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Tuesday, November 24, 
4:02 pm

Red Hat on Oracle's head?

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ellison,larry125x100.jpgA hot topic in tech dealmaking circles since Oracle Corp.'s (NASDAQ:ORCL) $7 billion agreement to purchase Sun Microsystems Inc. (NASDAQ:JAVA) is the future of Linux distributor Red Hat Inc. (NYSE:RHT). Dealscape recently highlighted one of the ideas floating through the ether -- a sale to IBM, which was popularized by Jefferies & Co. analyst Katherine Egbert. The chatter surrounding a sale of Red Hat continues to grow with Cnet addressing the subject Tuesday.

If Red Hat is in play, then maybe Oracle is looking to wear it.

Given Oracle's prior acquisition history, it is not opposed to making more than one large acquisition back-to-back before integration is complete. For example, after chasing PeopleSoft for a year, it agreed to acquire it in December 2004 in a $10.3 billion deal. Then in September 2005, it agreed to purchase Siebel Systems for $5.8 billion. Additionally, it purchased Hyperion Solutions in March 2007 for $3.3 billion, then nine months later purchased BEA Systems for $8.5 billion.

A closer look at these large deals reveals a pattern: Oracle often follows one large deal with another nine months later, then spends the next year or more integrating the two purchases before seeking its next big acquisitions. So if this rhythm continues to hold true, Larry Ellison will make another megadeal in the coming months. Red Hat might be the ideal buy. 

Red Hat is a perfect fit for Oracle given the market's preference of using Red Hat Enterprise Linux operating system with Oracle's software, and Oracle's inability after two years of selling its rival Oracle Unbreakable Linux to extricate itself from that relationship.

While the purchase of Sun provides Oracle with another alternative operating system, Solaris, to sell to customers, the odds are strong that most customers will likely stick with Red Hat. Oracle could remove from the market Java's leading alternative, Red Hat's Jboss, and prevent IBM from gaining access to it via a Red Hat purchase.

However, the case for an IBM purchase of Red Hat put forth by Egbert is equally strong. Indeed, IBM and Oracle may be competing head to head to buy Red Hat, which may make it Ellison's biggest challenge since PeopleSoft. - Matthew Wurtzel

See story from Cnet
See earlier story from Dealscape

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Comments

From: Marky Goldstein,

The best idea is that all those companies become large shareholders of Red Hat instead of one company owning it. Such an alliance has much more power.


From: Mark Johnson,

Do you have permission to print this article from "Seeking Alpha"?


From: Matthew Wurtzel Author Profile Page,

Mark,

Thanks for the response, and if you are a Seeking Alpha reader new to TheDeal.com, welcome to Dealscape.

The article in question on Seeking Alpha is in fact the reprint. The story here on TheDeal.com is the original. We have an agreement that allows Seeking Alpha to republish select Dealscape entries from TheDeal.com.

Thanks,
Matthew Wurtzel
Dealscape editor


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