investments are comprised primarily of debt securities that are classified as available for sale and recorded at their fair market values. Liquid investments with effective maturities of three months or less from the balance sheet date (that is, time remaining on the day of purchase) are classified as cash equivalents. Investments with remaining effective maturities of twelve months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than twelve months from the balance sheet date are classified as long-term investments. The Company’s Level 1 financial instruments are valued using quoted prices in active markets for identical instruments. The Company’s Level 2 financial instruments, including derivative instruments, are valued using quoted prices for identical instruments in less active markets or using other observable market inputs for comparable instruments.

Unrealized gains and temporary losses on investments classified as available for sale are included within accumulated other comprehensive income, net of any related tax effect. Upon realization, such amounts are reclassified from accumulated other comprehensive income to other income, net. Realized gains and losses and other than temporary impairments, if any, are reflected in the statements of operations as other income, net. The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other than temporary. The vast majority of the Company’s investments are priced by pricing vendors. These pricing vendors use the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs. In the event observable inputs are not available, the Company assesses other factors to determine the security’s market value, including broker quotes or model valuations. Independent price verifications of all holdings are performed by pricing vendors which are then reviewed by the Company. In the event a price fails a pre-established tolerance check, it is researched so that the Company can assess the cause of the variance to determine what the Company believes is the appropriate fair market value. See NOTE 18—Assets and Liabilities Measured at Fair Value on a Recurring Basis for further discussion on fair value measurements.

The Company minimizes its credit risk associated with investments by investing primarily in investment grade, liquid securities. The Company’s policy is designed to limit exposures to any one issuer depending on credit quality. Periodic evaluations of the relative credit standing of those issuers are considered in the Company’s investment strategy.

Internal use software

Internal use software

The Company capitalizes costs related to the development of internal use software for its website, enterprise resource planning system and systems management applications. The Company amortizes the costs of computer software developed for internal use on a straight-line basis over an estimated useful life of five years. The carrying value of internal use software is included in property and equipment on the Company’s Consolidated Balance Sheets.

Capitalized software costs

Capitalized software costs

Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. As a result of the Company’s practice of releasing source code that it has developed on a weekly basis for unrestricted download on the Internet, there is generally no passage of time between achievement of technological feasibility and the availability of the Company’s product for general release. Therefore, at February 28, 2014 and February 28, 2013, the Company had no internally developed capitalized software costs for products to be sold to third parties.

Property and equipment

Property and equipment

Property and equipment is primarily comprised of furniture, computer equipment, computer software and leasehold improvements, which are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: furniture and fixtures, seven years; computer equipment, three to four years; computer software, five years; leasehold improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. Expenditures for maintenance and repairs are charged to operations as incurred; major expenditures for renewals and betterments are capitalized and depreciated. Property and equipment acquired under capital leases are depreciated over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease.

Share-based compensation

Share-based compensation

The Company measures share-based compensation cost at grant date, based on the estimated fair value of the award and recognizes the cost over the employee’s requisite service period typically on a straight-line basis, net of estimated forfeitures. The Company estimates the fair value of stock options using the Black-Scholes-Merton valuation model. The fair value of nonvested share awards, nonvested share units and performance share units (“PSUs”) are measured at their underlying closing share price on the date of grant. The Company’s share-based compensation is described further in NOTE 13—Share-based Awards.

Sales and marketing expenses

Sales and marketing expenses

Sales and marketing expenses consist of costs, including salaries, sales commissions and related expenses, such as travel, of all personnel involved in the sales and marketing process. Sales and marketing expenses also include costs of advertising, sales lead generation programs, cooperative marketing arrangements and trade shows. Payments made to resellers or other customers are recognized as a reduction of revenue unless the Company (i) receives an identifiable benefit (goods or services) in exchange for such payments that is sufficiently separable from the purchase of the Company’s products and (ii) the Company can reasonably estimate the fair value of the benefit identified. Advertising costs are expensed as incurred.

Advertising expense totaled $53.4 million, $42.7 million and $29.2 million for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively.

Research and development expenses

Research and development expenses

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new software products, significant enhancements to existing software products, and the portion of costs of development of internal use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

Income taxes

Income taxes

The Company accounts for income taxes using the liability method in which deferred tax assets or liabilities are recognized for the temporary differences between financial reporting and tax bases of the Company’s assets and liabilities and for tax carryforwards at enacted statutory tax rates in effect for the years in which the differences are expected to reverse.

The Company continues to assess the realizability of its deferred tax assets, which primarily consist of share-based compensation expense deductions, tax credit carryforwards and deferred revenue. In assessing the realizability of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The Company continues to maintain a valuation allowance against its deferred tax assets with respect to certain foreign net operating loss (“NOL”) carryforwards.

With respect to foreign earnings, it is the Company’s policy to invest the earnings of foreign subsidiaries indefinitely outside the U.S. From time to time, however, the Company may remit a portion of these earnings to the extent it incurs no additional U.S. tax and it is otherwise feasible.

Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in (i) calculating its income tax expense, deferred tax assets and deferred tax liabilities, (ii) determining any valuation allowance recorded against deferred tax assets and (iii) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. The Company’s income tax expense and deferred taxes are described further in NOTE 11—Income Taxes.

Foreign currency translation

Foreign currency translation

The Euro has been determined to be the primary functional currency for the Company’s European operations and local currencies have been determined to be the functional currencies for the Company’s Asia Pacific and Latin American operations, with the exception of the Company’s operations in Mexico, where the functional currency is the U.S. dollar. Foreign exchange gains and losses, which result from the process of remeasuring foreign currency transactions into the appropriate functional currency, are included in other income, net in the Company’s Consolidated Statements of Operations.

The impact of changes in foreign currency exchange rates resulting from the translation of foreign currency financial statements into U.S. dollars for financial reporting purposes is included in other comprehensive income, which is a separate component of stockholders’ equity. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average rates for the period.

Customers and credit risk

Customers and credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, investments and trade receivables. The Company primarily places its cash, cash equivalents and investments with high-credit quality financial institutions which invest predominantly in U.S. government instruments, investment grade corporate bonds and certificates of deposit guaranteed by banks which are members of the Federal Deposit Insurance Corporation. Cash deposits are primarily in financial institutions in the U.S. and the United Kingdom. However, cash for monthly operating costs of international operations are deposited in banks outside the U.S.

The Company performs credit evaluations to reduce credit risk and generally requires no collateral from its customers. Management estimates the allowance for uncollectible accounts based on their historical experience and credit evaluation. The Company’s standard credit terms are net 30 days in North America, net 30 to 45 days in EMEA (Europe, Middle East and Africa) and Latin America, and range from net 30 to net 60 days in Asia Pacific.

Net income per common share

Net income per common share

The Company computes basic net income per common share by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares and dilutive potential common share equivalents then outstanding. Potential common share equivalents consist of shares issuable upon the exercise of stock options or vesting of share-based awards.

Segment reporting

Segment reporting

The Company is organized primarily on the basis of three geographic business units: the Americas (U.S., Latin America and Canada), EMEA (Europe, Middle East and Africa) and Asia Pacific. These business units are aggregated into one reportable segment due to the similarity in nature of products and services provided, financial performance economic characteristics (e.g., revenue growth and gross margin), methods of production and distribution and customer classes (e.g., distributors, resellers and enterprise).

The Company has offices in more than 80 locations around the world. The Company manages its international business on an Americas-wide, EMEA-wide and Asia Pacific-wide basis. See NOTE 20—Segment Reporting for further discussion.

Recent accounting pronouncements

Recent accounting pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), to eliminate diversity in practice of presenting unrecognized tax benefits as a liability or presenting unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances by requiring that an unrecognized tax benefit be presented in the financial statements as a reduction to deferred tax assets excluding certain exceptions. ASU 2013-11 is effective prospectively for the Company in the first quarter of its fiscal year ending February 28, 2015. The Company does not believe that this updated standard will have a material impact on its consolidated financial statements.

In March 2013, the FASB issued Accounting Standards Update No. 2013-05, Foreign Currency Matters (Topic 830)—Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”), which requires a parent entity to release a related foreign entity’s cumulative translation adjustment into net income only if its sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-05 is effective prospectively for the Company in the first quarter of its fiscal year ending February 28, 2015. The Company does not believe that this updated standard will have a material impact on its consolidated financial statements.

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Company

12 Months Ended

Feb. 28, 2014

Company

NOTE 1—Company

Red Hat, Inc., incorporated in Delaware, together with its subsidiaries (“Red Hat” or the “Company”) is a leading global provider of open source software solutions, using a community-powered approach to develop and offer reliable and high-performing operating system, virtualization, middleware, storage and cloud technologies.

Open source software is an alternative to proprietary software and represents a different model for the development and licensing of commercial software code than that typically used for proprietary software. Because open source software code is often freely shared, there are customarily no licensing fees for the use of open source software. Therefore, the Company does not recognize revenue from the licensing of the code itself. The Company provides value to its customers through the development, aggregation, integration, testing, certification, delivery, maintenance, enhancement and support of its Red Hat enterprise technologies, and by providing a level of performance, reliability, scalability, flexibility, stability and security for the enterprise technologies the Company packages and distributes. Moreover, because communities of developers not employed by the Company assist with the creation of the Company’s open source offerings, opportunities for further innovation of the Company’s offerings are supplemented by these communities.

The Company derives its revenue and generates cash from customers primarily from two sources: (i) subscription revenue and (ii) training and services revenue. These arrangements typically involve subscriptions to Red Hat enterprise technologies. The arrangements with the Company’s customers that produce this revenue and cash are explained in further detail in NOTE 2—Summary of Significant Accounting Policies.

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Business Combinations (Tables)

12 Months Ended

Feb. 28, 2014

Pro Forma Consolidated Financial Information

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the years ended February 28, 2013 and February 29, 2012 (in thousands, except per share amounts) as if the acquisitions of Gluster, Polymita, FuseSource and ManageIQ had closed on March 1, 2011, after giving effect to certain purchase accounting adjustments. These pro forma results are not necessarily indicative of what the Company’s operating results would have been had the acquisitions actually taken place at the beginning of the period.

	Year ended February 28, 2013 (unaudited)		Year ended February 29, 2012 (unaudited)
Revenue	$	1,329,780	$	1,134,679
Net income and diluted net income		136,459		125,387
Basic net income per common share	$	0.71	$	0.65
Diluted net income per common share	$	0.70	$	0.64

Goodwill And Other Business Combinations

The following is a summary of goodwill for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

Balance at February 28, 2011	$	463,673
Acquisition of Gluster		126,716
Impact of foreign currency fluctuations and other adjustments		1,174
Balance at February 29, 2012	$	591,563
Acquisition of ManageIQ		83,074
Other acquisitions		17,462
Impact of foreign currency fluctuations and other adjustments		(1,188	)
Balance at February 28, 2013	$	690,911
Final purchase price allocation adjustment for ManageIQ (1)		(3,164	)
Impact of foreign currency fluctuations		(317	)
Balance at February 28, 2014	$	687,430

(1) The final measurement period adjustment of $3.2 million was not significant relative to the total consideration paid for ManageIQ and, therefore, the final adjustment has not been retrospectively applied to the Company’s Consolidated Balance Sheet as of February 28, 2013. If the Company had applied the adjustment retrospectively, the Deferred tax assets, net balance on the Company’s Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million higher and the Goodwill balance on its Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million lower.

ManageIQ, Inc.

Tangible and Identifiable Intangible Assets and Liabilities Based on Management's Assessment of Acquisition Date Fair value of Assets Acquired and Liabilities Assumed

The table below represents the tangible and identifiable intangible assets and liabilities (in thousands) based on management’s assessment of the acquisition date fair value of the assets acquired and liabilities assumed:

	Total Consideration Allocated
Identifiable intangible assets (see detail below)	$	17,340
Cash		222
Accounts receivable		570
Fixed assets		69
Deferred tax assets, net		6,610
Other assets		155
Accrued liabilities		(262	)
Deferred revenue		(132	)
Goodwill		79,910
Total consideration allocated	$	104,482

Summary of Allocation of Identifiable Intangible Asset Resulting from Acquisition

The following table summarizes the allocation of identifiable intangible assets resulting from the acquisition. For purposes of this allocation, the Company has assessed a fair value of ManageIQ’s identifiable intangible assets related to developed technology, employee covenants not to compete, customer relationships, and tradenames and trademarks based on the net present value of the projected income stream of these identifiable intangible assets. The fair value of the identifiable intangible assets is being amortized over the estimated useful life of each intangible asset on a straight-line basis which approximates the economic pattern of benefits (in thousands):

	Amortization Expense Type		Estimated  Life (Years)		Total
Developed technology		Cost of revenue		5	$	13,500
Employee covenants not to compete		Research and development		4		2,800
Customer relationships		Sales and marketing		5		1,000
Tradenames and trademarks		General and administrative		2		40
Total identifiable intangible assets					$	17,340

Gluster

Tangible and Identifiable Intangible Assets and Liabilities Based on Management's Assessment of Acquisition Date Fair value of Assets Acquired and Liabilities Assumed

The table below represents the tangible and identifiable intangible assets and liabilities (in thousands) based on management’s assessment of the acquisition date fair value of the assets acquired and liabilities assumed:

	Total Consideration Allocated
Identifiable intangible assets (see detail below)	$	6,800
Cash		696
Accounts receivable		321
Fixed assets		454
Deferred tax assets, net		3,263
Other assets		1,093
Accrued liabilities		(1,872	)
Deferred revenue		(321	)
Goodwill		126,716
Total consideration allocated	$	137,150

Summary of Allocation of Identifiable Intangible Asset Resulting from Acquisition

The following table summarizes the allocation of identifiable intangible assets resulting from the acquisition. For purposes of this allocation, the Company has assessed a fair value of Gluster identifiable intangible assets related to customer relationships and tradenames and trademarks based on the net present value of the projected income stream of these identifiable intangible assets. The fair value of the identifiable intangible assets is being amortized over the estimated useful life of each intangible asset on a straight-line basis which approximates the economic pattern of benefits (in thousands):

	Amortization Expense Type		Estimated  Life (Years)		Total
Customer relationships		Sales and marketing		5	$	6,200
Tradenames and trademarks		General and administrative		Indefinite		600
Total identifiable intangible assets					$	6,800

Summary of Consideration Transferred in Connection With Acquisition

The total consideration transferred by the Company in connection with the acquisition is summarized in the following table (in thousands):

	Total Consideration Transferred
Cash consideration paid to and/or on behalf of holders of Gluster stock and vested options	$	135,906
Fair value of unvested employee share-based awards assumed and attributed to pre-combination services (1)		1,244
Total	$	137,150

(1) The total fair value, as of October 7, 2011, of all assumed nonvested share-based awards was $14.5 million, of which $1.2 million has been attributed to pre-acquisition employee services and accordingly has been recognized as consideration transferred. The remaining $13.3 million of fair value will be recognized as compensation expense over the remaining vesting period.

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Common and Preferred Stock - Additional Information (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	10 Months Ended	12 Months Ended
	Apr. 15, 2013	Feb. 28, 2014 Vote	Feb. 28, 2014 Vote	Feb. 28, 2013 Vote	Feb. 29, 2012
Schedule of Common Stock as Converted [Line Items]
Common stock, shares authorized		300,000,000	300,000,000	300,000,000
Common stock, per share par value		$ 0.0001	$ 0.0001	$ 0.0001
Common stock votes per share		1	1	1
Common stock, purchased during the period	3,648,575	1,358,004	5,006,579	2,290,936	3,167,413
Aggregate cost of common stock repurchased	$ 179,300	$ 60,000	$ 239,363	$ 120,662	$ 133,220
Preferred stock, shares authorized		5,000,000	5,000,000	5,000,000
Preferred stock, per share par value		$ 0.0001	$ 0.0001	$ 0.0001
Preferred stock, shares outstanding		0	0	0

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Summary of Revenue, Income (Loss) from Operations, Total Assets and Total Cash, Cash Equivalents and Available-for-Sale Investment Securities by Geographic Segments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 28, 2014	Nov. 30, 2013	Aug. 31, 2013	May 31, 2013	Feb. 28, 2013	Nov. 30, 2012	Aug. 31, 2012	May 31, 2012	Feb. 28, 2014		Feb. 28, 2013		Feb. 29, 2012
Segment Reporting Information [Line Items]
Revenue from unaffiliated customers	$ 400,397	$ 396,536	$ 374,423	$ 363,259	$ 347,885	$ 343,606	$ 322,595	$ 314,731	$ 1,534,615		$ 1,328,817		$ 1,133,103
Income (loss) from operations	59,300	60,792	55,574	56,623	50,231	49,919	49,980	50,908	232,289		201,038		199,913
Cash, cash equivalents and available-for-sale investment securities	1,487,429				1,318,373				1,487,429		1,318,373		1,260,353
Total assets	3,106,619				2,813,660				3,106,619		2,813,660		2,491,099
Operating Segments | Americas
Segment Reporting Information [Line Items]
Revenue from unaffiliated customers									974,655		855,214		716,033
Income (loss) from operations									199,254		181,136		165,278
Cash, cash equivalents and available-for-sale investment securities	808,830				825,906				808,830		825,906		887,256
Total assets	2,153,828				2,068,879				2,153,828		2,068,879		1,898,897
Operating Segments | EMEA
Segment Reporting Information [Line Items]
Revenue from unaffiliated customers									352,935		284,922		257,603
Income (loss) from operations									94,949		72,440		74,581
Cash, cash equivalents and available-for-sale investment securities	517,397				370,174				517,397		370,174		299,703
Total assets	703,929				534,093				703,929		534,093		424,542
Operating Segments | Asia Pacific
Segment Reporting Information [Line Items]
Revenue from unaffiliated customers									207,025		188,681		159,467
Income (loss) from operations									51,860		46,160		39,321
Cash, cash equivalents and available-for-sale investment securities	161,202				122,293				161,202		122,293		73,394
Total assets	248,862				210,688				248,862		210,688		167,660
Corporate
Segment Reporting Information [Line Items]
Income (loss) from operations									$ (113,774)	[1]	$ (98,698)	[1]	$ (79,267)	[1]

[1] Amounts represent share-based compensation expense for each of the three fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, which was not allocated to geographic segments.

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Income Taxes (Tables)

12 Months Ended

Feb. 28, 2014

Schedule of U.S. and Foreign Components of Income Before Provision for Income Taxes

The U.S. and foreign components of the Company’s income before provision for income taxes consisted of the following (in thousands):

	February 28, 2014		February 28, 2013		February 29, 2012
U.S.	$	135,371	$	130,560	$	147,148
Foreign		104,177		79,192		60,861
Income before provision for income taxes	$	239,548	$	209,752	$	208,009

Schedule of Components of Provision for Income Taxes

The components of the Company’s provision for income taxes consisted of the following (in thousands):

	February 28, 2014			February 28, 2013			February 29, 2012
Current:
Foreign	$	23,391		$	16,556		$	16,612
Federal		19,734			33,598			18,609
State		7,147			1,882			3,069
Current tax expense	$	50,272		$	52,036		$	38,290
Deferred:
Foreign		(1,100	)		2,899			(4,390	)
Federal		14,468			9,687			27,483
State		(2,384	)		(5,074	)		—
Deferred tax expense	$	10,984		$	7,512		$	23,093
Net provision for income taxes	$	61,256		$	59,548		$	61,383

Schedule of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2014 and February 28, 2013, consisted of the following (in thousands):

	February 28, 2014			February 28, 2013
Deferred tax assets:
Foreign net operating loss carryforwards	$	4,016		$	7,629
Domestic net operating loss carryforwards		8,650			12,227
Domestic credit carryforwards		24,045			29,062
Share-based compensation		32,478			26,781
Deferred revenue		49,749			43,066
Foreign deferred royalty expenses		8,396			6,000
Other		10,599			8,299
Total deferred tax assets	$	137,933		$	133,064
Valuation allowance for deferred tax assets		(699	)		(659	)
Total deferred tax assets, net of valuation allowance	$	137,234		$	132,405
Deferred tax liabilities:
Goodwill		5,163			2,971
Fixed and intangible assets		28,283			23,905
Compensation accruals		12,738			9,124
Other		3,342			8,132
Total deferred tax liabilities	$	49,526		$	44,132
Net deferred tax asset	$	87,708		$	88,273

Gross and Net Deferred Tax Assets and Liability Positions

The Company’s gross and net deferred tax asset and liability positions at February 28, 2014 are as follows (in thousands):

	Domestic			Foreign			Consolidated
Deferred tax assets:
Current	$	108,678		$	11,350		$	120,028
Non-current		9,125			8,081			17,206
Deferred tax liabilities:
Current		8,753			3,681			12,434
Non-current		35,522			1,570			37,092
Net deferred tax asset	$	73,528		$	14,180		$	87,708
Net current deferred tax asset	$	99,925		$	8,339		$	108,264
Net non-current deferred tax asset, recorded in Other assets, net		—			7,655			7,655
Net current deferred tax liability, recorded in Other current obligations		—			(670	)		(670	)
Net non-current deferred tax liability, recorded in Other long-term obligations		(26,397	)		(1,144	)		(27,541	)
Net deferred tax asset	$	73,528		$	14,180		$	87,708

Reconciliation of Statutory Federal Income Tax Rates to Provision for Income Taxes

Taxes computed at the statutory federal income tax rates are reconciled to the provision for income taxes for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively, as follows (in thousands):

	February 28, 2014			February 28, 2013			February 29, 2012
Effective rate		25.6	%		28.4	%		29.5	%
Provision at federal statutory rate, 35%	$	83,842		$	73,413		$	72,803
State tax, net of federal tax benefit (1)		3,169			907			3,070
Foreign rate differential		(10,817	)		(7,034	)		(7,631	)
Israel tax holiday (2)		(1,901	)		(1,806	)		(1,447	)
Foreign dividend		623			5,787			3,721
Nondeductible items		2,157			2,141			2,923
Research tax credit		(3,070	)		(5,348	)		(2,357	)
Foreign tax credit		(11,878	)		(7,852	)		(10,830	)
Domestic production activities deduction		(4,973	)		—			—
Other		4,104			(660	)		1,131
Provision for income taxes	$	61,256		$	59,548		$	61,383

(1) During the year ended February 28, 2013, the Company amended its state income tax returns for prior years, which resulted in a reduction of state tax, net of federal tax benefit, of $3.4 million.

(2) The Company qualifies for a tax holiday in Israel which began during the fiscal year ended February 28, 2011 and is scheduled to terminate as of the fiscal year ending February 29, 2020. The tax holiday provides for an exemption from income tax in the first two years, and for a reduced rate of taxation on income generated in Israel for the subsequent eight years. The financial impact of this holiday for the year ended February 28, 2014 was a $1.9 million reduction in the Company’s provision for income taxes, which increased the Company’s diluted earnings per share by $0.01.

Schedule of Unrecognized Tax Benefits

The following table reconciles unrecognized tax benefits for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

Balance at February 28, 2011	$	42,083
Additions based on tax positions related to the current year		2,066
Additions based on tax positions related to prior years		531
Reductions related to settlements with tax authorities		(259	)
Reductions related to changes in facts and circumstances		(659	)
Balance at February 29, 2012	$	43,762
Additions based on tax positions related to prior years		2,122
Additions based on tax positions related to the current year		2,576
Reductions related to changes in facts and circumstances		(147	)
Balance at February 28, 2013	$	48,313
Additions based on tax positions related to prior years		100
Additions based on tax positions related to the current year		9,005
Reductions related to settlements with tax authorities		(364	)
Balance at February 28, 2014	$	57,054

Summary of Tax Years Subject to Examination

The following table summarizes the tax years in the Company’s major tax jurisdictions that remain subject to income tax examinations by tax authorities as of February 28, 2014. Due to NOL carryforwards, in some cases the tax years continue to remain subject to examination with respect to such NOLs:

Tax Jurisdiction	Years Subject to Income  Tax Examination
U.S. federal		1994 – Present
North Carolina		1999 – Present
Ireland		2008 – Present
Japan (1)		2012 – Present

(1) The Company has been examined for income tax for years through February 28, 2011. A tax examination was concluded in fiscal 2012 with no significant adjustments resulting. However, the statute of limitations remains open for five years.

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Summary of Allocation of Identifiable Intangible Asset Resulting from Acquisition (Detail) (USD $) In Thousands, unless otherwise specified			1 Months Ended					12 Months Ended		1 Months Ended
	Feb. 28, 2013	Dec. 21, 2012 ManageIQ, Inc.	Dec. 21, 2012 ManageIQ, Inc. Application Development Related And Other Emerging Technology Subscriptions Cost of Revenue	Dec. 21, 2012 ManageIQ, Inc. Employee Covenants Not To Compete Research and Development	Dec. 21, 2012 ManageIQ, Inc. Customer Relationships Sales and Marketing	Dec. 21, 2012 ManageIQ, Inc. Tradenames And Trademarks General and Administrative	Oct. 07, 2011 Gluster	Feb. 28, 2014 Gluster General and Administrative Tradenames And Trademarks	Oct. 07, 2011 Gluster General and Administrative Tradenames And Trademarks	Oct. 07, 2011 Gluster Customer Relationships Sales and Marketing
Finite Lived Intangible Assets Amortization Expense [Line Items]
Estimated Life			5 years	4 years	5 years	2 years				5 years
Estimated Life								Indefinite
Total identifiable intangible assets	$ 30,600	$ 17,340	$ 13,500	$ 2,800	$ 1,000	$ 40	$ 6,800		$ 600	$ 6,200

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Summary of Effects of Derivative Instruments (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013
Derivative [Line Items]
Total, Fair Value	$ 119	$ 61
Amount of Gain (Loss) Recognized in Income on Derivative	(1,550)	(386)
Forward contracts
Derivative [Line Items]
Notional value of foreign currency foreign currency forward contracts not designated as hedges	28,336	65,542
Other Current Assets
Derivative [Line Items]
Assets-foreign currency forward contracts not designated as hedges	134	280
Notional value of foreign currency foreign currency forward contracts not designated as hedges	24,790	36,214
Accounts Payable and Accrued Liabilities
Derivative [Line Items]
Liabilities-foreign currency forward contracts not designated as hedges	(15)	(219)
Notional value of foreign currency foreign currency forward contracts not designated as hedges	3,546	29,328
Other Income (Expense), Net | Other Current Assets
Derivative [Line Items]
Amount of Gain (Loss) Recognized in Income on Derivative	1,147	1,309
Other Income (Expense), Net | Accounts Payable and Accrued Liabilities
Derivative [Line Items]
Amount of Gain (Loss) Recognized in Income on Derivative	$ (2,697)	$ (1,695)

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Current assets:
Cash and cash equivalents	$ 646,742	$ 487,084
Investments in available-for-sale securities, current	335,387	392,381
Accounts receivable, net of allowances for doubtful accounts of $1,986 and $1,339, respectively	360,594	302,942
Deferred tax assets, net	108,264	88,765
Prepaid expenses	118,387	94,421
Other current assets	1,808	3,156
Total current assets	1,571,182	1,368,749
Property and equipment, net of accumulated depreciation and amortization of $209,295 and $189,985, respectively	173,917	141,586
Goodwill	687,430	690,911
Identifiable intangibles, net	133,399	142,243
Investments in available-for-sale securities, long-term	505,300	438,908
Other assets, net	35,391	31,263
Total assets	3,106,619	2,813,660
Current liabilities:
Accounts payable and accrued expenses	179,468	154,202
Deferred revenue	966,832	830,486
Other current obligations	1,786	1,024
Total current liabilities	1,148,086	985,712
Long-term deferred revenue	322,365	259,466
Other long-term obligations	85,003	48,321
Commitments and contingencies (NOTES 14 and 15)
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized, none outstanding
Common stock, $0.0001 per share par value, 300,000,000 shares authorized, 230,915,589 and 229,210,961 shares issued, 189,712,211 and 193,021,226 shares outstanding at February 28, 2014 and February 28, 2013, respectively	23	23
Additional paid-in capital	1,891,848	1,802,899
Retained earnings	720,172	541,880
Treasury stock at cost, 41,203,378 and 36,189,735 shares at February 28, 2014 and February 28, 2013, respectively	(1,056,419)	(816,674)
Accumulated other comprehensive loss	(4,459)	(7,967)
Total stockholders' equity	1,551,165	1,520,161
Total liabilities and stockholders' equity	$ 3,106,619	$ 2,813,660

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Earnings Per Share (Tables)

12 Months Ended

Feb. 28, 2014

Reconciliation of Numerators and Denominators of Earnings Per Share Calculation

The following table reconciles the numerators and denominators of the earnings per share calculation for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands, except per share amounts):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Net income, basic and diluted	$	178,292	$	150,204	$	146,626
Weighted average common shares outstanding		189,920		193,147		193,151
Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares		2,116		2,657		3,300
Diluted shares		192,036		195,804		196,451
Net income per share—diluted	$	0.93	$	0.77	$	0.75

Shares Considered Anti-Dilutive for Calculating Diluted EPS

The following share awards are not included in the computation of diluted earnings per share because the aggregate value of proceeds considered received upon either exercise or vesting was greater than the average market price of the Company’s common stock during the related periods and the effect of including such share awards in the computation would be anti-dilutive (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Number of shares considered anti-dilutive for calculating diluted EPS		360		77		311

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Intrinsic Value Of Service - Based Awards (Detail) (Service Based Share Units, USD $) In Thousands, except Share data, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012	Feb. 28, 2011
Service Based Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares and Share Units, Outstanding	5,373,308	5,193,433	5,486,639	5,793,338
Number of Shares and Share Units, Expected to vest	4,553,165
Weighted Average Remaining Vesting Period, Outstanding (in years)	1 year 6 months
Weighted Average Remaining Vesting Period, Expected to vest (in years)	1 year 6 months
Intrinsic Value, Outstanding	$ 316,971
Intrinsic Value, Expected to vest	$ 268,591

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Shares Considered Anti-Dilutive for Calculating Diluted EPS (Detail) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of shares considered anti-dilutive for calculating diluted EPS	360	77	311

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Consolidated Statements of Stockholders' Equity (USD $) In Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)
Balance at Feb. 28, 2011	$ 1,290,699	$ 22	$ 1,610,238	$ 245,050	$ (562,792)	$ (1,819)
Balance (in shares) at Feb. 28, 2011		223,778
Net income	146,626			146,626
Other comprehensive income (loss), net of tax	(4,133)					(4,133)
Vest and exercise of share-based awards (in shares)		2,775
Vest and exercise of share-based awards	16,812	1	16,811
Common stock repurchase	(133,220)				(133,220)
Share-based compensation expense	79,267		79,267
Assumed employee share-based awards from acquisitions	1,244		1,244
Tax benefits related to share-based awards	37,854		37,854
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards	(36,332)		(36,332)
Balance at Feb. 29, 2012	1,398,817	23	1,709,082	391,676	(696,012)	(5,952)
Balance (in shares) at Feb. 29, 2012		226,553
Net income	150,204			150,204
Other comprehensive income (loss), net of tax	(2,015)					(2,015)
Vest and exercise of share-based awards (in shares)		2,658
Vest and exercise of share-based awards	11,478		11,478
Common stock repurchase	(120,662)				(120,662)
Share-based compensation expense	98,698		98,698
Tax benefits related to share-based awards	33,625		33,625
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards	(49,984)		(49,984)
Balance at Feb. 28, 2013	1,520,161	23	1,802,899	541,880	(816,674)	(7,967)
Balance (in shares) at Feb. 28, 2013		229,211
Net income	178,292			178,292
Other comprehensive income (loss), net of tax	3,508					3,508
Vest and exercise of share-based awards (in shares)		1,705
Vest and exercise of share-based awards	2,122		2,122
Common stock repurchase	(239,363)				(239,363)
Share-based compensation expense	113,774		113,774
Tax benefits related to share-based awards	10,073		10,073
Minimum tax withholdings paid by the Company on behalf of employees related to net settlement of employee share-based awards	(37,402)		(37,402)
Other			382		(382)
Balance at Feb. 28, 2014	$ 1,551,165	$ 23	$ 1,891,848	$ 720,172	$ (1,056,419)	$ (4,459)
Balance (in shares) at Feb. 28, 2014		230,916

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Total Fair Value Service Performance Based Awards Recognized (Detail) (Service Based Share Units, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Service Based Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total fair value of service-based awards recognized	$ 92,450	$ 76,460	$ 61,818

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Activities In Allowance For Doubtful Accounts (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014		Feb. 28, 2013		Feb. 29, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance at beginning of period	$ 1,339		$ 1,877		$ 1,379
Charged to (recovery of) expense	841		(102)		989
Adjustments	(194)	[1]	(436)	[1]	(491)	[1]
Balance at end of period	$ 1,986		$ 1,339		$ 1,877

[1] Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable.

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Activity For Performance-Based Share Units (Detail) (Performance Share Units, USD $)	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Performance Share Units
Shares Underlying Performance Share Units
Beginning Balance	1,504,670	1,725,607	1,430,005
Granted	671,448	613,800	633,336
Vested	(399,334)	(634,384)	(337,734)
Forfeited	(101,559)	(200,353)
Ending balance	1,675,225	1,504,670	1,725,607
Weighted Average Grant-date Fair Value
Weighted Average Grant-date Fair Value, beginning balance	$ 43.22	$ 31.60	$ 24.48
Granted, Weighted Average Grant-date Fair Value	$ 47.86	$ 52.23	$ 43.60
Vested, Weighted Average Grant-date Fair Value	$ 33.47	$ 23.62	$ 23.98
Forfeited, Weighted Average Grant-date Fair Value	$ 44.34	$ 32.81
Weighted Average Grant-date Fair Value, ending balance	$ 47.34	$ 43.22	$ 31.60

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Identifiable Intangible Assets (Tables)

12 Months Ended

Feb. 28, 2014

Summary of Identifiable Intangible Assets

The following is a summary of identifiable intangible assets (in thousands):

	February 28, 2014							February 28, 2013
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Trademarks, copyrights and patents	$	105,269	$	(34,784	)	$	70,485	$	94,020	$	(27,412	)	$	66,608
Purchased technologies		79,433		(55,960	)		23,473		79,201		(46,507	)		32,694
Customer and reseller relationships		89,992		(63,075	)		26,917		89,959		(53,391	)		36,568
Covenants not to compete		10,690		(5,977	)		4,713		10,516		(4,143	)		6,373
Other intangible assets		8,922		(1,111	)		7,811		—		—			—
Total identifiable intangible assets	$	294,306	$	(160,907	)	$	133,399	$	273,696	$	(131,453	)	$	142,243

Schedule of Amortization Expense Associated with Identifiable Intangible Assets

Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is summarized as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Cost of revenue	$	11,212	$	5,943	$	3,533
Sales and marketing		8,872		8,416		8,348
Research and development		3,836		3,836		4,194
General and administrative		5,316		5,328		3,674
Total amortization expense	$	29,236	$	23,523	$	19,749

Schedule of Amortization Expense

As of February 28, 2014, future amortization expense on existing intangibles is as follows (in thousands):

Fiscal Year	Amortization Expense of Intangible Assets
2015	$	29,293
2016		22,727
2017		20,146
2018		16,238
2019		12,740
Thereafter		22,617
Total amortization expense	$	123,761

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Summary of Identifiable Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 294,306	$ 273,696
Accumulated Amortization	(160,907)	(131,453)
Net Amount	133,399	142,243
Trademarks, Copyrights and Patents
Finite-Lived Intangible Assets [Line Items]
Gross Amount	105,269	94,020
Accumulated Amortization	(34,784)	(27,412)
Net Amount	70,485	66,608
Purchased Technologies
Finite-Lived Intangible Assets [Line Items]
Gross Amount	79,433	79,201
Accumulated Amortization	(55,960)	(46,507)
Net Amount	23,473	32,694
Customer and Reseller Relationships
Finite-Lived Intangible Assets [Line Items]
Gross Amount	89,992	89,959
Accumulated Amortization	(63,075)	(53,391)
Net Amount	26,917	36,568
Covenants Not To Compete
Finite-Lived Intangible Assets [Line Items]
Gross Amount	10,690	10,516
Accumulated Amortization	(5,977)	(4,143)
Net Amount	4,713	6,373
Other Intangible Assets
Finite-Lived Intangible Assets [Line Items]
Gross Amount	8,922
Accumulated Amortization	(1,111)
Net Amount	$ 7,811

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Legal Proceedings

12 Months Ended

Feb. 28, 2014

Legal Proceedings

NOTE 15—Legal Proceedings

The Company experiences routine litigation in the normal course of its business, including patent litigation. The Company presently believes that the outcome of this routine litigation will not have a material adverse effect on its financial condition, results of operations or cash flows.

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Other Assets, Net (Tables)

12 Months Ended

Feb. 28, 2014

Components of Other Assets, Net

Other assets, net were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Cost-basis investments (1)	$	21,801	$	5,354
Net non-current deferred tax assets (see NOTE 11—Income Taxes)		7,655		5,226
Security deposits and other		5,935		5,123
Equity-method investment (1)		—		15,560
Other assets, net	$	35,391	$	31,263

(1) Equity-method investment represents the Company’s investment in Open Invention Network LLC (“OIN”) and the related share of OIN’s accumulated deficit for the fiscal year ended February 28, 2013. During the fourth quarter of the fiscal year ended February 28, 2014, OIN accepted an additional full member which decreased the Company’s overall influence as well as ownership stake in OIN below the threshold prescribed by U.S. GAAP to qualify for equity method accounting treatment. As a result, the Company’s investment in OIN was reclassified as a cost-basis investment for the fiscal year ended February 28, 2014 and totaled $14.2 million as of February 28, 2014.

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Total Intrinsic value of Service-Based Awards (Detail) (Service Based Share Units, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Service Based Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of service-based awards vesting	$ 88,969	$ 118,299	$ 96,536

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Share Repurchase Program

12 Months Ended

Feb. 28, 2014

Share Repurchase Program

NOTE 17—Share Repurchase Program

Between March 1, 2013, and April 15, 2013, the Company repurchased an aggregate of 3,648,575 shares of its common stock for $179.3 million. These repurchases were made pursuant to the Company’s repurchase program previously announced on March 28, 2012, and completed the repurchases authorized under such program.

On April 15, 2013, the Company announced that its Board of Directors has authorized the repurchase of up to $300.0 million of Red Hat’s common stock from time to time on the open market or in privately negotiated transactions. The program commenced on April 16, 2013, and will expire on the earlier of (i) March 31, 2015, or (ii) a determination by the Board, Chief Executive Officer or Chief Financial Officer to discontinue the program.

As of February 28, 2014, the Company had repurchased 1,358,004 shares of its common stock for $60.0 million under this program. As of February 28, 2014, the amount available under the program for the repurchase of the Company’s common stock was $240.0 million.

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Components of Other Assets ,Net (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014		Feb. 28, 2013
Other Assets [Line Items]
Cost-basis investments	$ 21,801	[1]	$ 5,354	[1]
Net non-current deferred tax assets (see NOTE 11-Income Taxes)	7,655		5,226
Security deposits and other	5,935		5,123
Equity-method investment			15,560	[1]
Other assets, net	35,391		31,263
Open Invention Network Llc
Other Assets [Line Items]
Cost-basis investments	$ 14,200

[1] Equity-method investment represents the Company's investment in Open Invention Network LLC ("OIN") and the related share of OIN's accumulated deficit for the fiscal year ended February 28, 2013. During the fourth quarter of the fiscal year ended February 28, 2014, OIN accepted an additional full member which decreased the Company's overall influence as well as ownership stake in OIN below the threshold prescribed by U.S. GAAP to qualify for equity method accounting treatment. As a result, the Company's investment in OIN was reclassified as a cost-basis investment for the fiscal year ended February 28, 2014 and totaled $14.2 million as of February 28, 2014.

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Fair Value of Assets and Liabilities Acquired (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash	$ 443.2	$ 296.9

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Cash flows from operating activities:
Net income	$ 178,292	$ 150,204	$ 146,626
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	74,405	62,341	51,372
Deferred income taxes	26,613	39,849	45,702
Excess tax benefits from share-based payment arrangements	(12,837)	(34,219)	(29,931)
Share-based compensation expense	113,774	98,698	79,267
Net amortization of bond premium on debt securities available for sale	8,697	6,889	6,518
Other	1,411	(2,626)	(1,186)
Changes in operating assets and liabilities net of effects of acquisitions:
Accounts receivable	(61,785)	(46,913)	(70,410)
Prepaid expenses	(25,122)	(14,726)	(19,190)
Accounts payable and accrued expenses	28,436	40,196	5,986
Deferred revenue	205,357	162,574	176,855
Other	3,339	3,030	274
Net cash provided by operating activities	540,580	465,297	391,883
Cash flows from investing activities:
Purchase of investment in debt securities available for sale	(772,741)	(875,428)	(962,974)
Proceeds from sales and maturities of investment in debt securities available for sale	764,122	741,301	791,585
Acquisitions of businesses, net of cash acquired		(135,501)	(135,210)
Purchase of developed software and other intangible assets	(17,972)	(34,367)	(5,349)
Purchase of property and equipment	(79,587)	(85,671)	(46,269)
Other	(2,084)	617	(643)
Net cash used in investing activities	(108,262)	(389,049)	(358,860)
Cash flows from financing activities:
Excess tax benefits from share-based payment arrangements	12,837	34,219	29,931
Proceeds from exercise of common stock options	2,122	11,478	16,812
Purchase of treasury stock	(239,363)	(120,662)	(133,220)
Payments related to settlement of employee shared-based awards	(37,402)	(49,984)	(36,332)
Payments on other borrowings	(1,304)	(1,016)	(1,027)
Net cash used in financing activities	(263,110)	(125,965)	(123,836)
Effect of foreign currency exchange rates on cash and cash equivalents	(9,550)	(12,416)	(2,600)
Net increase (decrease) in cash and cash equivalents	159,658	(62,133)	(93,413)
Cash and cash equivalents at beginning of year	487,084	549,217	642,630
Cash and cash equivalents at end of year	646,742	487,084	549,217
Cash paid during the year for:
Interest	43	50	45
Income taxes	34,736	14,863	12,381
Non-cash investing and financing activities:
Fixed assets acquired under capital leases	$ 1,560	$ 1,137	$ 1,746

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Accounts receivable, allowances for doubtful accounts	$ 1,986	$ 1,339
Property and equipment, accumulated depreciation and amortization	$ 209,295	$ 189,985
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, outstanding	0	0
Common stock, per share par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	230,915,589	229,210,961
Common stock, shares outstanding	189,712,211	193,021,226
Treasury stock, shares	41,203,378	36,189,735

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Derivative Instruments

12 Months Ended

Feb. 28, 2014

Derivative Instruments

NOTE 10—Derivative Instruments

The Company transacts business in various foreign countries and is, therefore, subject to risk of foreign currency exchange rate fluctuations. The Company from time to time enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. All derivative instruments are recorded on the Consolidated Balance Sheets at their respective fair market values. The Company has elected not to prepare and maintain the documentation required to qualify its forward contracts for hedge accounting treatment and, therefore, changes in fair value are recorded in the Consolidated Statements of Operations.

The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of February 28, 2014 and for the year then ended (in thousands):

							Year ended February 28, 2014
	As of February 28, 2014						Classification of  Gain (Loss) Recognized in Income  on Derivatives	Amount of  Gain (Loss) Recognized in Income on Derivatives
	Balance Sheet Classification	Fair Value			Notional Value
Assets—foreign currency forward contracts not designated as hedges	Other current assets	$	134		$	24,790	Other income (expense), net	$	1,147
Liabilities—foreign currency forward contracts not designated as hedges	Accounts payable and accrued expenses		(15	)		3,546	Other income (expense), net		(2,697	)
TOTAL		$	119		$	28,336		$	(1,550	)

The effects of derivative instruments on the Company’s Consolidated Financial Statements are as follows as of February 28, 2013 and for the year then ended (in thousands):

							Year ended February 28, 2013
	As of February 28, 2013						Classification of  Gain (Loss) Recognized in Income  on Derivatives	Amount of  Gain (Loss) Recognized in Income on Derivatives
	Balance Sheet Classification	Fair Value			Notional Value
Assets—foreign currency forward contracts not designated as hedges	Other current assets	$	280		$	36,214	Other income (expense), net	$	1,309
Liabilities—foreign currency forward contracts not designated as hedges	Accounts payable and accrued expenses		(219	)		29,328	Other income (expense), net		(1,695	)
TOTAL		$	61		$	65,542		$	(386	)

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Rent Expense Under Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Commitments and Contingencies Disclosure [Line Items]
Total operating lease expense	$ 29,472	$ 26,830	$ 24,434

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Summary of Fair Value of Options Granted (Parenthetical) (Detail)	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Share based Compensation Arrangement Assumptions Used to Estimate Fair Values of Share Options Granted [Line Items]
Expected life (in years)	3 years 3 months 7 days	3 years 3 months 7 days	3 years 3 months 7 days

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Intrinsic Value of Stock Options Exercised (Parenthetical) (Detail)	12 Months Ended
	Feb. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Stock Options, Expected to vest annual forfeiture rate	10.00%

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Other Long-Term Obligation (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Other Long Term Liabilities [Line Items]
Accrued income taxes	$ 45,645	$ 32,530
Deferred rent credits	10,879	9,299
Net non-current deferred tax liability	27,541	5,718
Other	938	774
Other long-term obligations	$ 85,003	$ 48,321

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Document and Entity Information (USD $)	12 Months Ended
	Feb. 28, 2014	Apr. 16, 2014	Aug. 30, 2013
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Feb. 28, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Trading Symbol	RHT
Entity Registrant Name	RED HAT INC
Entity Central Index Key	0001087423
Current Fiscal Year End Date	--02-28
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		189,344,281
Entity Public Float			$ 8,000,000,000

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Income Taxes

12 Months Ended

Feb. 28, 2014

Income Taxes

NOTE 11—Income Taxes

The U.S. and foreign components of the Company’s income before provision for income taxes consisted of the following (in thousands):

	February 28, 2014		February 28, 2013		February 29, 2012
U.S.	$	135,371	$	130,560	$	147,148
Foreign		104,177		79,192		60,861
Income before provision for income taxes	$	239,548	$	209,752	$	208,009

The components of the Company’s provision for income taxes consisted of the following (in thousands):

	February 28, 2014			February 28, 2013			February 29, 2012
Current:
Foreign	$	23,391		$	16,556		$	16,612
Federal		19,734			33,598			18,609
State		7,147			1,882			3,069
Current tax expense	$	50,272		$	52,036		$	38,290
Deferred:
Foreign		(1,100	)		2,899			(4,390	)
Federal		14,468			9,687			27,483
State		(2,384	)		(5,074	)		—
Deferred tax expense	$	10,984		$	7,512		$	23,093
Net provision for income taxes	$	61,256		$	59,548		$	61,383

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2014 and February 28, 2013, consisted of the following (in thousands):

	February 28, 2014			February 28, 2013
Deferred tax assets:
Foreign net operating loss carryforwards	$	4,016		$	7,629
Domestic net operating loss carryforwards		8,650			12,227
Domestic credit carryforwards		24,045			29,062
Share-based compensation		32,478			26,781
Deferred revenue		49,749			43,066
Foreign deferred royalty expenses		8,396			6,000
Other		10,599			8,299
Total deferred tax assets	$	137,933		$	133,064
Valuation allowance for deferred tax assets		(699	)		(659	)
Total deferred tax assets, net of valuation allowance	$	137,234		$	132,405
Deferred tax liabilities:
Goodwill		5,163			2,971
Fixed and intangible assets		28,283			23,905
Compensation accruals		12,738			9,124
Other		3,342			8,132
Total deferred tax liabilities	$	49,526		$	44,132
Net deferred tax asset	$	87,708		$	88,273

The Company’s gross and net deferred tax asset and liability positions at February 28, 2014 are as follows (in thousands):

	Domestic			Foreign			Consolidated
Deferred tax assets:
Current	$	108,678		$	11,350		$	120,028
Non-current		9,125			8,081			17,206
Deferred tax liabilities:
Current		8,753			3,681			12,434
Non-current		35,522			1,570			37,092
Net deferred tax asset	$	73,528		$	14,180		$	87,708
Net current deferred tax asset	$	99,925		$	8,339		$	108,264
Net non-current deferred tax asset, recorded in Other assets, net		—			7,655			7,655
Net current deferred tax liability, recorded in Other current obligations		—			(670	)		(670	)
Net non-current deferred tax liability, recorded in Other long-term obligations		(26,397	)		(1,144	)		(27,541	)
Net deferred tax asset	$	73,528		$	14,180		$	87,708

As of February 28, 2014, the Company continues to maintain a valuation allowance against its deferred tax assets with respect to certain state NOLs.

As of February 28, 2014, the Company had U.S. federal NOL carryforwards of $23.5 million and state NOL carryforwards of $114.5 million, of which $55.5 million consists of share-based compensation deductions in excess of the amounts expensed in the Company’s operating results. The resulting excess tax benefit will be recognized as an increase to additional paid in capital when realized. The NOL carryforwards expire in varying amounts beginning in the fiscal year ending February 29, 2016. As of February 28, 2014, the Company had U.S. federal research tax credit carryforwards of $30.6 million and state research tax credit carryforwards of $10.5 million, which expire in varying amounts beginning in the fiscal year ending February 28, 2018.

Taxes computed at the statutory federal income tax rates are reconciled to the provision for income taxes for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively, as follows (in thousands):

	February 28, 2014			February 28, 2013			February 29, 2012
Effective rate		25.6	%		28.4	%		29.5	%
Provision at federal statutory rate, 35%	$	83,842		$	73,413		$	72,803
State tax, net of federal tax benefit (1)		3,169			907			3,070
Foreign rate differential		(10,817	)		(7,034	)		(7,631	)
Israel tax holiday (2)		(1,901	)		(1,806	)		(1,447	)
Foreign dividend		623			5,787			3,721
Nondeductible items		2,157			2,141			2,923
Research tax credit		(3,070	)		(5,348	)		(2,357	)
Foreign tax credit		(11,878	)		(7,852	)		(10,830	)
Domestic production activities deduction		(4,973	)		—			—
Other		4,104			(660	)		1,131
Provision for income taxes	$	61,256		$	59,548		$	61,383

(1) During the year ended February 28, 2013, the Company amended its state income tax returns for prior years, which resulted in a reduction of state tax, net of federal tax benefit, of $3.4 million.

(2) The Company qualifies for a tax holiday in Israel which began during the fiscal year ended February 28, 2011 and is scheduled to terminate as of the fiscal year ending February 29, 2020. The tax holiday provides for an exemption from income tax in the first two years, and for a reduced rate of taxation on income generated in Israel for the subsequent eight years. The financial impact of this holiday for the year ended February 28, 2014 was a $1.9 million reduction in the Company’s provision for income taxes, which increased the Company’s diluted earnings per share by $0.01.

As of February 28, 2014, cumulative undistributed earnings of non-U.S. subsidiaries totaled $296.4 million. Determination of the deferred tax liability, if any, on these earnings reinvested indefinitely outside the U.S. is not practicable because of available foreign tax credits. It is the Company’s policy to invest the earnings of foreign subsidiaries indefinitely outside the U.S. From time to time, however, the Company may remit a portion of these earnings to the extent it does not incur additional U.S. tax and it is otherwise feasible. The Company has provided U.S. income taxes on the earnings of certain foreign subsidiaries that are not considered as permanently reinvested outside the U.S. The U.S. income tax on such earnings is completely offset by U.S. foreign tax credits.

Unrecognized tax benefits

The following table reconciles unrecognized tax benefits for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

Balance at February 28, 2011	$	42,083
Additions based on tax positions related to the current year		2,066
Additions based on tax positions related to prior years		531
Reductions related to settlements with tax authorities		(259	)
Reductions related to changes in facts and circumstances		(659	)
Balance at February 29, 2012	$	43,762
Additions based on tax positions related to prior years		2,122
Additions based on tax positions related to the current year		2,576
Reductions related to changes in facts and circumstances		(147	)
Balance at February 28, 2013	$	48,313
Additions based on tax positions related to prior years		100
Additions based on tax positions related to the current year		9,005
Reductions related to settlements with tax authorities		(364	)
Balance at February 28, 2014	$	57,054

The Company’s unrecognized tax benefits as February 28, 2014 and February 28, 2013, which, if recognized, would affect the Company’s effective tax rate were $49.7 million and $45.3 million, respectively.

It is the Company’s policy to recognize interest and penalties related to uncertain tax positions as income tax expense. Accrued interest and penalties related to unrecognized tax benefits totaled $6.0 million and $4.2 million as of February 28, 2014 and February 28, 2013, respectively.

The results and timing of the resolution of tax audits is highly uncertain and the Company is unable to estimate the range of the possible changes to the balance of unrecognized tax benefits. However, the Company does not anticipate that within the next 12 months that the total amount of unrecognized tax benefits will significantly increase or decrease as a result of any such potential tax audit resolutions.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The following table summarizes the tax years in the Company’s major tax jurisdictions that remain subject to income tax examinations by tax authorities as of February 28, 2014. Due to NOL carryforwards, in some cases the tax years continue to remain subject to examination with respect to such NOLs:

Tax Jurisdiction	Years Subject to Income Tax Examination
U.S. federal		1994 – Present
North Carolina		1999 – Present
Ireland		2008 – Present
Japan (1)		2012 – Present

(1) The Company has been examined for income tax for years through February 28, 2011. A tax examination was concluded in fiscal 2012 with no significant adjustments resulting. However, the statute of limitations remains open for five years.

The U.S. Internal Revenue Service recently completed its examination with respect to the Company’s fiscal year ended February 28, 2010 and proposed certain adjustments. The Company believes that it has adequately provided for any reasonably foreseeable outcomes that may result from the proposed adjustments but, depending on the ultimate outcome, the Company could be required to pay additional income taxes. The Company does not believe that such outcome would have a material effect on its consolidated financial condition or consolidated results of operations.

The Company is currently undergoing an income tax examination in India.

The Company believes it has adequately provided for any reasonably foreseeable outcomes related to tax audits.

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Schedule of Unrecognized Tax Benefits (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Reconciliation of Unrecognized Tax Benefits [Line Items]
Beginning Balance	$ 48,313	$ 43,762	$ 42,083
Additions based on tax positions related to the current year	9,005	2,576	2,066
Additions based on tax positions related to prior years	100	2,122	531
Reductions related to settlements with tax authorities	(364)		(259)
Reductions related to changes in facts and circumstances		(147)	(659)
Ending Balance	$ 57,054	$ 48,313	$ 43,762

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Intrinsic Value of Stock Options Exercised (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012	Feb. 28, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Stock Options, Outstanding	376,621	452,687	1,103,153	2,029,488
Number of Stock Options, Exercisable	133,881
Number of Stock Options, Expected to vest	212,369
Weighted Average Remaining Contractual Life, Outstanding (in years)	3 years 7 months 6 days
Weighted Average Remaining Contractual Life, Exercisable	2 years 4 months 24 days
Weighted Average Remaining Contractual Life, Expected to vest	4 years 3 months 18 days
Intrinsic Value, Outstanding	$ 6,886
Intrinsic Value, Exercisable	3,609
Intrinsic Value, Expected to vest	2,972
Total intrinsic value of stock options exercised	$ 6,775	$ 29,598	$ 31,736

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Revenue:
Subscriptions	$ 1,336,771	$ 1,148,341	$ 965,575
Training and services	197,844	180,476	167,528
Total subscription and training and services revenue	1,534,615	1,328,817	1,133,103
Cost of subscription and training and services revenue:
Cost of subscriptions	97,100	80,340	66,237
Cost of training and services	135,500	120,260	112,311
Total cost of subscription and training and services revenue	232,600	200,600	178,548
Gross profit	1,302,015	1,128,217	954,555
Operating expense:
Sales and marketing	597,885	514,554	419,635
Research and development	317,263	263,150	208,662
General and administrative	152,407	146,333	126,345
Facility exit costs (NOTE 14)	2,171	3,142
Total operating expense	1,069,726	927,179	754,642
Income from operations	232,289	201,038	199,913
Interest income	6,645	8,245	8,418
Other income (expense), net	614	469	(322)
Income before provision for income taxes	239,548	209,752	208,009
Provision for income taxes	61,256	59,548	61,383
Net income	$ 178,292	$ 150,204	$ 146,626
Basic net income per common share	$ 0.94	$ 0.78	$ 0.76
Diluted net income per common share	$ 0.93	$ 0.77	$ 0.75
Weighted average shares outstanding
Basic	189,920	193,147	193,151
Diluted	192,036	195,804	196,451

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Property and Equipment

12 Months Ended

Feb. 28, 2014

Property and Equipment

NOTE 5—Property and Equipment

The Company’s property and equipment is recorded at cost and consists of the following (in thousands):

	February 28, 2014			February 28, 2013
Computer equipment	$	137,570		$	127,741
Software, including software developed for internal use		112,348			108,644
Furniture and fixtures		28,007			19,271
Leasehold improvements		96,410			58,443
Property and equipment – in progress		8,877			17,472
Property and equipment	$	383,212		$	331,571
Less: accumulated depreciation		(209,295	)		(189,985	)
Property and equipment, net	$	173,917		$	141,586

The useful lives of property and equipment range from three to fifteen years. Leasehold improvements are amortized over the lesser of the useful life or lease term. Depreciation expense recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is summarized as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total depreciation expense	$	45,169	$	38,818	$	31,623

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Accounts Receivable

12 Months Ended

Feb. 28, 2014

Accounts Receivable

NOTE 4—Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. Activity in the Company’s allowance for doubtful accounts for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is presented in the following table (in thousands):

	Balance  at beginning of period		Charged to (recovery  of) expense			Adjustments (1)			Balance at end of period
2012	$	1,379	$	989		$	(491	)	$	1,877
2013	$	1,877	$	(102	)	$	(436	)	$	1,339
2014	$	1,339	$	841		$	(194	)	$	1,986

(1) Represents foreign currency translation adjustments and amounts written-off as uncollectible accounts receivable.

As of February 28, 2014 and February 28, 2013, no individual customer accounted for 10% or more of the Company’s accounts receivable.

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Employee Benefit Plans

12 Months Ended

Feb. 28, 2014

Employee Benefit Plans

NOTE 16—Employee Benefit Plans

The Company provides retirement plans whereby participants may elect to contribute a portion of their annual compensation to the plans, after complying with certain limitations. The Company has the option to make contributions to the plans and contributed to the plans for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total contributions to employee benefit plans	$	17,613	$	14,695	$	11,377

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Common and Preferred Stock

12 Months Ended

Feb. 28, 2014

Common and Preferred Stock

NOTE 12—Common and Preferred Stock

Common stock

The Company has authorized 300,000,000 shares of common stock with a par value of $0.0001 per share. Holders of these shares have one vote per share. Upon the dissolution, liquidation or winding up of the Company, holders of common stock will be entitled to receive the assets of the Company after satisfaction of the preferential rights of any outstanding preferred stock or any other outstanding stock ranking on liquidation senior to or on parity with the common stock.

The Company repurchased 5,006,579 shares, 2,290,936 shares and 3,167,413 shares of its common stock during the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, respectively, at an aggregate cost of $239.4 million, $120.7 million and $133.2 million, respectively. These amounts are recorded as treasury stock on the Company’s Consolidated Balance Sheets.

Preferred stock

At February 28, 2014, the Company has authorized 5,000,000 shares of preferred stock with a par value of $0.0001 per share. No shares of preferred stock were outstanding as of February 28, 2014 or February 28, 2013.

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Share Based Awards - Additional Information (Detail) (USD $) Share data in Millions, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for issuance	19.6
Share-based compensation expense capitalized	$ 0	$ 0	$ 0
Annual forfeiture rate	10.00%
Targeted percentage of performance share units earned by executive	200.00%
Nonvested Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage vested every three months following year one	6.25%
Percentage vested first anniversary	25.00%
Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage vested during following four years	25.00%
Percentage vested first anniversary	25.00%
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost related to unvested options	3,800,000
Weighted average period over which awards are expected to be recognized (in years)	2 years 7 months 6 days
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost related to unvested options	19,800,000
Weighted average period over which awards are expected to be recognized (in years)	1 year 8 months 12 days
Common stock performance period (in years)	3 years
Number of shares subject to PSU awards expected to vest	1.1
2004 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contract term (in years)	5 years
Percentage vested during following four years	25.00%
Percentage vested every three months following year one	6.25%
2004 Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contract term (in years)	7 years
Share Price Performance Period
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Targeted percentage of performance share units earned by executive	200.00%
First Performance Segment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Targeted percentage of performance share units earned by executive	50.00%
Second Performance Segment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Targeted percentage of performance share units earned by executive	100.00%
Service Based Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost related to unvested options	$ 213,400,000
Weighted average period over which awards are expected to be recognized (in years)	1 year 4 months 24 days

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Prepaid Expenses

12 Months Ended

Feb. 28, 2014

Prepaid Expenses

NOTE 8—Prepaid Expenses

Prepaid expenses include sales commissions, taxes and insurance. Sales commissions are the incremental costs that are directly associated with non-cancelable subscription contracts with customers and consist of sales commissions paid to the Company’s sales force. The commissions are deferred and amortized over a period to approximate the period of the subscription term. For further discussion on deferred commissions see NOTE 2—Summary of Significant Accounting Policies. Prepaid expenses, including sales commissions, were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Deferred commissions	$	80,987	$	62,159
Professional services		12,827		13,172
Taxes		13,012		10,743
Insurance		1,207		1,547
Other		10,354		6,800
Prepaid expenses	$	118,387	$	94,421

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Accounts Receivable - Additional Information (Detail)	Feb. 28, 2014 Customer	Feb. 28, 2013 Customer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of individual customers accounting for 10.0% of accounts receivable	0	0

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Investments Measured at Fair Value (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013 Maximum
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Accumulated unrealized losses related to investments	$ 0.2	$ 0.1

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Identifiable Intangible Assets

12 Months Ended

Feb. 28, 2014

Identifiable Intangible Assets

NOTE 6—Identifiable Intangible Assets

Identifiable intangible assets consist primarily of trademarks, copyrights and patents, purchased technologies, customer and reseller relationships, and covenants not to compete which are amortized over the estimated useful life, generally on a straight-line basis, with the exception of customer and reseller relationships which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit. Useful lives range from three to ten years. As of February 28, 2014 and February 28, 2013, trademarks with an indefinite estimated useful life totaled $9.6 million and $9.3 million, respectively. The following is a summary of identifiable intangible assets (in thousands):

	February 28, 2014							February 28, 2013
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Trademarks, copyrights and patents	$	105,269	$	(34,784	)	$	70,485	$	94,020	$	(27,412	)	$	66,608
Purchased technologies		79,433		(55,960	)		23,473		79,201		(46,507	)		32,694
Customer and reseller relationships		89,992		(63,075	)		26,917		89,959		(53,391	)		36,568
Covenants not to compete		10,690		(5,977	)		4,713		10,516		(4,143	)		6,373
Other intangible assets		8,922		(1,111	)		7,811		—		—			—
Total identifiable intangible assets	$	294,306	$	(160,907	)	$	133,399	$	273,696	$	(131,453	)	$	142,243

The balances in identifiable intangible assets as of February 28, 2013 include $30.6 million of identifiable intangible assets acquired as part of business combinations completed during the year ended February 28, 2013. See NOTE 3—Business Combinations for further discussion related to business combinations.

Patents purchased from a related party during the year ended February 28, 2013 totaled $22.4 million. See NOTE 7—Other Assets, Net for further discussion.

Amortization expense associated with identifiable intangible assets recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is summarized as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Cost of revenue	$	11,212	$	5,943	$	3,533
Sales and marketing		8,872		8,416		8,348
Research and development		3,836		3,836		4,194
General and administrative		5,316		5,328		3,674
Total amortization expense	$	29,236	$	23,523	$	19,749

As of February 28, 2014, future amortization expense on existing intangibles is as follows (in thousands):

Fiscal Year	Amortization Expense of Intangible Assets
2015	$	29,293
2016		22,727
2017		20,146
2018		16,238
2019		12,740
Thereafter		22,617
Total amortization expense	$	123,761

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Other Assets, Net

12 Months Ended

Feb. 28, 2014

Other Assets, Net

NOTE 7—Other Assets, Net

Other assets, net were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Cost-basis investments (1)	$	21,801	$	5,354
Net non-current deferred tax assets (see NOTE 11—Income Taxes)		7,655		5,226
Security deposits and other		5,935		5,123
Equity-method investment (1)		—		15,560
Other assets, net	$	35,391	$	31,263

(1) Equity-method investment represents the Company’s investment in Open Invention Network LLC (“OIN”) and the related share of OIN’s accumulated deficit for the fiscal year ended February 28, 2013. During the fourth quarter of the fiscal year ended February 28, 2014, OIN accepted an additional full member which decreased the Company’s overall influence as well as ownership stake in OIN below the threshold prescribed by U.S. GAAP to qualify for equity method accounting treatment. As a result, the Company’s investment in OIN was reclassified as a cost-basis investment for the fiscal year ended February 28, 2014 and totaled $14.2 million as of February 28, 2014.

The Company reviews its non-marketable cost-basis investments in equity securities for other than temporary declines in fair value based on prices recently paid for shares in that company, as well as changes in market conditions. The carrying values are not necessarily representative of the amounts that the Company could realize in a current transaction. During the years ended February 28, 2014, February 28, 2013 and February 29, 2012, no significant losses were recognized for equity investments in other companies.

During the year ended February 28, 2013, the Company purchased patents for $22.4 million from OIN. The gain recognized by OIN related to the sale of these patents was excluded from the Company’s pro rata share of OIN’s gains and losses for the year ended February 28, 2013.

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Accounts Payable and Accrued Expenses

12 Months Ended

Feb. 28, 2014

Accounts Payable and Accrued Expenses

NOTE 9—Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Accounts payable	$	18,326	$	27,096
Accrued wages and other compensation related expenses		100,474		72,912
Accrued other trade payables		40,998		38,595
Accrued income and other taxes payable		19,253		15,111
Accrued other		417		488
Accounts payable and accrued expenses	$	179,468	$	154,202

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Identifiable Intangible Assets - Additional Information (Detail) (USD $)	12 Months Ended		12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 28, 2014 Trademarks, Copyrights and Patents Minimum	Feb. 28, 2014 Trademarks, Copyrights and Patents Maximum	Feb. 28, 2014 Purchased Technologies Minimum	Feb. 28, 2014 Purchased Technologies Maximum	Feb. 28, 2014 Customer and Reseller Relationships Minimum	Feb. 28, 2014 Customer and Reseller Relationships Maximum	Feb. 28, 2014 Covenants Not To Compete Minimum	Feb. 28, 2014 Covenants Not To Compete Maximum	Feb. 28, 2013 Patents	Feb. 28, 2014 Trademarks	Feb. 28, 2013 Trademarks
Acquired Finite-Lived Intangible Assets [Line Items]
Useful life (in years)	5 years		3 years	10 years	3 years	10 years	3 years	10 years	3 years	10 years
Carrying amount for intangible assets												$ 9,600,000	$ 9,300,000
Identifiable intangible assets		30,600,000
Patent Purchased											$ 22,400,000

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Summary of Accumulated Other Comprehensive Loss (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated loss from foreign currency translation adjustment	$ (4,823)	$ (8,768)
Accumulated unrealized gain, net of tax, on available-for-sale securities	364	801
Accumulated other comprehensive loss	$ (4,459)	$ (7,967)

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Summary of Share-Based Awards Granted During Period (Detail) (USD $)	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, Shares and Shares Underlying Awards	133,800	114,361	51,563
Total share-based awards, Shares and Shares Underlying Awards	3,318,576	3,200,033	2,832,969
Stock options, Weighted Average Per Share Award Fair Value	$ 12.64	$ 15.16	$ 15.41
Total share-based awards, Weighted Average Per Share Award Fair Value	$ 46.11	$ 52.75	$ 44.41
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, Shares and Shares Underlying Awards	133,800	114,361	51,563
Stock options, Weighted Average Per Share Award Fair Value	$ 12.64	$ 15.16	$ 15.41
Service Based Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares and Share units, Shares and Shares Underlying Awards	2,513,328	2,471,872	2,148,070
Shares and share units, Weighted Average Per Share Award Fair Value	$ 47.43	$ 54.62	$ 45.35
Performance Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares and Share units, Shares and Shares Underlying Awards	671,448	613,800	633,336
Shares and share units, Weighted Average Per Share Award Fair Value	$ 47.86	$ 52.23	$ 43.60
Performance Share Units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares and Share units, Shares and Shares Underlying Awards	671,448	613,800	633,336
Shares and share units, Weighted Average Per Share Award Fair Value	$ 47.86	$ 52.23	$ 43.60

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Schedule of Amortization Expense Associated with Identifiable Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	$ 29,236	$ 23,523	$ 19,749
Cost of Revenue
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	11,212	5,943	3,533
Sales and Marketing
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	8,872	8,416	8,348
Research and Development
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	3,836	3,836	4,194
General and Administrative
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	$ 5,316	$ 5,328	$ 3,674

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Schedule Of Future Minimum Lease Payments Required Under Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014
Commitments and Contingencies [Line Items]
2015	$ 27,977
2016	26,247
2017	23,785
2018	16,372
2019	13,354
Thereafter	86,789
Total minimum lease payments	$ 194,524

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Depreciation Expense Recognized in Consolidated Financial Statements (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Property, Plant and Equipment [Line Items]
Total depreciation expense	$ 45,169	$ 38,818	$ 31,623

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Summary of Fair Value of Options Granted (Detail) (USD $)	12 Months Ended
	Feb. 28, 2014		Feb. 28, 2013		Feb. 29, 2012
Share based Compensation Arrangement Assumptions Used to Estimate Fair Values of Share Options Granted [Line Items]
Expected dividend yield
Risk-free interest rate	0.62%		0.41%		0.61%
Expected volatility	36.80%	[1]	38.13%	[1]	47.91%	[1]
Expected life (in years)	3 years 3 months 7 days	[2]	3 years 3 months 7 days	[2]	3 years 3 months 7 days	[2]
Weighted average fair value of options granted during the period	$ 12.64		$ 15.16		$ 15.41

[1] The expected volatility rates for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated based on an approximate equal weighting of the historical volatility of the Company's common stock over a period of approximately 3.27 years and the implied volatility of publicly traded options for the Company's common stock.

[2] The expected term for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was determined based on the Company's historical exercise data. The Company reassesses its estimate of expected term annually or when new information indicates a change is appropriate

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Property and Equipment (Tables)

12 Months Ended

Feb. 28, 2014

Schedule of Property and Equipment at Cost

The Company’s property and equipment is recorded at cost and consists of the following (in thousands):

	February 28, 2014			February 28, 2013
Computer equipment	$	137,570		$	127,741
Software, including software developed for internal use		112,348			108,644
Furniture and fixtures		28,007			19,271
Leasehold improvements		96,410			58,443
Property and equipment – in progress		8,877			17,472
Property and equipment	$	383,212		$	331,571
Less: accumulated depreciation		(209,295	)		(189,985	)
Property and equipment, net	$	173,917		$	141,586

Depreciation Expense Recognized in Consolidated Financial Statements

The useful lives of property and equipment range from three to fifteen years. Leasehold improvements are amortized over the lesser of the useful life or lease term. Depreciation expense recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 is summarized as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total depreciation expense	$	45,169	$	38,818	$	31,623

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Business Combinations - Additional Information (Detail) (USD $)					1 Months Ended	12 Months Ended	1 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012	Feb. 28, 2011	Dec. 21, 2012 ManageIQ, Inc.	Feb. 28, 2013 Other Acquisitions Entity	Oct. 07, 2011 Gluster
Business Acquisition [Line Items]
Transaction costs					$ 500,000	$ 1,000,000	$ 500,000
Purchase consideration transferred					104,500,000		137,150,000
Number of acquired businesses						2
Cash consideration						31,200,000	135,906,000
Goodwill acquired	687,430,000	690,911,000	591,563,000	463,673,000	79,910,000	17,500,000
Identifiable intangible assets acquired		30,600,000			17,340,000	13,200,000	6,800,000
Current assets acquired						$ 500,000
Percentage of equity interest held by Nexus in Gluster	36.40%

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Commitments and Contingencies

12 Months Ended

Feb. 28, 2014

Commitments and Contingencies

NOTE 14—Commitments and Contingencies

Operating leases

As of February 28, 2014, the Company leased office space and certain equipment under various non-cancelable operating leases. Future minimum lease payments required under the operating leases at February 28, 2014 are as follows (in thousands):

Fiscal Year	Operating Leases
2015	$	27,977
2016		26,247
2017		23,785
2018		16,372
2019		13,354
Thereafter		86,789
Total minimum lease payments	$	194,524

Rent expense under operating leases for the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012 is provided in the following table (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total operating lease expense	$	29,472	$	26,830	$	24,434

Facility exit costs

In December 2011, the Company entered into an agreement to sublease a building located in downtown Raleigh, North Carolina in which the Company’s headquarters are currently located. In connection with the transition to the Company’s new headquarters, the Company subleased or entered into agreements to assign its existing leases related to the two facilities that previously constituted the Company’s headquarters in Raleigh, North Carolina.

In May 2012, the Company entered into a sublease agreement with an unrelated third-party to lease one of the two facilities that previously constituted its headquarters. As a result, the Company recognized a loss of $3.1 million for the year ended February 28, 2013, which represented the excess of the Company’s remaining obligation on the space over the agreed sublease income.

The Company ceased using the remaining facility in June 2013 and, as a result, recognized a loss of $2.2 million which represented the remaining costs associated with its exit from the facility. In August 2013, the Company agreed to assign its lease related to the remaining facility to an unrelated third party effective September 2014.

Amortization of related leasehold improvements was accelerated to coincide with the Company’s exit from the two facilities. This change in estimated useful life resulted in incremental amortization expense of $2.9 million for the year ended February 28, 2013 and is included in general and administrative expense on the Company’s Consolidated Statement of Operations.

Product indemnification

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party from losses arising in connection with the Company’s services or products, or from losses arising in connection with certain events defined within a particular contract, which may include litigation or claims relating to intellectual property infringement, certain losses arising from damage to property or injury to persons or other matters. In each of these circumstances, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements may in certain cases be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third-parties for certain payments made by the Company.

It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the facts and circumstances involved in each particular agreement. The Company does not record a liability for claims related to indemnification unless the Company concludes that the likelihood of a material claim is probable and estimable. Payments pursuant to these indemnification claims during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were in the aggregate immaterial.

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Summary of Revenue from Unaffiliated Customers (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 28, 2014	Nov. 30, 2013	Aug. 31, 2013	May 31, 2013	Feb. 28, 2013	Nov. 30, 2012	Aug. 31, 2012	May 31, 2012	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Segment Reporting Information [Line Items]
Total revenue from unaffiliated customers	$ 400,397	$ 396,536	$ 374,423	$ 363,259	$ 347,885	$ 343,606	$ 322,595	$ 314,731	$ 1,534,615	$ 1,328,817	$ 1,133,103
U.S.
Segment Reporting Information [Line Items]
Total revenue from unaffiliated customers									848,053	753,898	622,608
Foreign
Segment Reporting Information [Line Items]
Total revenue from unaffiliated customers									$ 686,562	$ 574,919	$ 510,495

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Earnings Per Share

12 Months Ended

Feb. 28, 2014

Earnings Per Share

NOTE 19—Earnings Per Share

The following table reconciles the numerators and denominators of the earnings per share calculation for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands, except per share amounts):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Net income, basic and diluted	$	178,292	$	150,204	$	146,626
Weighted average common shares outstanding		189,920		193,147		193,151
Incremental shares attributable to assumed vesting or exercise of outstanding equity award shares		2,116		2,657		3,300
Diluted shares		192,036		195,804		196,451
Net income per share—diluted	$	0.93	$	0.77	$	0.75

The following share awards are not included in the computation of diluted earnings per share because the aggregate value of proceeds considered received upon either exercise or vesting was greater than the average market price of the Company’s common stock during the related periods and the effect of including such share awards in the computation would be anti-dilutive (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Number of shares considered anti-dilutive for calculating diluted EPS		360		77		311

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Activity for Service-Based Share Units (Detail) (Service Based Share Units, USD $)	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Service Based Share Units
Nonvested Shares and Share Units
Beginning Balance	5,193,433	5,486,639	5,793,338
Granted	2,513,328	2,471,872	2,148,070
Vested	(1,915,326)	(2,184,588)	(2,162,667)
Forfeited	(418,127)	(580,490)	(431,900)
Assumed			139,798	[1]
Ending balance	5,373,308	5,193,433	5,486,639
Weighted Average Grant-date Fair Value
Weighted Average Grant-date Fair Value, beginning balance	$ 46.59	$ 36.36	$ 28.60
Granted, Weighted Average Grant-date Fair Value	$ 47.43	$ 54.62	$ 45.35
Vested, Weighted Average Grant-date Fair Value	$ 42.35	$ 31.33	$ 25.78
Forfeited, Weighted Average Grant-date Fair Value	$ 48.53	$ 41.56	$ 32.22
Assumed, Weighted Average Grant-date Fair Value			$ 43.34	[1]
Weighted Average Grant-date Fair Value, ending balance	$ 48.34	$ 46.59	$ 36.36

[1] Amount represents partially vested share awards assumed as part of a business combination.

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Unaudited Quarterly Results (Tables)

12 Months Ended

Feb. 28, 2014

Schedule Of Unaudited Quarterly Results

Below are unaudited condensed quarterly results for the year ended February 28, 2014:

	Year ended February 28, 2014 Unaudited
	4th Quarter		3rd Quarter			2nd Quarter		1st Quarter
	(in thousands, except per share data)
Revenue:
Subscriptions	$	351,492	$	342,770		$	326,692	$	315,817
Training and services		48,905		53,766			47,731		47,442
Total subscription and training and services revenue	$	400,397	$	396,536		$	374,423	$	363,259
Gross profit	$	339,861	$	336,109		$	318,843	$	307,202
Income from operations	$	59,300	$	60,792		$	55,574	$	56,623
Interest income	$	2,037	$	1,579		$	1,527	$	1,502
Other income (expense), net	$	282	$	(440	)	$	1,196	$	(424	)
Net income, basic and diluted	$	45,068	$	52,025		$	40,808	$	40,391
Net income per common share (1):
Basic	$	0.24	$	0.27		$	0.22	$	0.21
Diluted	$	0.24	$	0.27		$	0.21	$	0.21
Weighted average shares outstanding:
Basic		189,604		189,514			189,437		191,114
Diluted		191,712		191,365			191,432		192,969

(1) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

Below are unaudited condensed quarterly results for the year ended February 28, 2013:

	Year ended February 28, 2013 Unaudited
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(in thousands, except per share data)
Revenue:
Subscriptions	$	302,784		$	294,186		$	278,800		$	272,571
Training and services		45,101			49,420			43,795			42,160
Total subscription and training and services revenue	$	347,885		$	343,606		$	322,595		$	314,731
Gross profit	$	294,280		$	290,488		$	274,737		$	268,712
Income from operations	$	50,231		$	49,919		$	49,980		$	50,908
Interest income	$	1,861		$	1,936		$	2,154		$	2,294
Other income (expense), net	$	(32	)	$	(730	)	$	(656	)	$	1,887
Net income, basic and diluted	$	42,973		$	34,765		$	35,005		$	37,461
Net income per common share (1):
Basic	$	0.22		$	0.18		$	0.18		$	0.19
Diluted	$	0.22		$	0.18		$	0.18		$	0.19
Weighted average shares outstanding:
Basic		193,207			193,374			193,064			192,947
Diluted		195,133			195,666			195,795			195,937

(1) Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per common share information may not equal the reported annual earnings per common share.

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Schedule of Defined Benefit Plans Disclosures (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Total contributions to employee benefit plans	$ 17,613	$ 14,695	$ 11,377

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Share-based Awards (Tables)

12 Months Ended

Feb. 28, 2014

Summary of Share-Based Awards Granted During Period, by Type

The following table summarizes share-based awards, by type, granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Awards Granted Year ended February 28, 2014				Awards Granted Year ended February 28, 2013				Awards Granted Year ended February 29, 2012
	Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value		Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value		Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value
Stock options		133,800	$	12.64		114,361	$	15.16		51,563	$	15.41
Service-based shares and share units		2,513,328	$	47.43		2,471,872	$	54.62		2,148,070	$	45.35
Performance-based shares and share units—Maximum		671,448	$	47.86		613,800	$	52.23		633,336	$	43.60
Total share-based awards		3,318,576	$	46.11		3,200,033	$	52.75		2,832,969	$	44.41

Share-Based Compensation Expense

The following summarizes share-based compensation expense recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Cost of revenue	$	11,793	$	9,433	$	7,880
Sales and marketing		40,322		32,906		25,060
Research and development		34,194		29,647		21,570
General and administrative		27,465		26,712		24,757
Total share-based compensation expense	$	113,774	$	98,698	$	79,267

Total Fair Value of Stock Options Recognized

The total fair value of stock options recognized in the Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of stock options recognized	$	2,139	$	2,791	$	3,104

Summary of Stock Option Activity

The following table summarizes the activity for the Company’s stock options for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Shares  Underlying Options			Weighted Average Exercise  Price Per Share
Outstanding at February 28, 2011		2,029,488		$	16.88
Granted		51,563			45.08
Exercised		(1,059,191	)		15.87
Forfeited		(123,618	)		17.16
Assumed (1)		204,911			1.13
Outstanding at February 29, 2012		1,103,153		$	16.21
Granted		114,361			55.17
Exercised		(735,086	)		15.61
Forfeited		(29,741	)		25.10
Outstanding at February 28, 2013		452,687		$	26.43
Granted		133,800			47.12
Exercised		(175,026	)		12.13
Forfeited		(34,840	)		22.93
Outstanding at February 28, 2014		376,621		$	40.75

(1) Amount represents partially vested options assumed as part of a business combination.

Summary of Outstanding and Exercisable Stock Options

The following summarizes information, as of February 28, 2014, about the Company’s outstanding and exercisable stock options:

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.00 – $10.00		52,214		4.6	$	1.85		32,588	$	1.70
$10.01 – $20.00		7,157		1.0	$	16.24		7,157	$	16.24
$20.01 – $30.00		20,773		0.6	$	27.51		20,773	$	27.51
$30.01 – $40.00		24,813		1.6	$	39.37		19,350	$	39.36
$40.01 – $50.00		115,623		4.0	$	44.31		19,857	$	45.13
$50.01 and over		156,041		3.8	$	54.23		34,156	$	55.45
Total		376,621		3.6	$	40.75		133,881	$	32.08

Intrinsic Value of Outstanding, Exercisable and Expected to Vest Stock Options

The following summarizes the intrinsic value, as of February 28, 2014, of the Company’s outstanding, exercisable and expected to vest stock options:

Intrinsic Value of Stock Options	Number of Stock Options		Weighted  Average Remaining Contractual Life		Intrinsic Value  at February 28, 2014 (in thousands)
Outstanding		376,621		3.6	$	6,886
Exercisable		133,881		2.4	$	3,609
Expected to vest (assuming annual forfeiture rate of 10%)		212,369		4.3	$	2,972

Total Intrinsic Value of Stock Options Exercised

The intrinsic value of stock options exercised during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of stock options exercised	$	6,775	$	29,598	$	31,736

Summary of Fair Value of Options Granted

The fair values of options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated on the date of grant using the Black-Scholes-Merton option-pricing model based on the following weighted average assumptions:

	Year ended February 28, 2014			Year ended February 28, 2013			Year ended February 29, 2012
Expected dividend yield		—	%		—	%		—	%
Risk-free interest rate		0.62	%		0.41	%		0.61	%
Expected volatility (1)		36.80	%		38.13	%		47.91	%
Expected life (in years) (2)		3.27			3.27			3.27
Weighted average fair value of options granted during the period	$	12.64		$	15.16		$	15.41

(1) The expected volatility rates for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated based on an approximate equal weighting of the historical volatility of the Company’s common stock over a period of approximately 3.27 years and the implied volatility of publicly traded options for the Company’s common stock.

(2) The expected term for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was determined based on the Company’s historical exercise data. The Company reassesses its estimate of expected term annually or when new information indicates a change is appropriate.

Service Based Share Units

Total Fair Value of Service/Performance-Based Awards Recognized

The total fair value of service-based share awards recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of service-based awards recognized	$	92,450	$	76,460	$	61,818

Activity for Service-Based Share Units

The following table summarizes the activity for the Company’s service-based share awards for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Nonvested Shares and Share Units			Weighted  Average Grant-date Fair Value
Service-based share awards at February 28, 2011		5,793,338		$	28.60
Granted		2,148,070			45.35
Vested		(2,162,667	)		25.78
Forfeited		(431,900	)		32.22
Assumed (1)		139,798			43.34
Service-based share awards at February 29, 2012		5,486,639		$	36.36
Granted		2,471,872			54.62
Vested		(2,184,588	)		31.33
Forfeited		(580,490	)		41.56
Service-based share awards at February 28, 2013		5,193,433		$	46.59
Granted		2,513,328			47.43
Vested		(1,915,326	)		42.35
Forfeited		(418,127	)		48.53
Service-based share awards at February 28, 2014		5,373,308		$	48.34

(1) Amount represents partially vested share awards assumed as part of a business combination.

Intrinsic Value of Service-Based Awards

The following summarizes the intrinsic value, as of February 28, 2014, of the Company’s service-based awards outstanding and expected to vest:

Intrinsic Value of Service-based Awards	Number of Shares and Share Units		Weighted  Average Remaining Vesting Period		Intrinsic Value  at February 28, 2014 (in thousands)
Outstanding		5,373,308		1.5	$	316,971
Expected to vest (assuming annual forfeiture rate of 10%)		4,553,165		1.5	$	268,591

Total Intrinsic Value of Service-Based Awards

The intrinsic value of service-based awards vesting during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of service-based awards vesting	$	88,969	$	118,299	$	96,536

Performance Share Units

Total Fair Value of Service/Performance-Based Awards Recognized

The total fair value of performance-based share awards recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of performance-based awards recognized	$	19,185	$	19,447	$	14,345

Activity for Performance-Based Share Units

The following table summarizes the activity for the Company’s PSUs for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Maximum
Activity	Shares Underlying Performance Share Units			Weighted Average Grant  Date Fair Value
Outstanding at February 28, 2011		1,430,005		$	24.48
Granted		633,336			43.60
Vested		(337,734	)		23.98
Forfeited		—			—
Outstanding at February 29, 2012		1,725,607		$	31.60
Granted		613,800			52.23
Vested		(634,384	)		23.62
Forfeited		(200,353	)		32.81
Outstanding at February 28, 2013		1,504,670		$	43.22
Granted		671,448			47.86
Vested		(399,334	)		33.47
Forfeited		(101,559	)		44.34
Outstanding at February 28, 2014		1,675,225		$	47.34

(1) Vested and forfeited amounts represent the actual number of shares vesting and forfeited during the year. Outstanding represents the remaining maximum potential shares available to vest as of the period ended.

Total Fair Value of Performance-Based Awards Vesting

The total intrinsic value of performance-based share awards vesting during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of performance-based awards vesting	$	19,639	$	37,872	$	16,032

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Fair Value of Assets and Liabilities Acquired (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014		Feb. 28, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 1,044,266		$ 1,021,508
Total	1,044,385		1,021,569
Foreign Exchange Contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency derivatives, assets	134	[1]	280	[2]
Foreign currency derivatives, liabilities	(15)	[3]	(219)	[4]
Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	178,280	[5]	143,680	[6]
Available-for-sale securities	178,280		143,680
Interest-bearing Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	86,937	[5]	123,518	[6]
Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	37,643	[5]	54,483	[6]
U.S. Agencies Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	279,049	[5]	359,993	[6]
Corporate Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	382,516	[5]	312,691	[6]
Foreign Government Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	79,841	[5]	26,869	[6]
Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities			274
Equity securities			274	[6]
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	178,280		143,954
Fair Value, Inputs, Level 1 | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	178,280	[5]	143,680	[6]
Fair Value, Inputs, Level 1 | Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities			274	[6]
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	866,105		877,615
Fair Value, Inputs, Level 2 | Foreign Exchange Contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency derivatives, assets	134	[1]	280	[2]
Foreign currency derivatives, liabilities	(15)	[3]	(219)	[4]
Fair Value, Inputs, Level 2 | Interest-bearing Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	86,937	[5]	123,518	[6]
Fair Value, Inputs, Level 2 | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	37,643	[5]	54,483	[6]
Fair Value, Inputs, Level 2 | U.S. Agencies Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	279,049	[5]	359,993	[6]
Fair Value, Inputs, Level 2 | Corporate Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	382,516	[5]	312,691	[6]
Fair Value, Inputs, Level 2 | Foreign Government Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 79,841	[5]	$ 26,869	[6]

[1] Included in Other current assets in the Company's Consolidated Balance Sheet at February 28, 2014.

[2] Included in Other current assets in the Company's Consolidated Balance Sheet at February 28, 2013.

[3] Included in Accounts payable and accrued expenses in the Company's Consolidated Balance Sheet at February 28, 2014.

[4] Included in Accounts payable and accrued expenses in the Company's Consolidated Balance Sheet at February 28, 2013.

[5] Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company's Consolidated Balance Sheet at February 28, 2014 in addition to $443.2 million of cash.

[6] Included in Cash and cash equivalents, Investments in debt and equity securities, short-term or Investments in debt securities, long-term in the Company's Consolidated Balance Sheet at February 28, 2013, in addition to $296.9 million of cash.

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Net income	$ 178,292	$ 150,204	$ 146,626
Other comprehensive income (loss):
Change in foreign currency translation adjustment	3,945	(2,810)	(2,708)
Available-for-sale securities:
Unrealized gain (loss) on available-for-sale securities during the period	(466)	2,092	(146)
Reclassification for gain realized on available-for-sale securities, reported in Other income (expense), net	(350)	(797)	(1,982)
Tax (expense) benefit	379	(500)	703
Net change in available-for-sale securities (net of tax)	(437)	795	(1,425)
Total other comprehensive income (loss)	3,508	(2,015)	(4,133)
Comprehensive income	$ 181,800	$ 148,189	$ 142,493

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Summary of Stock Option Activity (Detail) (USD $)	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Shares Underlying Options
Shares Underlying Options Outstanding, beginning balance	452,687	1,103,153	2,029,488
Granted, Shares Underlying Options	133,800	114,361	51,563
Exercised, Shares Underlying Options	(175,026)	(735,086)	(1,059,191)
Forfeited, Shares Underlying Options	(34,840)	(29,741)	(123,618)
Assumed, Shares Underlying Options			204,911	[1]
Shares Underlying Options Outstanding, ending balance	376,621	452,687	1,103,153
Weighted Average Exercise Price Per Share
Weighted Average Exercise Price Per Share, beginning balance	$ 26.43	$ 16.21	$ 16.88
Granted, Weighted Average Exercise Price Per Share	$ 47.12	$ 55.17	$ 45.08
Exercised, Weighted Average Exercise Price Per Share	$ 12.13	$ 15.61	$ 15.87
Forfeited, Weighted Average Exercise Price Per Share	$ 22.93	$ 25.10	$ 17.16
Assumed, Weighted Average Exercise Price Per Share			$ 1.13	[1]
Weighted Average Exercise Price Per Share, ending balance	$ 40.75	$ 26.43	$ 16.21

[1] Amount represents partially vested options assumed as part of a business combination.

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Business Combinations

12 Months Ended

Feb. 28, 2014

Business Combinations

NOTE 3—Business Combinations

Acquisition of ManageIQ, Inc.

On December 21, 2012, the Company completed its acquisition of ManageIQ, Inc. (“ManageIQ”), a provider of enterprise cloud management and automation solutions that enable organizations to deploy, manage and optimize private clouds, public clouds and virtualized infrastuctures. Under the terms of the purchase agreement, the consideration transferred by the Company totaled $104.5 million. The Company incurred approximately $0.5 million in transaction costs including legal and accounting fees relating to the acquisition. These costs have been expensed as incurred and included in general and administrative expense on the Consolidated Statement of Operations for the year ended February 28, 2013.

The table below represents the tangible and identifiable intangible assets and liabilities (in thousands) based on management’s assessment of the acquisition date fair value of the assets acquired and liabilities assumed:

	Total Consideration Allocated
Identifiable intangible assets (see detail below)	$	17,340
Cash		222
Accounts receivable		570
Fixed assets		69
Deferred tax assets, net		6,610
Other assets		155
Accrued liabilities		(262	)
Deferred revenue		(132	)
Goodwill		79,910
Total consideration allocated	$	104,482

The following table summarizes the allocation of identifiable intangible assets resulting from the acquisition. For purposes of this allocation, the Company has assessed a fair value of ManageIQ’s identifiable intangible assets related to developed technology, employee covenants not to compete, customer relationships, and tradenames and trademarks based on the net present value of the projected income stream of these identifiable intangible assets. The fair value of the identifiable intangible assets is being amortized over the estimated useful life of each intangible asset on a straight-line basis which approximates the economic pattern of benefits (in thousands):

	Amortization Expense Type		Estimated  Life (Years)		Total
Developed technology		Cost of revenue		5	$	13,500
Employee covenants not to compete		Research and development		4		2,800
Customer relationships		Sales and marketing		5		1,000
Tradenames and trademarks		General and administrative		2		40
Total identifiable intangible assets					$	17,340

Other acquisitions in fiscal 2013

During the year ended February 28, 2013, the Company entered into agreements to acquire two businesses operating in the middleware space. These acquisitions include technologies that are complementary to the Company’s JBoss Middleware technology. One acquisition, which included certain assets and related operations acquired from Polymita Technologies S.L. (“Polymita”), closed on August 28, 2012. The second acquisition closed on September 7, 2012 and included certain assets and related operations acquired from FuseSource, a division of Progress Software Corporation (“FuseSource”). The total cash consideration for these two acquisitions was $31.2 million. The total cash consideration transferred of $31.2 million has been allocated to the Company’s assets as follows: $17.5 million to goodwill, $13.2 million to identifiable intangible assets and the remaining $0.5 million to other current assets.

Transaction fees related to these two acquisitions totaled approximately $1.0 million for the year ended February 28, 2013 and are included in general and administrative expense on the Company’s Consolidated Statement of Operations for the year ended February 28, 2013.

Acquisition of Gluster, Inc.

On October 7, 2011, the Company completed its acquisition of all issued and outstanding shares of Gluster, Inc. (“Gluster”), a provider of scale-out, open source storage solutions. The acquisition was intended to expand the Company’s enterprise software offerings to include management of unstructured data. Under the terms of the purchase agreement, the consideration transferred by the Company totaled $137.2 million. The Company incurred approximately $0.5 million in transaction costs including legal and accounting fees relating to the acquisition. These costs have been expensed as incurred and included in general and administrative expense on the Consolidated Statement of Operations for the year ended February 29, 2012.

The total consideration transferred by the Company in connection with the acquisition is summarized in the following table (in thousands):

	Total Consideration Transferred
Cash consideration paid to and/or on behalf of holders of Gluster stock and vested options	$	135,906
Fair value of unvested employee share-based awards assumed and attributed to pre-combination services (1)		1,244
Total	$	137,150

(1) The total fair value, as of October 7, 2011, of all assumed nonvested share-based awards was $14.5 million, of which $1.2 million has been attributed to pre-acquisition employee services and accordingly has been recognized as consideration transferred. The remaining $13.3 million of fair value will be recognized as compensation expense over the remaining vesting period.

The table below represents the tangible and identifiable intangible assets and liabilities (in thousands) based on management’s assessment of the acquisition date fair value of the assets acquired and liabilities assumed:

	Total Consideration Allocated
Identifiable intangible assets (see detail below)	$	6,800
Cash		696
Accounts receivable		321
Fixed assets		454
Deferred tax assets, net		3,263
Other assets		1,093
Accrued liabilities		(1,872	)
Deferred revenue		(321	)
Goodwill		126,716
Total consideration allocated	$	137,150

The following table summarizes the allocation of identifiable intangible assets resulting from the acquisition. For purposes of this allocation, the Company has assessed a fair value of Gluster identifiable intangible assets related to customer relationships and tradenames and trademarks based on the net present value of the projected income stream of these identifiable intangible assets. The fair value of the identifiable intangible assets is being amortized over the estimated useful life of each intangible asset on a straight-line basis which approximates the economic pattern of benefits (in thousands):

	Amortization Expense Type		Estimated  Life (Years)		Total
Customer relationships		Sales and marketing		5	$	6,200
Tradenames and trademarks		General and administrative		Indefinite		600
Total identifiable intangible assets					$	6,800

Pro forma consolidated financial information

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the years ended February 28, 2013 and February 29, 2012 (in thousands, except per share amounts) as if the acquisitions of Gluster, Polymita, FuseSource and ManageIQ had closed on March 1, 2011, after giving effect to certain purchase accounting adjustments. These pro forma results are not necessarily indicative of what the Company’s operating results would have been had the acquisitions actually taken place at the beginning of the period.

	Year ended February 28, 2013 (unaudited)		Year ended February 29, 2012 (unaudited)
Revenue	$	1,329,780	$	1,134,679
Net income and diluted net income		136,459		125,387
Basic net income per common share	$	0.71	$	0.65
Diluted net income per common share	$	0.70	$	0.64

Related party matters

Dr. Naren Gupta, a director of Red Hat since 2005, was a director of Gluster and is the Managing Director of Nexus Venture Partners (“Nexus”), a venture capital fund that was a principal investor in Gluster. Nexus held approximately 36.4% percent of the shares of Gluster capital stock and vested options outstanding on the closing date.

Dr. Gupta did not attend the meeting at which Red Hat’s Board of Directors (the “Board”) approved the transaction and recused himself from all Board deliberations with respect to the transaction. The purchase price in the transaction was determined through arm’s-length negotiations between Red Hat and Gluster.

Goodwill and other business combinations

The Company completed its annual goodwill impairment test in February 2014. No goodwill impairment was deemed to have occurred. The following is a summary of goodwill for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

Balance at February 28, 2011	$	463,673
Acquisition of Gluster		126,716
Impact of foreign currency fluctuations and other adjustments		1,174
Balance at February 29, 2012	$	591,563
Acquisition of ManageIQ		83,074
Other acquisitions		17,462
Impact of foreign currency fluctuations and other adjustments		(1,188	)
Balance at February 28, 2013	$	690,911
Final purchase price allocation adjustment for ManageIQ (1)		(3,164	)
Impact of foreign currency fluctuations		(317	)
Balance at February 28, 2014	$	687,430

(1) The final measurement period adjustment of $3.2 million was not significant relative to the total consideration paid for ManageIQ and, therefore, the final adjustment has not been retrospectively applied to the Company’s Consolidated Balance Sheet as of February 28, 2013. If the Company had applied the adjustment retrospectively, the Deferred tax assets, net balance on the Company’s Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million higher and the Goodwill balance on its Consolidated Balance Sheet for the fiscal year ended February 28, 2013 would have been $3.2 million lower.

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Summary of Changes in Goodwill (Parenthetical) (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014
Goodwill [Line Items]
Final purchase price allocation adjustment	$ 3,164
Deferred tax assets	$ 3,164

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Summary of Tax Years Subject to Examination (Parenthetical) (Detail)	12 Months Ended
	Feb. 28, 2011
Income Tax Examination [Line Items]
Statute of limitation remaining open years	5 years

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Share Repurchase Program - Additional Information (Detail) (USD $)	1 Months Ended	10 Months Ended	12 Months Ended
	Apr. 15, 2013	Feb. 28, 2014	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Accelerated Share Repurchases [Line Items]
Repurchased aggregate shares of common stock, shares	3,648,575	1,358,004	5,006,579	2,290,936	3,167,413
Repurchased aggregate shares of common stock	$ 179,300,000	$ 60,000,000	$ 239,363,000	$ 120,662,000	$ 133,220,000
Common stock authorized for stock repurchase program			300,000,000
Remaining common stock amount available for repurchase			$ 240,000,000

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Other Assets, Net - Additional Information (Detail) (Patents, USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 28, 2013
Patents
Other Assets [Line Items]
Intangible asset acquired	$ 22.4

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Segment Reporting

12 Months Ended

Feb. 28, 2014

Segment Reporting

NOTE 20—Segment Reporting

The following summarizes revenue from unaffiliated customers, income (loss) from operations, total cash, cash equivalents and available-for-sale investment securities and total assets by geographic segment at and for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	Americas		EMEA		Asia Pacific		Corporate(1)			Total
	Year ended February 28, 2014
Revenue from unaffiliated customers	$	974,655	$	352,935	$	207,025	$	—		$	1,534,615
Income (loss) from operations	$	199,254	$	94,949	$	51,860	$	(113,774	)	$	232,289
Cash, cash equivalents and available-for-sale investment securities	$	808,830	$	517,397	$	161,202	$	—		$	1,487,429
Total assets	$	2,153,828	$	703,929	$	248,862	$	—		$	3,106,619

	Year ended February 28, 2013
Revenue from unaffiliated customers	$	855,214	$	284,922	$	188,681	$	—		$	1,328,817
Income (loss) from operations	$	181,136	$	72,440	$	46,160	$	(98,698	)	$	201,038
Cash, cash equivalents and available-for-sale investment securities	$	825,906	$	370,174	$	122,293	$	—		$	1,318,373
Total assets	$	2,068,879	$	534,093	$	210,688	$	—		$	2,813,660

	Year ended February 29, 2012
Revenue from unaffiliated customers	$	716,033	$	257,603	$	159,467	$	—		$	1,133,103
Income (loss) from operations	$	165,278	$	74,581	$	39,321	$	(79,267	)	$	199,913
Cash, cash equivalents and available-for-sale investment securities	$	887,256	$	299,703	$	73,394	$	—		$	1,260,353
Total assets	$	1,898,897	$	424,542	$	167,660	$	—		$	2,491,099

(1) Amounts represent share-based compensation expense for each of the three fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, which was not allocated to geographic segments.

Supplemental information about geographic areas

The following table lists, for the years ended February 28, 2014, February 28, 2013 and February 29, 2012, revenue from unaffiliated customers in the U.S., the Company’s country of domicile, and revenue from foreign countries (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
U.S., the Company’s country of domicile	$	848,053	$	753,898	$	622,608
Foreign		686,562		574,919		510,495
Total revenue from unaffiliated customers	$	1,534,615	$	1,328,817	$	1,133,103

There were no individual foreign countries in which the Company earned 10% or more of its revenue from unaffiliated customers.

Total tangible long-lived assets located in the U.S., the Company’s country of domicile, and similar tangible long-lived assets held outside the U.S. are summarized in the following table for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	As of February 28, 2014		As of February 28, 2013		As of February 29, 2012
U.S., the Company’s country of domicile	$	137,356	$	105,029	$	63,069
Foreign		36,561		36,557		28,996
Total tangible long-lived assets	$	173,917	$	141,586	$	92,065

Supplemental information about major customers

For the year ended February 28, 2013, the U.S. government and its agencies generated approximately 11% of the Company’s total revenue from unaffiliated customers. For the years ended February 28, 2014 and February 29, 2012 there were no individual customers from which the Company generated 10% or greater revenue.

Supplemental information about products and services

The following table, for each of the fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012, provides further detail, by type, of our subscription and services revenues. Infrastructure-related offerings subscription revenue includes subscription revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Enterprise Virtualization. Subscription revenue generated from our Application development-related and other emerging technology offerings includes Red Hat JBoss Middleware, Red Hat Storage Server and Red Hat cloud offerings such as OpenStack and OpenShift (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Subscription revenue:
Infrastructure-related offerings	$	1,171,103	$	1,027,983	$	870,315
Application Development-related and other emerging technology offerings		165,668		120,358		95,260
Total subscription revenue		1,336,771		1,148,341		965,575
Training and services revenue:
Consulting services		145,191		129,363		116,573
Training		52,653		51,113		50,955
Total training and services revenue		197,844		180,476		167,528
Total revenue	$	1,534,615	$	1,328,817	$	1,133,103

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Summary of Tangible Long-Lived Assets (Detail) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Segment Reporting, Asset Reconciling Item [Line Items]
Total tangible long-lived assets	$ 173,917	$ 141,586	$ 92,065
U.S.
Segment Reporting, Asset Reconciling Item [Line Items]
Total tangible long-lived assets	137,356	105,029	63,069
Foreign
Segment Reporting, Asset Reconciling Item [Line Items]
Total tangible long-lived assets	$ 36,561	$ 36,557	$ 28,996

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Schedule of Components of Provision for Income Taxes (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Deferred Income Taxes And Tax Credits [Line Items]
Current, Foreign	$ 23,391	$ 16,556	$ 16,612
Current, Federal	19,734	33,598	18,609
Current, State	7,147	1,882	3,069
Current tax expense	50,272	52,036	38,290
Deferred, Foreign	(1,100)	2,899	(4,390)
Deferred, Federal	14,468	9,687	27,483
Deferred, State	(2,384)	(5,074)
Deferred tax expense	10,984	7,512	23,093
Net provision for income taxes	$ 61,256	$ 59,548	$ 61,383

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Accounts Payable and Accrued Expenses (Tables)

12 Months Ended

Feb. 28, 2014

Summary of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses were comprised of the following (in thousands):

	February 28, 2014		February 28, 2013
Accounts payable	$	18,326	$	27,096
Accrued wages and other compensation related expenses		100,474		72,912
Accrued other trade payables		40,998		38,595
Accrued income and other taxes payable		19,253		15,111
Accrued other		417		488
Accounts payable and accrued expenses	$	179,468	$	154,202

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Share-based Awards

12 Months Ended

Feb. 28, 2014

Share-based Awards

NOTE 13—Share-based Awards

Overview

The Company’s 2004 Long-Term Incentive Plan, as amended and restated (the “2004 Plan”), provides for the granting of stock options, service-based share awards and performance-based share awards, among other awards. As of February 28, 2014, there were 19.6 million shares of common stock reserved for issuance under future share-based awards to be granted to any employee, officer or director or consultant of the Company at terms and prices to be determined by the Board of Directors.

The following table summarizes share-based awards, by type, granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Awards Granted Year ended February 28, 2014				Awards Granted Year ended February 28, 2013				Awards Granted Year ended February 29, 2012
	Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value		Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value		Shares and Shares Underlying Awards		Weighted Average Per Share Award Fair Value
Stock options		133,800	$	12.64		114,361	$	15.16		51,563	$	15.41
Service-based shares and share units		2,513,328	$	47.43		2,471,872	$	54.62		2,148,070	$	45.35
Performance-based shares and share units—Maximum		671,448	$	47.86		613,800	$	52.23		633,336	$	43.60
Total share-based awards		3,318,576	$	46.11		3,200,033	$	52.75		2,832,969	$	44.41

The following summarizes share-based compensation expense recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Cost of revenue	$	11,793	$	9,433	$	7,880
Sales and marketing		40,322		32,906		25,060
Research and development		34,194		29,647		21,570
General and administrative		27,465		26,712		24,757
Total share-based compensation expense	$	113,774	$	98,698	$	79,267

Share-based compensation expense qualifying for capitalization was insignificant for each of the Company’s fiscal years ended February 28, 2014, February 28, 2013 and February 29, 2012. Accordingly, no share-based compensation expense was capitalized during these years.

Estimated annual forfeitures—An estimated forfeiture rate of 10% per annum, which approximates the Company’s historical rate, was applied to options and service-based share awards. Awards are adjusted to actual forfeiture rates at vesting. The Company reassesses its estimated forfeiture rate annually or when new information, including actual forfeitures, indicate a change is appropriate.

Stock options

The 2004 Plan provides that the purchase price per share for each option shall not be less than the fair market value of the underlying share on the date of grant. Options granted under the 2004 Plan to date include contract terms of five years and generally vest 25% upon completion of one full year of service and 6.25% on the first day of each subsequent three-month period of service. The maximum contract term for an option granted under the 2004 Plan is seven years from the date of grant.

The total fair value of stock options recognized in the Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of stock options recognized	$	2,139	$	2,791	$	3,104

The following table summarizes the activity for the Company’s stock options for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Shares Underlying Options			Weighted Average Exercise Price Per Share
Outstanding at February 28, 2011		2,029,488		$	16.88
Granted		51,563			45.08
Exercised		(1,059,191	)		15.87
Forfeited		(123,618	)		17.16
Assumed (1)		204,911			1.13
Outstanding at February 29, 2012		1,103,153		$	16.21
Granted		114,361			55.17
Exercised		(735,086	)		15.61
Forfeited		(29,741	)		25.10
Outstanding at February 28, 2013		452,687		$	26.43
Granted		133,800			47.12
Exercised		(175,026	)		12.13
Forfeited		(34,840	)		22.93
Outstanding at February 28, 2014		376,621		$	40.75

(1) Amount represents partially vested options assumed as part of a business combination.

As described above, options are typically granted with an exercise price equal to the fair market value of the Company’s common stock on the date of grant. No options were granted by the Company during the three years ended February 28, 2014 with exercise prices less than the grant date fair value of the Company’s common stock.

The following summarizes information, as of February 28, 2014, about the Company’s outstanding and exercisable stock options:

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.00 – $10.00		52,214		4.6	$	1.85		32,588	$	1.70
$10.01 – $20.00		7,157		1.0	$	16.24		7,157	$	16.24
$20.01 – $30.00		20,773		0.6	$	27.51		20,773	$	27.51
$30.01 – $40.00		24,813		1.6	$	39.37		19,350	$	39.36
$40.01 – $50.00		115,623		4.0	$	44.31		19,857	$	45.13
$50.01 and over		156,041		3.8	$	54.23		34,156	$	55.45
Total		376,621		3.6	$	40.75		133,881	$	32.08

The following summarizes the intrinsic value, as of February 28, 2014, of the Company’s outstanding, exercisable and expected to vest stock options:

Intrinsic Value of Stock Options	Number of Stock Options		Weighted Average Remaining Contractual Life		Intrinsic Value at February 28, 2014 (in thousands)
Outstanding		376,621		3.6	$	6,886
Exercisable		133,881		2.4	$	3,609
Expected to vest (assuming annual forfeiture rate of 10%)		212,369		4.3	$	2,972

The intrinsic value of stock options exercised during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of stock options exercised	$	6,775	$	29,598	$	31,736

As of February 28, 2014, compensation cost related to unvested stock options not yet recognized in the Company’s Consolidated Financial Statements totaled $3.8 million. The weighted average period over which these unvested stock options are expected to be recognized is approximately 2.6 years.

The fair values of options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated on the date of grant using the Black-Scholes-Merton option-pricing model based on the following weighted average assumptions:

	Year ended February 28, 2014			Year ended February 28, 2013			Year ended February 29, 2012
Expected dividend yield		—	%		—	%		—	%
Risk-free interest rate		0.62	%		0.41	%		0.61	%
Expected volatility (1)		36.80	%		38.13	%		47.91	%
Expected life (in years) (2)		3.27			3.27			3.27
Weighted average fair value of options granted during the period	$	12.64		$	15.16		$	15.41

(1) The expected volatility rates for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were estimated based on an approximate equal weighting of the historical volatility of the Company’s common stock over a period of approximately 3.27 years and the implied volatility of publicly traded options for the Company’s common stock.

(2) The expected term for options granted during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was determined based on the Company’s historical exercise data. The Company reassesses its estimate of expected term annually or when new information indicates a change is appropriate.

Service-based share awards

Service-based share awards include nonvested shares, nonvested share units and deferred share units granted under the 2004 Plan. Nonvested shares and share units generally vest, subject to continued service to the Company, 25% on the first anniversary of the date of grant and (i) 6.25% on the first day of each subsequent three-month period for nonvested shares and (ii) 25% each year over a four-year period beginning on the date of grant for nonvested share units. Nonvested shares and nonvested share units are generally amortized to expense on a straight-line basis over four years. Deferred share units are awarded to directors and generally vest within one year when issued in lieu of annual share awards or immediately when issued in lieu of cash.

The total fair value of service-based share awards recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of service-based awards recognized	$	92,450	$	76,460	$	61,818

The following table summarizes the activity for the Company’s service-based share awards for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Nonvested Shares and Share Units			Weighted Average Grant-date Fair Value
Service-based share awards at February 28, 2011		5,793,338		$	28.60
Granted		2,148,070			45.35
Vested		(2,162,667	)		25.78
Forfeited		(431,900	)		32.22
Assumed (1)		139,798			43.34
Service-based share awards at February 29, 2012		5,486,639		$	36.36
Granted		2,471,872			54.62
Vested		(2,184,588	)		31.33
Forfeited		(580,490	)		41.56
Service-based share awards at February 28, 2013		5,193,433		$	46.59
Granted		2,513,328			47.43
Vested		(1,915,326	)		42.35
Forfeited		(418,127	)		48.53
Service-based share awards at February 28, 2014		5,373,308		$	48.34

(1) Amount represents partially vested share awards assumed as part of a business combination.

The following summarizes the intrinsic value, as of February 28, 2014, of the Company’s service-based awards outstanding and expected to vest:

Intrinsic Value of Service-based Awards	Number of Shares and Share Units		Weighted Average Remaining Vesting Period		Intrinsic Value at February 28, 2014 (in thousands)
Outstanding		5,373,308		1.5	$	316,971
Expected to vest (assuming annual forfeiture rate of 10%)		4,553,165		1.5	$	268,591

The intrinsic value of service-based awards vesting during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of service-based awards vesting	$	88,969	$	118,299	$	96,536

As of February 28, 2014, compensation cost related to service-based share awards not yet recognized in the Company’s Consolidated Financial Statements totaled $213.4 million. The weighted average period over which these nonvested awards are expected to be recognized is approximately 1.4 years.

Performance-based share awards

Under the 2004 Plan, certain executive officers and senior management were awarded a target number of PSUs. The PSU payouts are either based on (i) the Company’s financial performance (“performance condition”) or (ii) the performance of the Company’s common stock (“market condition”). Set forth below are general descriptions of the two types of performance-based awards granted to certain executive officers and members of senior management:

PSUs with performance conditions

Depending on the Company’s financial performance measured against the financial performance of specified peer companies during a three-year performance period, PSU grantees may earn up to 200% of the target number of PSUs (the “Maximum PSUs”). Payouts are earned over a performance period with two separate performance segments. Up to 50% of the Maximum PSUs may be earned in respect of the first performance segment; and up to 100% of the Maximum PSUs may be earned in respect of the second performance segment, less the amount earned in the first performance segment.

PSUs with market conditions

Depending on the performance of the Company’s common stock over a performance period of approximately three years, PSU grantees may earn up to 200% of the target number of PSUs. The number of PSUs earned is determined based on a comparison of the performance of the Company’s stock price relative to the performance of the stock price of specified peer companies during the same performance period. Each grantee will receive a number of shares of common stock equal to the number of PSUs earned in a single payout following the end of the performance period.

The following table summarizes the activity for the Company’s PSUs for the years ended February 28, 2014, February 28, 2013 and February 29, 2012:

	Maximum
Activity	Shares Underlying Performance Share Units			Weighted Average Grant Date Fair Value
Outstanding at February 28, 2011		1,430,005		$	24.48
Granted		633,336			43.60
Vested		(337,734	)		23.98
Forfeited		—			—
Outstanding at February 29, 2012		1,725,607		$	31.60
Granted		613,800			52.23
Vested		(634,384	)		23.62
Forfeited		(200,353	)		32.81
Outstanding at February 28, 2013		1,504,670		$	43.22
Granted		671,448			47.86
Vested		(399,334	)		33.47
Forfeited		(101,559	)		44.34
Outstanding at February 28, 2014		1,675,225		$	47.34

(1) Vested and forfeited amounts represent the actual number of shares vesting and forfeited during the year. Outstanding represents the remaining maximum potential shares available to vest as of the period ended.

The total fair value of performance-based share awards recognized in the Company’s Consolidated Financial Statements for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total fair value of performance-based awards recognized	$	19,185	$	19,447	$	14,345

The total intrinsic value of performance-based share awards vesting during the years ended February 28, 2014, February 28, 2013 and February 29, 2012 was as follows (in thousands):

	Year ended February 28, 2014		Year ended February 28, 2013		Year ended February 29, 2012
Total intrinsic value of performance-based awards vesting	$	19,639	$	37,872	$	16,032

As of February 28, 2014, the number of shares subject to PSU awards expected to vest was 1.1 million shares. Compensation expense related to PSUs expected to vest but not yet recognized in the Consolidated Financial Statements totaled $19.8 million as of February 28, 2014. The weighted average period over which these awards are expected to be recognized is approximately 1.7 years.

XML

Total Fair Value Of Performance-Based Awards Vesting (Detail) (Performance Share Units, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Feb. 28, 2014	Feb. 28, 2013	Feb. 29, 2012
Performance Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of performance-based awards vesting	$ 19,639	$ 37,872	$ 16,032