Oracle-Red Hat Acquisition Rumors Swirl After Reports Surface

Oracle might be eyeing additional acquisitions, and some analysts suspect that the IT giant might have its sights set on Red Hat. This week, a report surfaced that claimed an Oracle-Red Hat merger might "[make] sense." Even as the note cautioned that the acquisition wouldn't happen "now," other reports have Oracle and Hewlett-Packard recently in unsuccessful talks to snatch up Sun Microsystems.

Oracle might be gearing up for another highly public acquisition, and this time the IT giant may have its eyes set on open-source innovator Red Hat. This week, an analyst suggested that an Oracle acquisition of Red Hat is "eventually highly likely."

Although Oracle and Red Hat are not speaking about these reports, it generated enough buzz to warrant stories and additional speculation. Stories about a possible IBM-Sun Microsystems merger also helped push the Oracle-buys-Red Hat story line.

"It would make sense for Oracle to own Red Hat ultimately," Katherine Egbert, an analyst with Jefferies & Co., wrote in a March 23 research report, "but given IBM's potentially pending acquisition of OpenSolaris and Oracle's history as a value buyer, the time does not seem right.

"While we think an Oracle purchase of Red Hat is eventually highly likely, we think it's premature," Egbert added, "in part because of [IBM's] highly publicized interest in [Sun Microsystems] and the pursuant uncertainty around whether IBM would continue to be an advocate for RHEL once they owned both AIX and OpenSolaris development, and in part because Oracle does not have a history of purchasing still-fast-growing competitors."

Shares of Red Hat rocketed upward on March 23, at least partially thanks to the rumors, only to fall off slightly on March 24.

Oracle seems to have been in a buying mood lately. According to eWEEK's Storage Station blog, which quoted two "excellent sources," Oracle was recently ready to make a joint move with Hewlett-Packard to purchase Sun Microsystems for a combined deal worth somewhere between $6 billion and $7 billion.

For $2 billion of that, Oracle supposedly wanted Sun's software library, including Java, ZFS, Glassfish, Solaris, OpenSolaris and OpenOffice.org (HP would have paid $4 billion to $5 billion for Sun's hardware). Sun, however, declined the offer.

Oracle has circled Red Hat before. Way back in 2006, the acquisition rumor mill geared up to a furious pitch after Oracle CEO Larry Ellison started making comments about stepping in to provide Red Hat support. At the time, analysts suggested that such a move would be unlikely, given Red Hat's relative expense.

Speculation has continued since then, along with the assumption that a robust Red Hat would be a bit too large for Oracle to comfortably acquire, monetarily speaking.

Oracle has been displaying some robust health itself, despite the global recession, with its third-quarter fiscal 2009 earnings per share up 3 percent over the same quarter last year.

On March 23, Oracle announced the acquisition of Relsys International, which provides drug safety and risk management solutions with advanced analytics. The purchase allows Oracle to bolster its suite of software applications targeted at the health care IT field.

Even before that, Egbert suggested that Oracle could acquire SMB (small and midsize business) server virtualization specialist Virtual Iron Software, as part of a play that would allow it to effectively compete with VMware and Citrix Systems in the virtualization products arena.

Oracle purchased mValent in its first acquisition of 2009, gaining that company's configuration management solutions for potential use within Oracle Enterprise Manager.