Red Hat: Unlikely to Recover From ORCL/MSFT One-Two Punch -- Barron's

Includes: MSFT, ORCL, RHT
by: SA Eli Hoffmann

Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

PLUGGED IN: Hat Trick by Mark Veverka

Highlighted companies: Red Hat Inc. (RHAT), Microsoft Corp. (NASDAQ:MSFT), Oracle Corp. (NYSE:ORCL)
Summary: Red Hat Inc. (RHAT) makes its money by selling its repackaged/enhanced version of the Linux open-source operating system, and by selling maintenance packages to Linux users. In the last 2 weeks, it received two devastating blows: first from Oracle Corp.'s (ORCL) announcement (Oct. 24) that it would begin providing support for customers using Linux. And then Microsoft Corp. (MSFT) announced (Nov. 2) it would be partnering with Novell in building an "intellectual property bridge" between proprietary Windows software and open-source Linux, Red Hat Chart 5 11 06repackaged by Novell under the name Suse Linux. Linux users tend to be midsize companies, as do MSFT's enterprise users, which means "Microsoft will be essentially re-selling Suse Linux to its massive customer base at low prices," hardly good news for RHAT. Red Hat shares have already fallen 15% since Oracle's announcement. What comes next? "The best case scenario might be that revenue doesn't deteriorate as quickly as some pessimists would expect..."
Quick comment: More Seeking Alpha Red Hat commentary: Oracle Taking On Red Hat in Linux MarketPanic Exit From Red Hat Shares - Overdone?Red Hat Confidently Announces Share BuybackMicrosoft To Work With Novell's Linux