TechWeek: Less Than Meets the Eye

Finally, it's not altogether clear that the agreement will hurt Red Hat, though I have to admit my first reaction was to think it would. Merrill Lynch analyst Kash Rangan says that the indemnification issue (essentially insurance against intellectual-property lawsuits) has ceased to be a hot-button issue for potential Linux customers now that the threat posed by The SCO Group(SCOX) has receded.

SCO, you might recall, claimed to own substantial chunks of Unix code that appear in Linux and threatened to sue IBM(IBM) and nearly everybody else in the industry, including customers, for reparations.

There's also the question of how the feisty open-source community will react once Microsoft begins to collect royalties, or tolls, as Rangan put it, related to the agreement. (Merrill Lynch is seeking investment banking business with Microsoft and Red Hat.)

The Shrinking Software Universe

Oracle's(ORCL) $440 million takeout of Stellent (STEL) on Thursday underlines the speed of consolidation in the software industry and the rush by big players in software -- and some in hardware -- to provide a complete "stack" of infrastructure products.

Stellent is one of the last-remaining players in enterprise content management software, along with Open Text(OTEX). Indeed, Open Text purchased Hummingbird earlier this year, and IBM snapped up Filenet in August.

EMC(EMC) though, got there first, picking up Documentum for a cool $1.7 billion in late 2003, and proving that a pure-play content-management company could be a good fit within a more heterogeneous organization.

Documentum's preacquisition revenue in 2003 was $289 million; as of EMC's most recent reported quarter, Documentum was on an annualized run rate of $630 million, for a compound annual growth rate of 24%.

Stellent will strengthen Oracle's hand as it seeks to expand its database capabilities to more unstructured types of data email, for example, an area that is garnering increasing attention in the business environment.

"Stellent will bring Oracle more capabilities in handling unstructured data and corporate information. On a combined basis, we believe that this acquisition will significantly strengthen Oracle's offering in the convergence of the structured and unstructured data within their customers," wrote Murray Beach, president of Boston Corporate Finance, an M&A-oriented investment bank.

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TechWeek Scorecard
Index	Closing	Change
Nasdaq Composite	2331	0.9%
Philadelphia Semiconductor	449	0.7%
Goldman Sachs Software	182	-0.5%
TSC Internet	238	0.0%

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