Novice Investing - Green Light for Red Hat

Date: Friday 05th 2008f September 2008 05:49:07 PM

Green Light for Red Hat - 12/24/2006

By: Novice Investing Staff

Red Hat Inc. (RHT) reported its third quarter earning on Friday 22nd Dec 2006. Red Hat reported earning of 14 cents per share which is better than Wall Street expectation of 12 cents per share. Meanwhile, revenue jumped 45% to $ 105.8 Million from $ 73.1 Million last year. Red Hat shares skyrocketed 22% on the earning news. Its shares had been depressed due to Oracle's late entrance to the open source arena which was later followed by Microsoft collaboration with Novell Inc. (NOVL), a Red Hat competitor.

While it is too early to judge the impact of Oracle and Microsoft entry into Linux open source, the 45% jump in revenue solidifies the strategy of focusing on distributing open source software for free while making money on supports and installations. Previously, we have indicated that this move by Oracle is a significant threat for Red Hat's core business in open source. However, Red Hat had repelled this notion by announcing a strong third quarter earning this past week.

Going forward, investors need to be on the lookout for the aforementioned Oracle and Microsoft entrant into the open source field. As it takes time for companies to switch a highly sophisticated network system, the effect and change to Red Hat's business model will be gradual. Furthermore, Novell was in collaboration with Microsoft to provide open source solution along with highly formidable Window system.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Red Hat Inc. (RHT) or any other securities.

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