Every year, spring brings gives us two things: another rendition of the Open Source Business Conference and rumors of Oracle buying Red Hat, plus various other activities related to open-source consolidation.
In years past OSBC has taken flight with rumors of Zend (false!), JBoss (true!), MySQL (true!), etc. on the block, with Oracle often the proposed buyer.
This year is no different, as Barron’s has obliged by printing yet another rumor that Oracle is planning to invade Raleigh, N.C., to take Red Hat captive.
The source of the rumor is Katherine Egbert, an analyst at Jefferies & Co. The substance for the rumor?
Well, there isn’t any.
The only proffered clue is Oracle’s “history of organically entering new markets and driving the perceived value of the incumbents before ultimately buying shares.” There’s just one problem: while Oracle did arguably try this with its Unbreakable Linux rip-off of Red Hat Enterprise Linux, the effort has failed to cram down Red Hat’s market capitalization.
Indeed, Red Hat remains one of the few companies (along with Oracle) to outperform a suffering market. While a Red Hat acquisition right now wouldn’t price Red Hat at its peak, Red Hat also isn’t trading at a huge discount.
While there are difficulties inherent in an Oracle acquisition of Red Hat–it’s doubtful that IBM would be very pleased with the move, for example–I personally believe the combination could make a lot of sense, and is almost inevitable as Oracle seeks to outflank its primary competitor, Microsoft.
But I’ve seen no signs that it’s happening anytime soon. And again, for all the reasons Egbert points to as hints of Oracle’s interest in buying Red Hat, those same signs suggest Oracle would do better to wait until Red Hat trades at a more pronounced discount to historical highs.
by Matt Asay