Skip to main content Soars on News of Deal With Red Hat

The online magazine has struck a deal to supply Red Hat's news site with Salon's technology content.
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rocketed Wednesday on news that the company has struck a deal with

Red Hat


, the Linux software distributor, to provide Red Hat's recently launched news site with Salon's technology content.

In the face of a continued slide on the


, Salon was up 3 1/4, or 63%, to 8 1/2 in extraordinarily heavy trading Wednesday. Red Hat was rising as well, up 6, or 3%, to 220 7/8. The company announced early Wednesday that it had agreed to buy

Hell's Kitchen Systems

, a business-to-business company, in a stock deal valued at about $90 million. (Salon ended up 2 3/4, or 53%, to 7 15/16 Wednesday, while Red Hat finished up 42 1/8, or 20%, to 256.)

For Salon, the deal with Red Hat is a good one, said Carolyn Trauboco, analyst with

First Union Securities

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. "The announcement is a step in the right direction," she said. "It validates Salon's high level of editorial content, especially in technology." Trauboco initiated coverage of Salon last fall with a price target of 15 and a strong buy recommendation. Her firm has not done any underwriting for the company. The company has indicated that it will continue pursuing deals similar to Wednesday's Red Hat announcement, Trauboco noted.

Last month,

Rainbow Media

, the programming arm of

Cablevision Systems


, said it would buy 10% of Salon in exchange for $11.8 million in advertising and promotion space across Rainbow's media properties, including



American Movie Classics

. Salon is also developing a television show for Bravo.

Separately, Red Hat is buying privately held HKS. Under the terms of the agreement, Durham, N.C.-based Red Hat will issue 398,335 shares of common stock to acquire all the outstanding shares of privately held Hell's Kitchen.

"Red Hat's global reach and brand recognition delivers HKS' e-commerce software to the open source servers running the world's Internet infrastructure,'' said Matthew Szulik, president and chief executive of Red Hat, in a statement. "The acquisition of HKS is another key addition to Red Hat's strategy to create a next-generation software company spanning powerful servers, Internet infrastructure and pervasive, post-PC-centric computing platforms.''

Red Hat is a developer and provider of open source software and services, including the Red Hat Linux operating system, whose publicly available source code can be copied, modified and distributed with minimal restrictions.

The deal to acquire Pittsburgh-based HKS is just the latest in a recent spate for Red Hat; in November, the company agreed to acquire

Cygnus Solutions

, an open source software technology company.

Red Hat said it will bundle HKS' credit card verification system software with the professional edition of its Red Hat Linux operating system, providing users worldwide with an e-commerce server and services solution for fast-growing e-business initiatives. The deal is subject to approval by HKS shareholders and other customary closing conditions.