Dell founder invests in Red Hat

Michael Dell, the founder and chairman of Dell, has invested a significant sum of money into Linux vendor Red Hat.

Nearly $100m (£53.1m) of Red Hat debentures were bought by MSD Capital on behalf of the Dell founder, according to business news site Triangle Business Journal this week. Debentures are loans that are usually secured and have associated fixed or floating charges. Financial filings indicate that Dell's debentures are being converted into Red Hat equity.

RedMonk analyst James Governor said the investment shows that the Dell founder approves of Red Hat's business model. The Linux vendor makes money from selling subscriptions for its version of the open source operating system.

"From Red Hat's perspective, it’s a wonderful endorsement," said Governor. "Michael Dell's a cautious guy — he's not in the business of taking risks."

Michael Dell's belief in Red Hat is not shared by everyone at Dell. Last year Judy Chavis, the Dell executive who oversees the strategic partnership with Red Hat, said the Linux vendor needs to lower its prices, or it will risk losing customers to free versions of the open source operating system.

Dell's personal investment has led to speculation that the company may acquire Red Hat, but Governor disagrees. "It wouldn't make sense for Dell to buy Red Hat," said Governor. "Dell is in the business of flogging kit, Red Hat makes its money from subscriptions. We haven't seen any indications that Dell is planning to extend its business model in this direction."

But the Dell founder's personal endorsement for Linux is unlikely to sit well with business partner Microsoft, said Governor

"I wish I could be a fly on the wall the next time Michael [Dell] and Bill Gates are in the same room," he said.