Red Hat: Customers Not Using Oracle as Bargaining Chip

For the third day running, there’s an upbeat note from the Street on Red Hat (RHT). Merrill Lynch’s Kash Rangan yesterday wrote up some comments made Tuesday at the firm’s software conference by Red Hat CEO Matthew Szulik.

According to Rangan, Szulik said Red Hat is seeing “limited impact” from the new Linux offerings from Oracle (ORCL) and Microsoft (MSFT)/Novell (NOVL). “Customers are not using ORCL’s offering as a bargaining tool, as feared by the Street,” Rangan writes, apparently paraphrasing Szulik. “Customers realize the importance of the operating system as the key layer separating the hardware and the software and are circumspect of ripping and replacing the operating system as operating systems represent only a fraction of the IT budgets.”

He says Szulik did concede that Red Hat “is seeing some impact” from Novell due to coupons provided by Microsoft.

According to Rangan, Szulik also indicated that the company sees a big growth opportunity in the BRIC countries - Brazil, Russia, India and China. “The current conversion rate of the UNIX installed base to Linux is still in the single digits in the developing countries, leaving significant growth opportunities, ” he writes.

Rangan continues to rate the stock a Buy, with a $30 price target.

Red Hat shares yesterday fell 4 cents to $24.23; the stock was up 37 cents to $24.60 after hours. (There was no news after hours on Red Hat as far as I can tell.)

Previously:

Red Hat: Jefferies Upgrades To Buy; Sees Little Impact From New Linux Rivals (February 13, 2007)

Red Hat: UBS Raises Target; Says Management Holding The Line On Pricing and Discounts (February 12, 2007)