The bottom line on Novell-Microsoft may be RedHat stock surge

The bottom line on Novell-Microsoft may be RedHat stock surge

Summary: I have always believed that conventional wisdom is more convention than wisdom, even my own, and that if you want to seperate truth from fiction you should follow the money. So far, you'll find that money in the red hat.

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The Novell-Microsoft deal, announced November 2, was designed to boost Novell's place in the Linux universe against that of competitors, notably RedHat.

Those analysts, like Peter Yared, who spun the deal as a good thing were banking on the idea it would make Novell a more significant competitor in the Linux space.

RedHat's "what, me worry" attitude was dismissed by no less a thinker than our own Larry Dignan, who predicted that buyers would enjoy "Some serious leverage as Red Hat subscriptions expire in a few months" because of the Microsoft (and Oracle) market entries. Mark Wagner added that the deal created "Fear, Uncertainty and Doubt" among RedHat customers, benefitting Microsoft.

OK, so what are the early returns from people who pay attention most closely, namely investors on Wall Street? Well, here's the performance of the relevant companies for the last three months:

  • Oracle -- Down 3.56%
  • Microsoft -- Up 2.7%.
  • Novell -- Up 8.13%
  • RedHat -- Up 36.82%

These are early days. The behavior of these vendors' stocks is not attributable solely to Linux, or their positions on the Linux market question.

But I have always believed that conventional wisdom is more convention than wisdom, even my own, and that if you want to seperate truth from fiction you should follow the money.

So far, you'll find that money in the red hat.

Topic: Enterprise Software

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14 comments
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  • Have you ever seen a battleship turn?

    It takes time. Lets see where the numbers are a year from now.
    No_Ax_to_Grind
    • These Linux deals

      Are mostly ignored by the user community. Remember the whole SCO thing? Lots of FUD but very few actual licenses sold. This will only matter if Novell actually makes a more useful product which isn't immediately duplicated or exceeded by the other distributions. Judging by the track record, that's pretty unlikely.
      alflanagan
    • That's what IBM used to say

      Back in the day that is precisely the kind of argument that was made on behalf of IBM and against Microsoft. Yet if you bought Microsoft then and sold IBM, you made out like a bandit.
      DanaBlankenhorn
  • Oh that was superb

    nt
    D T Schmitz
  • show me the money

    Microsoft has a market cap of $290 billion
    Red Hat has a market cap of $4.34 billion


    Microsoft has revenues of $50 billion
    Red Hat has revenues of $278 million
    zzz1234567890
    • Novell is the true comparison

      Their market cap is $2.39 billion and their annual revenues are $967 million. http://finance.google.com/finance?q=NOVL Yet RedHat has done three times as well with the market over the last three months as Novell. Yesterday Novell lost a dime a share, which is meaningful when your share price is about $7
      DanaBlankenhorn
    • Just goes to show you all the money wasted on MS technologies.

      Red Had can deliver better server software at a fraction of the cost.
      DonnieBoy
  • Lousy methodology

    Well, when you are in the sub-basement - the only place to go is up.

    RHT peaked last May, then took a serious dive. They seriously underperformed against both the S&P and their industrial ranking. Most analysts I saw at Fidelity have it as neutral.

    As of 2/5 the stock is rated as bearish - as it's losing price.
    quietLee
    • So, if RedHat was hurting so bad, the Novel/MS deal should have caused even

      more problems. Instead, RedHat is up 36%. Quite significant.
      DonnieBoy
      • Put up or shut up

        52 week low at 10/26 was 13.70, 52 week high was 5/8 at 32.48. Three out of four analysts are nuetral in terms of buy/sell - the fourth one says buy as of 1/3.

        Novell is in the same dumper - I'd take a pass on either of these.

        MSFT has done exactly the reverse of the other two in regards S&P and the industry BTW - and a higher earnings to share than either to boot.

        Point is - both Novell and Red Hat are around the bottom of the curve right now in terms of share price. Going up in value only makes sense. However, again both Novell and RHT are running opposite the rest of the industry in terms of stock price - might be a good bargain to pick up, might end up burning you as they haven't hit bottom yet.

        And I don't think the Street cares anywhere as much about the MS-Novell agreement as someone who reads this blog might.
        quietLee
        • That may be, but RedHat is WAY up since the announcement.

          In other words, after all, the Novel/MS deal has probably helped RedHat, and in any case has not hurt them.
          DonnieBoy
      • What I do find interesting is

        Both RHT and Novell saw a rise around May, had a low point around October and then started a rise. Reflecting industry buy/sell cycles?

        Anyways, while Novell looks to be the real stinker of the group, it has better stats. Over 75% of the stock is owned by institutions, versus none for RHT - the sales volume is higher than Red Hat - and Novell has about 3x the outstanding shares.

        In any event, Novell had it's best year in 2004, with a nice uptick in 2006. RHT had a nice uptick in 2004, with a better year in 2006. Both are doing better now than they were before 2004, in any event not enough to get me to buy either of them...

        I still think there is far more to the performance of either stocks than just a Novell-MS agreement.
        quietLee
        • Nobody was saying that you should use the recent information as a reason to

          buy RedHat, but to anybody with an IQ in double figures, it is rather obvious that nobody in the financial community is thinking that the deal between MS and Novel will amount to diddley squat. On the contrary, it is possible evidence that they know have more confidence in RedHat.
          DonnieBoy
    • Read this article, sound like you do not know what you are talking about.

      http://redherring.com/Article.aspx?a=21144&hed=Bull+Wears+Red+Hat
      DonnieBoy