(REUTERS) FOCUS-Red Hat surges on deal speculation
FOCUS-Red Hat surges on deal speculation
(recasts, adds analyst, investment banker, executive
comments, previous New York)
By Therese Poletti
SAN FRANCISCO, Nov 29 (Reuters) - Shares of Red Hat Inc.
<RHAT.O>, the largest distributor of the upstart Linux
operating system, surged another 11 percent on Monday amid talk
that the company is poised to make more acquisitions, as it
seeks to become a competitive threat to Microsoft Corp.
<MSFT.O>.
Since last Tuesday, shares of the Research Triangle Park,
N.C.-based company, which has a red fedora as its logo, have
soared 95 percent. Red Hat was the first company in the Linux
area to go public, in a successful public offering last August.
On Monday, its shares climbed 23-1/8 to 236-5/8, giving the
company a market capitalization of over $15 billion. The stock
was initially priced at $14 a share in its IPO in August.
The Nov. 29 edition of PC Week magazine, citing sources
familiar with its plans, reported that Red Hat is set to step
up its rivalry with Microsoft with a campaign of new
acquisitions, partnerships and Linux software development
advocacy.
Melissa London, a Red Hat spokeswoman, declined to comment
on the report. "We do have a policy of not commenting on wild
or random speculation," London said.
But in Silicon Valley, executives at startup Linux
companies, analysts and investment bankers said it is common
knowledge that Red Hat is out looking for ways to expand its
business and take advantage of the currency it has with its
hefty stock price.
"There is no question that they are searching the highways
and the by-ways," said Rick Dalton, a managing director at
Broadview International LLC, an investment banking firm.
"Having a huge market cap, which they do, it's only prudent to
do what they are doing and go out and use it to fill in the
gaps in the strategy and build a real company."
In addition, on Monday, Red Hat announced a computer
services deal with auto parts retailer AutoZone Inc. <AZO.N>,,
which plans to install Linux on 3,000 terminals in 2,711
AutoZone stores throughout the U.S. Red Hat will provide
on-site technical consulting to AutoZone as part of its plans.
Linux, a version of the Unix operating system that runs on
Intel Corp. <INTC.O> chips and other processors, has taken the
computer world by storm in the past year, as many computer
makers have begun to offer it as an alternative to Microsoft's
Windows NT for certain applications.
It is mostly used for specific tasks, such as e-mail or Web
servers, but it is expanding into new areas, such as devices,
set-top boxes. Some companies are trying to move Linux to the
desktop, where it has been too unwieldy for most computer
users.
As investors speculated that Red Hat may continue to make
more acquisitions, such as its Nov. 15 acquisition of tools
maker Cygnus Solutions for $674 million in stock, shares of one
company, Canadian software developer Corel Corp.
<COR.TO><CORL.O> jumped.
Corel is one company that is pushing to make Linux easier
to use on the desktop and just two weeks ago launched its
version of Linux, Corel Linux, with an easy-to-use interface.
Amid market rumors circulating in online chat rooms that it
could be a takeover target by Red Hat, Corel's stock jumped
6-3/4 to 20-7/8 and was the most active on the NASDAQ.
A Corel spokeswoman in Ottawa dismissed the takeover talk
as pure speculation. "We haven't been approached by Red Hat, we
haven't been bought out by Red Hat," a Corel spokeswoman said.
PC Week said Red Hat is preparing to boost its ties to
Sendmail Inc., the developer of the popular e-mail messaging
software that is at the heart of the Internet. Red Hat may also
strengthen its links with Mozilla, an effort to develop a new
version of the Netscape Internet browser software, PC Week
reported. Executives at Sendmail, which is based in Emeryville,
Calif., did not return calls.
The report said Red Hat was ready to invest "significant
cash, engineering and marketing resources into Mozilla," a
slow-starting initiative to develop a new version of the
Netscape browser software based on the voluntary efforts of a
loose network of open-source software programmers.
Industry executives said Red Hat has also been courting
companies such as Linuxcare, a San Francisco-based company that
provides services for companies using Linux, which is not owned
by any one company. Linux was developed by Finnish programmer
Linus Torvalds and a group of far-flung programmers worldwide.
"We have had flirtatious discussions but not anything of
substance," said Art Tyde, a co-founder and executive vice
president of Linuxcare. "They are out there talking to people
in the community. It is a pretty widespread rumor."
With such expanded relationships, Red Hat could build on
its momentum with Linux and double its workforce.
Red Hat has been looking for ways to boost Linux use in
running desktop PCs connected to corporate networks. It
announced a deal in September to supply Burlington Coat Factory
Warehouse Corp. <BCF.N> with services including telephone
technical support for 260 Burlington store locations.
"Red Hat is in a very interesting position," said Dan
Kusnetzky, an analyst at International Data Corp. "With a
market cap in excess of $10 billion, we have a moment in time
where they have enormous leverage and they could use it to make
their business better." |
