WR Hambrecht Starts Red Hat (RHAT) at Buy

November 21, 2006 9:32 AM EST

WR Hambrecht initiates coverage on Red Hat, Inc. (Nasdaq: RHAT) with a Buy rating and $21 price target. The firm said, "The ROI potential of open source solutions is too great to be ignored by CIOs, in our view, and we believe open source solutions will increasingly become accepted into the mainstream over time."

The firm also said, "The recent announcements from Oracle (ORCL) and Microsoft (MSFT) create an interesting dilemma for investors, however we believe that Dell, IBM and HP, etc., will stay the course and continue to support Red Hat, and the recent headlines have provided a unique opportunity for investors to 'get involved' in the Linux story. One of the key opportunities for Red Hat is the company's ability to diversify beyond its operating system roots. We believe the JBoss acquisition and its application server platform is a nice starting point, and may allow the company to further expand its open source offerings beyond basic systems management applications within the enterprise. We believe that the bulk of the sales force and R&D personnel issues are for the most part behind the company. However, this integration has not gone as smoothly as investors had hoped, and the benefits of this important strategic acquisition have yet to be realized, in our view. In comparison to other 'emerging technology' companies, RHAT shares appear undervalued at current prices."

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