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Corel denies Red Hat takeover rumours

by John Geralds in Silicon Valley

01 Dec 1999

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Michael Cowpland, Corel's chief executive, denied rumours on Tuesday that the company was in talks with Linux kingpin, Red Hat, about being acquired.

Cowpland claimed that the Canadian firm did not need to unite with Red Hat to take advantage of the fast growing market for the Linux open source operating system.

"Corel is very self contained in that we have all the applications, we have our 50 million users and we have an operating system that has already been very well accepted," he said, adding that the company was not involved in any specific acquisition plans at the moment.

But shares in Corel rose as much as 48 per cent on Monday to settle at $20.875 as analysts and investors speculated that Red Hat planned to acquire more software companies. This followed Red Hat's decision to buy Cygnus Solutions for about $697.6 million two weeks ago.

In a general market retreat on Tuesday, however, Corel's stock price fell $2.625 to close at $18.25.

Shares of Red Hat also climbed more than $23 to $236 on Monday, but fell back more than $26 to $210 on Tuesday. The firm's stock was initially priced at $14 a share at its initial public offering in August.

There has also been speculation, however, that Red Hat is courting companies such as LinuxCare, a San Francisco based company, which provides services for companies using Linux.

Art Tyde, Linuxcare's joint founder and executive vice president, said: "We have had flirtatious discussions, but not anything of substance."

But Rick Dalton, managing director at Broadview International, an investment banking firm, explained: "There is no question that Red Hat is searching the highways and the byways. Having a huge market cap, which it does, it's only prudent to do what it is doing, and go out and use it to fill the gaps in the strategy and build a real company."

Dan Kusnetzky, an analyst at IDC, also pointed out that Red Hat was in an interesting position. "With a market cap in excess of $10 billion, we have a moment in time where it has enormous leverage. Red Hat could use it to make its business better," he said.

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