Red Hat: The Fools Are Right
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.
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.