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 Channel Futures

Open Source


Red Hat: The Fools Are Right

  • Written by The VAR Guy 1
  • May 12, 2009
The VAR Guy enjoys Barron's and The Motley Fool -- two fantastic financial websites. But when it comes to rumors about Red Hat's future, The VAR Guy has to side with irreverent Fools rather than the traditional Barron's. Here's why.

motleyfoolThe VAR Guy enjoys Barron’s and The Motley Fool — two fantastic financial websites. But when it comes to rumors about Red Hat’s future, The VAR Guy has to side with irreverent Fools rather than the traditional Barron’s. Here’s why.

First, some background. Barron’s earlier this week speculated that Red Hat is a prime takeover target. But Barron’s misses the bigger picture. The publication spends paragraph after paragraph describing why Red Hat Linux is a tempting acquisition. No debate there. But Barron’s fails to mention Red Hat’s JBoss middleware business is growing faster than Red Hat’s traditional Linux platform business.

With that fact in mind: Why, oh why, would Red Hat’s board consider selling the company? After all, Linux adoption remains strong and the open source middleware market is just getting started. Plus the open source IT channel, led by Red Hat and Synnex, is just revving up its engine. Translation: Any suitor that potentially bids on Red Hat will need to pay a hefty premium for the company.

Foolish Logic Makes Sense

Ironically, The Motley Fool’s coverage sounds far more logical to The VAR Guy. Comparing Oracle-Sun to a potential IBM-Red Hat deal, the Fool points out:

Sun was and is a floundering mess of hardware and software, incapable of deciding what it wants to be when it grows up. Red Hat is in the business of profitable growth and cash flow generation, with a single-minded focus on open-source software and the support services that go with it.

Well said, Motley Fool. If IBM or any other major IT company steps in to acquire Red Hat at a lofty multiple, The VAR Guy will need to eat crow. Lots of it. In the meantime, Barron’s Red Hat speculation is just that — speculation.

The VAR Guy is updated multiple times daily. Follow him via RSS, Facebook and Twitter. And subscribe to his newsletter, webcasts and Resource Center.

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Channel Programs Open Source

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4 comments

  1. Avatar Roy Schestowitz May 13, 2009 @ 9:22 pm
    Reply

    The VAR Guy enjoys Barron’s and The Motley Fool — two fantastic financial websites. But when it comes to rumors about Red Hat’s future, The VAR Guy has to side with irreverent Fools rather than the traditional Barron’s. Here’s why.

    You can’t be serious. I have kept track of both these sites for years and along with MSNBC they are notorious for being tied to Microsoft (MSN for example) and they were even accused by other sites like MarketWatch of pumping Microsoft’s stock.

  2. Avatar The VAR Guy May 14, 2009 @ 12:06 am
    Reply

    Roy: Yes indeed, The VAR Guy enjoys Barron’s blog. It’s a guilty pleasure…

  3. Avatar JohnMc May 14, 2009 @ 3:34 pm
    Reply

    Multiple?! Heh. Back in 4Q, if memory serves right RH’s EPS was equal to that of Sun with 1/4 the capitalization. Multiples are right.

    But IBM won’t be the suitor. IBM has their own FOSS story to tell. With a whole slew of business patents, IBM is in a position to trade with Red Hat rather than buy them. So cross licensing deals would be the order of the day between those two.

  4. Avatar The VAR Guy May 14, 2009 @ 4:13 pm
    Reply

    JohnMc: Also, IBM prefers to see both Red Hat and Novell do well in the Linux market. Big Blue continues to support both distros (and in a growing number of cases, Canonical Ubuntu) in order to ensure no single Linux distro becomes as powerful as Windows during Microsoft’s dominance in the 1990s.

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