BREAKFAST WITH THE FOOL
Tuesday, November 30, 1999
"Do not fear death so much, but rather the inadequate life."
-- Bertolt Brecht
Red Hat Hotter Than Blazes
Richard McCaffery (TMF Gibson)
OK, let's talk about Red Hat (Nasdaq: RHAT).
Shares of the Linux operating system and services provider shot up 11% to close at $236 5/8 on speculation that it's prowling for additional acquisitions. Over the last five days, Red Hat has closed up $23 1/8, $44 9/16, $25 3/16, $19 1/4, and $2 7/16. Unreal.
It means that since going public August 10 at $14, Red Hat is up well over 1,000%.
So the company soared again yesterday on talk it's looking for additional acquisitions in the wake of its $674 million stock deal to purchase Cygnus Solutions November 15.
Well, it is. A spokesperson said Red Hat wants to build on momentum for the open source software system. No surprise there. With a market value around $16 billion, Red Hat has plenty of high-priced currency to use for purchases.
Yesterday the talk swirled around Ottawa, Canada-based Corel (Nasdaq: CORL), a company that develops software for the Linux operating system. Last Friday, Interactive Week Online speculated that Red Hat might make a pitch for Corel to improve its ability to work on desktops.
Corel, which develops graphics and business productivity applications, rose 47% on speculation; however, a company spokesperson said Corel hasn't had any talks with Red Hat and plans to remain an independent company, Bloomberg reported.
Of course, Red Hat didn't gain $23 yesterday on talk about buying Corel, a company with a $1.3 billion market cap. Rather, investors are bidding up shares in the belief that Red Hat will continue to expand its reach beyond the enterprise server market to all areas -- desktops, small devices, and Internet appliances -- and that by doing so it will become a legitimate contender to Microsoft (Nasdaq: MSFT).
Priced at $236 a share, it better become a contender.
News to Go
Long distance telephone giant AT&T (NYSE: T) won $510 million worth of contracts from General Motors (NYSE: GM) and Delphi Automotive (NYSE: DPH). Under the deals, AT&T will design, build, and operate IP networks to improve the companies' e-business abilities.
Cable television system holding company Cablevision Systems (AMEX: CVC) got the go-ahead in a private letter ruling from the Internal Revenue Service to distribute the stock of Rainbow Media Holdings, a subsidiary, to operating division Cablevision Systems Corp. This would allow the company to spin off the division or create a tracking stock.
The Federal Aviation Administration plans to investigate certain quality control issues at aerospace and defense giant Boeing (NYSE: BA) after concerns arose involving loose bolts and the use of a faulty adhesive in commercial airlines.
Passenger, cargo, and mail carrier Continental Airlines (NYSE: CAL) said that its mainline jet capacity growth in 2000 will drop to 4.6% from 6% because of early retirement of its DC-10-30 aircraft. In addition, the company increased its stock repurchase program by $400 million, bringing the total to $1.2 billion.