Red Hat Grapevine Busted

After a day of high spirits at Red Hat Inc. (RHT), shares dipped more than 5% this morning as analysts said rumors of Oracle Corp. (ORCL) bidding for the biggest seller of Linux was not likely to bear fruit anytime soon.

Investors have long speculated that the Redwood City, California-based Oracle would buy Red Hat. After rapid growth of Linux in corporate computing, Oracle launched its own version of the product in 2006. But Oracle did not succeed in providing strong support on the operating-system software. While buying Red Hat would definitely win Oracle more market share in the business, analysts say the deal does not seem practical at the moment.

Oracle Chief Executive Larry Ellison has indicated that he would look for high-value acquisitions at a discount in the current downturn. However, Oracle has just announced its first-ever dividend. It would also be keenly watching how the merger of IBM (IBM) and Sun Microsystems Inc. (JAVA) affects Red Hat. Both IBM and Sun produce servers that run the Linux software.

Red Hat lost 81 cents to trade at $15.56 on the New York Stock Exchange while Oracle was down 1% to $18 at noon on the NASDAQ.

Read the full analyst report on RHT