In a bid to strengthen its cloud management services
Red Hat Inc.
) recently entered into a definitive agreement to acquire Mahwah
based cloud management and automations solutions provider
ManageIQ for $104.0 million.
Privately held ManageIQ provides hybrid cloud operations
management solution that helps enterprises to deploy and manage
private clouds and virtual infrastructure. ManageIQ is already a
member of Red Hat Enterprise Virtualization Certified Partner
program. Apart from Red Hat, ManageIQ also partners several
bellwethers in the cloud computing market such as
Citrix Systems Inc.
This acquisition will not only expand Red Hat's
Infrastructure-as-a-Service (IaaS) solutions (Red Hat
CloudForms), but will also strengthen its enterprise
virtualizations and cloud management operations. Moreover, this
acquisition has placed Red Hat in the same league of VMware and
Citrix - the leaders in the server and desktop virtualization
Red Hat does not expect the current acquisition to impact its
revenue estimates for this fiscal year, but expects its quarterly
operating expenses (excluding stock-based compensation and
amortization of acquisition-related intangible assets) to
increase by $2 million.
We expect Red Hat to continue pursuing strategic acquisitions
of technology start-ups that can be easily synchronized with its
product lines. These acquisitions will help the company to expand
its customer base over the long term.
We expect the investments made by the company to expand its
product portfolio through new product launches in the cloud and
virtualization segments. However, we believe that sluggish
macroeconomic environment could negatively impact IT spending.
Significant foreign exchange volatility will act as a headwind in
the near term. Moreover, seasonality in the services business and
increasing investment may hurt profitability in the near
We maintain our Neutral recommendation over the long term.
Currently, Red Hat has a Zacks #3 Rank (Hold).
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