Market Overview

Red Hat To Acquire Novell?

Red Hat, Inc. (NYSE: RHT) was named by the Wall Street Journal yesterday to be one of the potential purchasers of Novell, which the New York Post announced would sell itself in two parts; Linux will go to a strategic buyer and the remainder will be sold to private equity, Jefferies reports. The other companies mentioned were VMware (NYSE: VMW), Oracle (NASDAQ: ORCL), and EMC (NYSE: EMC).

IBM (NYSE: IBM) was not mentioned in this publication, but if it was or were to be, Jefferies sees potential headline risk for Red Hat, since IBM has been the key OEN and development partner of Red Hat for many years. Should IBM be named or publish intention to purchase SuSE, the financial impact on Red Hat could total ~$60M annually.

Jefferies maintains its Buy rating but has raised the price target to $45 (from $35) for Red Hat, Inc., which closed yesterday at $38.74.

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