This Day On The Street
Continue to site
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

Red Hat Shares Rocked

Updated from Oct. 25

SAN FRANCISCO -- Shares of Red Hat (RHAT) plummeted Thursday morning after Oracle (ORCL - Get Report) said late Wednesday that it will offer full support for customers running the smaller company's version of the popular Linux operating system.

Because Linux is essentially free, vendors such as Red Hat survive by selling support and maintenance to corporate customers, so every Red Hat customer who chooses to buy support from Oracle represents lost Red Hat revenue.

Investors understood that dynamic immediately, selling off Red Hat shares in after-hours trading. Early in Thursday's session, Red Hat lost $4.57, or 23.4%, to $14.94, as a slew of brokerages downgraded the stock.

Oracle CEO Larry Ellison announced the new program at his company's OpenWorld convention here, which has drawn a record 42,000 attendees.

As of Wednesday, Oracle will offer full support to Red Hat customers, at a price that Ellison claimed is roughly 50% lower. He said the inability of Red Hat and other Linux vendors to offer the kind of support needed by large businesses was holding back the progress of the open source operating system. "The lack of enterprise quality support has slowed the adoption of Linux," Ellison said. "This isn't about Red Hat, this is about increasing the adoption of Linux."

Ellison's announcement was something of a surprise. There has been speculation for months that Oracle would compete head to head with Red Hat by offering its own version of Linux. But that would have opened the company to charges that it was splintering Linux for its own selfish ends. Competing with Red Hat by offering support, though, is a much cleaner solution.

"I don't think this will kill Red Hat," Ellison said in response to a question from the audience. "This is capitalism. We are competing," he said.

Oracle, he said, will do a better job fixing bugs than Red Hat, indemnify customers against potential intellectual property issues, and offer better customer support for less money.

A spokesman for Red Hat could not be reached for comment.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ORCL $39.29 0.00%
AAPL $94.19 0.00%
FB $118.06 0.00%
GOOG $695.70 0.00%
TSLA $222.56 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs