This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Oracle Seeing Red Hat

Trip Chowdhry, managing director of Global Equities Research, calls Oracle's potential entry into the Linux market "a nonevent for Red Hat." Chowdhry figures that Oracle Linux would be part of a single-purpose appliance linked to the company's database or application software. "People buy an appliance because they do one thing very well." But Linux, he says, is an all-purpose operating system, likely to appeal to smaller businesses, not Red Hat's core enterprise customers.

But Russ Herrold, a principal at CentOS, says building a stable Red Hat competitor would be "very doable; it's not particularly hard." he said on the Goldman call. How long would it take? "Could be done in three months with 15 engineers."

Of course, building the software doesn't guarantee that anybody will be interested in using it.

Red Hat is generally considered to excel at support and service (though some sources within the open source community say the reputation is exaggerated) and is known to be compatible with many flavors of hardware and software. Therefore, few people believe Red Hat would suffer anything approaching a hemorrhage of customers.

But Sherlund, who downgraded Red Hat to underperform in April, worries that competition from Oracle could result in pricing pressures that could hurt Red Hat's margins. "Oracle could easily undercut Red Hat on price, offering a largely similar Linux product for a much reduced price compared to RHEL or even at a nominal cost if bundled with other Oracle products including Oracle 10g database," he wrote. Goldman has or is seeking investment banking relationships with Oracle and Red Hat.

Tom Berquist, CFO of Ingres, an open source database startup and a former Wall Street software analyst, disagrees. "Red Hat is cheap enough so that Oracle would be hard-pressed to undersell them." Moreover, the market's reaction to Ellison's initial comments indicates that the risk of Oracle's entry into the market is largely priced into the stock. "There will be a reaction to the headline when Oracle makes its announcement, but it won't be severe and the stock will bounce back," Berquist predicted.

Although the basic version of Red Hat Linux is free, the company charges for advanced versions, and makes most of its money by selling support and access to its network of developers.

Dismissing any effort by a company as large and savvy as Oracle is always dangerous, but for now, Larry's penguin (the Linux mascot) doesn't look terribly threatening.

3 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASDAQ 4,422.0850 -71.3050 -1.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs