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5/21/2009
12:30 PM
Bob Evans
Bob Evans
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Does Red Hat Need Hardware White Knight After Oracle-Sun?

With its acquisition of Sun giving Oracle contol of the Solaris operating system, Red Hat and its Enterprise Linux might well become the less-favored stepchild in the expanded - and extended - Oracle family. And with the old hardware/software distinctions in the industry being erased, Red Hat is a likely takeover target, perhaps by a hardware company, predicts one financial analyst.

With its acquisition of Sun giving Oracle contol of the Solaris operating system, Red Hat and its Enterprise Linux might well become the less-favored stepchild in the expanded - and extended - Oracle family. And with the old hardware/software distinctions in the industry being erased, Red Hat is a likely takeover target, perhaps by a hardware company, predicts one financial analyst.Jefferies & Co. analyst Katherine Egbert writes, "We estimate that 1/3 of Red Hat's new business comes from Unix-to-Linux migrations. The danger to Red Hat is that Oracle will offer customers attractive terms terms to stay on Solaris, potentially even paying them not to migrate." Egbert's report was cited in an article on Seeking Alpha.

That article also says that Oracle, even before the Sun acquisition, was eager to find an alternative to Red Hat: "In fact Oracle has already been trying for two years to extricate itself from the Red Hat relationship in the form of its own Linux distribution, called Oracle Unbreakable Linux, but has had limited success."

Not surprisingly, analyst Egbert predicts that IBM could be the one to step in and acquire Red Hat, and the Seeking Alpha article offers two factors to buttress that speculation: "Red Hat with its JBoss alternative to Java seems like a decent consolation prize" for IBM, and Red Hat's $3.58 market cap as of May 20 could make it a less-expensive acquisiton than Sun.

For more perspective on the less-than-blissful relationship between Oracle and Red Hat, please see these two pieces by my incomparable colleague, Charlie Babcock: --"Oracle To Support Red Hat Linux, Using Red Hat's Own Product Against It" from October 2006, which is here; and --"Oracle Urges Red Hat To Give Away Its Product" from two months ago, which is here.

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