Fool Fight: Oracle vs. Red Hat

Welcome to another Fool Fight. Grab your ringside seat, please.

Our last bout, which featured Amazon and eBay, resulted in a knockout for eBay, thanks to several passionate Motley Fool CAPS players. Today, we're back on the Left Coast for a ka-powie in Silicon Valley.

Tale of the tape
Let's meet our combatants. In the red corner, it's Oracle (Nasdaq: ORCL  ) , which disappointed investors in its most recent quarter by not exceeding prior guidance. That hasn't deterred CEO Larry Ellison. He wants your identity and a contract to service all of your Linux software.

Meanwhile, in the, um, other red corner, it's Red Hat (NYSE: RHT  ) , which produced big revenue gains in its latest quarter, while upping expenses to better position itself against Oracle, Microsoft (Nasdaq: MSFT  ) , and Novell (Nasdaq: NOVL  ) , who have all been on the attack.

Get ready to ruuuuummmmmmble!
Who will take the title? Ding! There's the bell! First out of the corner is Oracle, with this jab from CAPS player atgkhoury:

"Acquisitions are working. Oracle bought itself [a] sales opportunity within the acquired companies' customer base.... Customers who were hesitant to buy [a] certain company's products fearing the longevity of the company are now willing to do so since Oracle is financially strong."

Red Hat covers up and retreats to the ropes. But then, when Oracle advances, the Linux lion unleashes a right hook courtesy of FoolishMage, one of my favorite posters from our Motley Fool Rule Breakers service:

"[Five-year average] gross margin [is] double that of the S&P 500. Great alternative to Microsoft.... Open source software from Red Hat is free, but the company is making big money on it."

Oracle is cut! It's a bad cut, too. Give that round to Red Hat. But then the bell rings and an opening appears. CAPS all-star Stan Huber, who goes by TMFPlatoish1 here in Fooldom, delivers a wicked uppercut:

"I think short-term jitters over the giant shadow of Oracle entering their turf in a more public way and starting a price war will keep pressure on what investors are willing to pay for this company. I don't often make an underperform call on a going concern with a useful product or service, but I think the high valuation that the market has been willing to give Red Hat will be increasingly called into question."

Caught off-guard, Red Hat falls to a knee. But the bruised and battered Linux leader is back up quickly and retaliates with a series of crushing shots to Larry's ribs, thanks to CAPS all-star togil07:

"Oracle's underlying database technology is strong, but I do not see strong future growth coming from anywhere really. Large businesses are frequently locked into maintenance and upgrade plans with Oracle all right, but Oracle has slept through the emerging web services and small business market, and most of the potential clients are either with the big O already or are thinking about open source alternatives."

Let's go to the scorecard
And there's the bell! Red Hat ends strong but, as the judges confer, Oracle's edge in bullish sentiment is too much to overcome, resulting in a unanimous victory for the database demon:

Metric

Oracle

Red Hat

Star rating (5 max)

**

**

Total ratings

752

301

Bullish ratings

677

226

Bull ratio

90.0%

75.1%

Bearish ratings

75

75

Bear ratio

10.0%

24.9%

Bullish pitches

97

57

Bearish pitches

14

18

Data current as of Dec. 28, 2006.

Get in the ring!
Does this signal the end of pure-play open source firms? Or is Ellison in the twilight of his career? Get in the game now and tell us what you think. It's entirely free to participate. Your Fool cap is waiting.

High-tech. Biotech. Nanotech. Any tech. David Gardner and his merry band of Foolish analysts cover it all for Motley Fool Rule Breakers subscribers and they've unearthed three four-bagger stocks in two years as a result. Who are these market-beaters? Click here now to find out and get 30 free days of access to the service.

Fool contributorTim Beyers, ranked 1,393 out of more than 18,000 CAPS players, has 30 picks in his CAPS portfolio, including Oracle, in which he also owns shares. Get the skinny on all of Tim's stock holdings by checking his Foolprofile. Amazon and eBay areStock Advisorselections. Microsoft is anInside Valuepick. The Motley Fool'sdisclosure policyis always in fighting shape.


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