Thursday, March 28, 2013

Investopedia: Red Hat's Valuation Looks More Reasonable, But Expectations Could Be Problematic

There's room for more than one successful model in the software world, and not every company has to be IBM (NYSE:IBM) or Oracle (Nasdaq:ORCL). To that end, cloud-based models like (NYSE:CRM) and service/support-oriented models like Red Hat (NYSE:RHT) can work in terms of generating attractive revenue and free cash flow growth rates. What's key, though, is understanding what's different about these models and adjusting expectations accordingly, and that may still be a significant source of risk to Red Hat investors.

Fiscal Q4 Numbers Came In Weaker Than Expected
Like Oracle and TIBCO (Nasdaq:TIBX) before it, Red Hat delivered a relatively disappointing quarterly result, though the magnitude of the disappoint was different. Even so, investors may do well to take a more cautious view of underlying growth here.

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