Tuesday, March 13, 2007

Calls of Note Part 2

BofA says their quarterly partner survay for Red Hat (NYSE:RHT) remains upbeat. Partners they surveyed (90) maintained a positive CY07 outlook, in aggregate, for their RHT biz and expect +24% Y/Y growth, which is consistent with firm's billings forecast (+24%). In addition, the majority view Oracle's presence as a relative non-event in the N/T, as only 12% see 'significant' interest from customers in Oracle's offering.

RHT is slated to report 4Q results on Thurs, Mar 29th. Firm is currently forecasting total rev of $112 million and pro forma EPS of $0.10, although they believe seasonal momentum could lead to modest top line upside. In terms of the key metrics to watch, firm's model projects total billed bookings (rev + change in deferred rev) of $140 million (+37% Y/Y) and OCF of $49 million.

RHEL 5 introduction could help create some N/T buzz. Tomorrow, firm expects mgmt will introduce RHEL 5 in San Francisco at 12:00 pm ET. Firm believes the key takeaway will be getting some insight into pricing for RHEL 5, as they expect that RHT is likely to adjust per server pricing based on the new virtualization capabilities. In addition, they believe mgmt may provide color around the upcoming Red Hat Exchange platform launch (RHX).

Notablecalls: Red Hat has been getting some positive comments lately. If the Xen
virtualization is even close to what it is promised to be, it sure will generate a lot of buzz. The biggest optimists are expecting Xen to make VMWare unnecessary in many cases. WMWare, remember, was valued at up to $9 bln in most optimistic valuations - compared to RHT's EV of $4 bln. Apples to oranges, but shows the potential value in virtualization.

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