Cnet Writer Says Dell (DELL) Should Buy Red Hat (RHAT)
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In an opinion piece on Cnet today, a writer suggested that Dell (Nasdaq: DELL) should take a serious look at buying Red Hat (Nasdaq: RHAT). The Cnet writer, Matt Asay, talks about Dell's low-cost hardware assembly and distribution is now commonplace in the computer industry.
He says Dell needs to look beyond hardware for growth, "it could hardly do better than to buy Red Hat (Nasdaq: RHAT), or possibly Sun (Nasdaq: JAVA) or Novell (Nasdaq: NOVL), for two reasons. The first is that buying Red Hat might be the least painful option for Dell getting into software in earnest, as it would offer Dell a close analog to what it has done to hardware: a commoditized software business that depends heavily on low-cost assembly and distribution. Dell and Red Hat were made for each other, in many ways.
The second reason is that buying Red Hat would also position Dell to do what no other software company has done, but which offers tremendous financial promise: consolidate the open-source ecosystem to provide huge value to chief information officers."
He says both companies excel at their core competencies, which for Dell is delivering commoditized hardware and for Red Hat delivering high-quality open-source software. To grow, Matt says Dell needs software, and Red Hat could use some financial backing as it expands its business beyond application servers and operating systems.
Dell's CFO said, "It's not a question of size (of acquisition). I think the question is more around diversifying our revenue base and becoming bigger in some things that are attractive for the long term...(Servers, storage systems, software, or services) is where we have to do an acquisition to become relevant. There is no question."
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Dell Inc. (Dell) is a technology company, which offers a range of product categories, including desktop personal computers (PC), servers and networking products, storage, mobility products, software and peripherals, and services.
Red Hat, Inc. (Red Hat) is engaged in providing open source software solutions to the enterprise, including its core enterprise operating system platform.
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db on Jan 6, 2009 01:20 PMI read that story and agree but also disagree. The biggest mistake Novell did to loose to Microsoft in 80's was to sale NetWare and give away eDirectory. Novell allowed Microsoft to basically give NT away while developing AD loosly around eDirectory while Novell struggled to sale NetWare. Linux is the same senario, why buy something that you an get for free. Buying Red Hat makes no since while giving SUSE away and aquiring a reoccuring revenew stream that Novell poses is a better aquisition for Dell. Dell doesn't need an OS to give away it needs an engineering platform like eDirectory with products it can control much like IBM. To Aquire Novell is like asking to buy the Louvre, it's easy to put a price on the building but try putting a price on the art inside. Love or hate Novell you can't argue with it's ability to engineer and If Dell can pull off a Novell aquistion it will have plenty of art to hang on it's walls.