Red Hat Inc, a software company whose profits come from programs available for free on the Internet, has convinced some investors it can thrive against Microsoft Corp, a competitor with more than 350 times its sales.
Since October, seven money managers have each bought more than half a million shares of Red Hat, the largest distributor of the Linux computer operating system. Fidelity Investments, Wellington Management Co LLC and American Century Investments bought a combined 11.1 million shares, helping to push them up 31 percent in less than seven months to US$6.14 at yesterday's close.
Shareholders say they are betting Red Hat can capitalize on demand for computers powered by Linux instead of by Microsoft's Windows. Almost 14 percent of the server computers sold last year were Linux-equipped, up from 11 percent in 2001, according to IDC, a technology-industry research firm.
"Linux is on a wave of acceptance, and Red Hat has figured out a way to make money on it," said Walter Price, who helps manage US$35 billion at Dresdner RCM Global Investors, including about 850,000 Red Hat shares. "They've got the best chance of any company doing Linux."
Not that Red Hat is in danger of overtaking Microsoft anytime soon. The company's US$25.9 million in sales in the quarter that ended February 28 was about 0.3 percent of Microsoft's revenue in the same period. Red Hat reported its first quarterly profit in December, US$214,000, about what Microsoft made every 10 minutes.
The 10-year-old company, based in Raleigh, North Carolina, also faces competition from Linux providers such as closely held SuSE Linux AG, based in Nuremberg, Germany. Red Hat and its rivals sell and service customized versions of Linux after obtaining the program for free on the Internet as part of the so-called open source movement. The movement's adherents oppose proprietary ownership of computer codes.
"Since they're the company leading this movement, it's hard for them to charge a lot of money," said Jimmy Chang, senior technology analyst for US Trust, which has assets under management of about $81 billion, including Red Hat shares. "It's very low margin. Long-term profitability is still an open-ended question."
Red Hat's 31 percent rise since Oct. 1 outpaced the Standard & Poor's 500 Software and Services Index, which was up 18 percent in the same period. The climb was propelled by institutional investors, who hold 47 percent of Red Hat's shares, up from 5.8 percent in June 2000, according to Chief Financial Officer Kevin Thompson.
Red Hat's shares almost quadrupled to close at US$52.06 on their first day of trading, Aug. 11, 1999. They peaked at US$302.62 on Dec. 8, 1999, twelve days before the company announced a two-for-one share split. At the top, Red Hat, with 1999 sales of US$33 million, had a market value of US$23 billion.
The fall was almost as swift. On May 24, 2000, the shares closed at US$15.75. They bottomed at US$2.40 on Sept. 21, 2001, after Red Hat reported its largest-ever loss, US$55.4 million on sales of US$18.9 million. The company was then worth US$407.6 million.
"When the stock hit almost US$300 a share, it was one of my worst days," said Chief Executive Officer Matthew Szulik, 46.
The Ministry of Transportation and Communications yesterday inaugurated the Danjiang Bridge across the Tamsui River in New Taipei City, saying that the structure would be an architectural icon and traffic artery for Taiwan. Feted as a major engineering achievement, the Danjiang Bridge is 920m long, 211m tall at the top of its pylon, and is the longest single-pylon asymmetric cable-stayed bridge in the world, the government’s Web site for the structure said. It was designed by late Iraqi-British architect Zaha Hadid. The structure, with a maximum deck of 70m, accommodates road and light rail traffic, and affords a 200m navigation channel for boats,
PRECISION STRIKES: The most significant reason to deploy HIMARS to outlying islands is to establish a ‘dead zone’ that the PLA would not dare enter, a source said A High Mobility Artillery Rocket System (HIMARS) would be deployed to Penghu County and Dongyin Island (東引) in Lienchiang County (Matsu) to force the Chinese military to retreat at least 100km from the coastline, a military source said yesterday. Taiwan has been procuring HIMARS and Army Tactical Missile Systems (ATACMS) from the US in batches. Once all batches have been delivered, Taiwan would possess 111 HIMARS units and 504 ATACMS, which have a range of 300km. Considering that “offense is the best defense,” the military plans to forward-deploy the systems to outlying islands such as Penghu and Dongyin so that
WHAT WAS ALL THAT FOR? Jaw Shaw-kong said that Cheng Li-wen had pushed for more drastic cuts and attacked him, just for the outcome to be nearly identical to his bill The legislature yesterday passed a supplementary budget bill to fund the purchase of separate packages of US military equipment, with the combined amount of spending capped at NT$780 billion (US$24.8 billion). The Chinese Nationalist Party (KMT) and Taiwan People’s Party (TPP) used their legislative majority to pass the bill, which runs until 2033 and has two main funding provisions. One was for NT$300 billion of arms sales already approved by the US for Taiwan on Dec. 17 last year, the other was for NT$480 billion for another arms package expected to be announced by Washington. The bill, which fell short of the NT$1.25
‘CLEAR MESSAGE’: The bill would set up an interagency ‘tiger team’ to review sanctions tools and other economic options to help deter any Chinese aggression toward Taiwan US Representative Young Kim has introduced a bill to deter Chinese aggression against Taiwan, calling for an interagency “tiger team” to preplan coordinated sanctions and economic measures in response to possible Chinese military or political action against Taiwan. “[Chinese President] Xi Jinping [習近平] has directed the People’s Liberation Army to be ready to invade Taiwan by 2027. China has a plan. America should have one too,” Kim said in a news release on Thursday last week. She introduced the “Deter PRC [People’s Republic of China] aggression against Taiwan act” to “ensure the US has a coordinated sanctions strategy ready should
RSS