[lug] Red Hat $ 217/share long or short?

[Jeffrey B. Siegal]

"Michael J. Hammel" wrote:
> I doubt the DOJ ruling had anything to do with the recent jump.

Actually, it did.  Immediately after the judge issued his finding that
Microsoft was a monopoly and abused its monopoly power, the prices of several
Microsoft competitors (including Red Hat as well as Sun and others) staged a
major immediate increae and started on a major ramp.  Putting Microsoft in
check like that greatly reduces the possibily of Microsoft pulling another
"cut off their air supply" type stunt.

> I suspect
> that it was being propped up by institutional investors (Intel perhaps) in
> order to give it the buying power it needs to purchase a few other key
> components.

No:

1. Intel as a major investor could not buy stock without SEC filings, if at
all.  

2. Most of the IPO shares are probably in institutional hands, and these
people could and would dump their shares if they thought the price was
inflated.  They're not, because they think there is a possibilty at least,
that Red Hat will continue to do well.

3. Even with stock *much* lower ($50 or less), Red Hat has plenty of buying
power to buy Applix or almost anyone else.  None of these Linux companies
except the ones getting ready for an IPO (VA, Linuxcare, etc.) are worth
enough to be out of Red Hat's reach. 

Another reason for the recent run up is the Cygnus acquisition.  That was a
terrific deal for Red Hat.  Not only are the companies highly culturally
compatible (which suggests limited departures by key employees), but for about
10% of their own market cap, Red Hat more than doubled their head count,
increased their revenues by about a factor of five, and got development and
support contracts with many solid gold technology companies who are long-time
Cygnus customers (including Cisco).