During the past two weeks, investors have sent Red Hat Software (Nasdaq:RHAT) stock soaring to a market value more than double that of the established and respected network operating system vendor Novell (Nasdaq:NOVL).
After surging towards the end of November, the North Carolina-based Linux vendor gave back $26.625 on November 30 and then regained $4.94 per share last Wednesday to close at $214.94 per share. That price was still more than $90 higher than its November 22 close of $124.63. In the four trading days from November 23 to 29, Red Hat's closing price climbed $112 and hit a one-day high of $254.
Volatility of technology stocks aside, analysts said the activity shows wide confidence in both the technology and future of Red Hat.
"Linux and open source are very real phenomena," said Christopher Galvin, an analyst at Hambrecht & Quist in San Francisco. He said Red Hat isn't only a leader in the Linux market; it's also "one of the few ways to play the [Linux] opportunity in the market".
But Linux and Red Hat have had some tangible and positive news recently, including the following:
-- On November 5, US District Judge Thomas Penfield Jackson ruled that Microsoft (Nasdaq:MSFT) is a predatory monopoly. The ruling has boosted Microsoft's competitors, although it has public relations value for them only in the short term, Galvin said.
-- On November 15, Red Hat announced the acquisition of Cygnus Solutions in California. The move increases Red Hat's customer base and gives it access to tools needed to build applications for embedded systems running Red Hat's Linux versions, Galvin said.
-- Last week, The Wall Street Journal named Red Hat one of the most influential technology companies.
Alex Baluta, an analyst at Merrill Lynch & Co., wrote that enthusiasm for Linux has driven Red Hat's market capitalisation to the sky-high ratio of more than 500 times the company's revenue.