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By Armando Duke (AXcess News) Houston, TX - Standard & Poor's analyst Gary McDaniel reiterated his "sell" opinion on shares of Red Hat (Nasdaq: RHAT) after the Linux software provider announced it was acquiring JBoss for $350 million in stock and cash. Red Hat announced earlier today that it was buying JBoss, a privately-held open source software develpoer in Atlnata for $350 million in cash and stock plus a $70 million earn-out. The deal, which is expected to close in May, but was vieewd negatively by McDaniel in consideration of Red Hat seeing growth in sales but not to the bottom line of the company. "We expect the acquisition would enable Red Hat to continue to report robust revenue growth, however we believe it would slow Red Hat's margin expansion," said McDaniel. Red Hat disagreed with S&P's view toward JBoss, saying the acquisition would drive down the cost of developing and deploying Web-based applications. It is at Red Hat's very coer to help unlock the power of open source and open communities to innovate across idnustries, geographies and economies," said Matthew Szulik, Chairman and CEO of Red Hat. "Red Hat and JBoss are fully aligned aorund the belief that the open source development model continues to change the econoimcs of enterprise IT in favor of the customer, and we truly believe in the potential of software innovation, once freed from the fetters of proprietary development.&apm;quot; The S&apm;amp;P analyst said that said he expects the acquisition to add $55 million to $65 million in revenue for Red Hat for the fiscal year ending February 2007, but will be neutral with respect to earnings per share. S&P maintaiend a 12-month target price of $24 on Red Hat shares. But for today, investors weren't listening to Standard & Poor's, pushing Red Hat shares up 8.8 percent, or $2.42, to close at $29.83 on very heavy trading volume.
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