Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Wednesday, November 15, 2006

Red Hat Gets A Break, Finally (RHAT)(NOK)(MSFT)(NOVL)

After being pounded in the market when its Linux solution was left out of Microsoft's alliance with alternative Linux shop Novell, Red Hat has finally gotten a break. Nokia has chosen Red Hat's Linux software system for it network server platforms.

While Red Hat has more market share in the Linus OS business than Novell, the deal, with its huge marketing support, boosted a flagging Novell.

Red Hat's stock has fallen from $32 in May to its current price of under $17. But, the stock may have run too far, too fast before that. It stood at under $11 in May 2005, so it had tripled in a year.

Wall St. should not forget that Red Hat is nicely profitable, and growing. In the last reported quarter ending August 31, the company did just shy of $100 million, and had an operating profit of over $9 million. Revenue had gone up each of the three immediate quarters.

Novell's deal with Microsoft may put it too close to the huge software company that many enterprise customers do not trust. Microsoft has made "land grabs" in the past, and companies like Nokia may elect to use Red Hat over the rival "Novell brought to you by Microsoft" Linux solution.

For Red Hat, not all the news is bad.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
 Subscribe

Powered by Blogger