Red Hat's Price Tumble Helps Oracle (ORCL, RHAT)

Includes: ORCL, RHT
by: William Trent, CFA
We knew Oracle (NASDAQ:ORCL) was doing much better in applications after having had trouble digesting acquisitions. We know their main target is SAP. But open source models are something of a threat to all of the existing software vendors, so yesterday’s disappointing Red Hat (RHAT) performance is attributable, at least in part, to their acquisition of JBoss. As Marketwatch noted:

Early this month, Red Hat bought JBoss for around $350 million in cash and stock. The deal aimed to help accelerate a shift towards service-oriented architecture.

JBoss was a maker of open-source middleware products, which are designed to help different software applications work together. The products, including application servers, compete against offerings from the likes of Oracle Corp., BEA Systems Inc. (BEAS) and International Business Machines Corp. (NYSE:IBM).

Plus, having some of the smaller players help clean up the excess capital (translation: buy up some of the extra companies) out there saves Oracle the trouble and gets the industry to a sustainable structure faster.

ORCL 1-yr chart:

ORCL 1-yr chart

Related article: Why I’m Buying Red Hat On Today’s Tumble.