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Does a Red Hat buyout make sense?

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Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of WRAL.com.

RALEIGH, N.C. – Rick Munarriz, writing at Motley Fool, is the latest in a number of market followers who believe that Red Hat (NYSE: RHT) is a takeover target.

Hatters’ management is scheduled to have an online conference today (11 a.m.) to discuss its technology roadmap. The world’s top Linux software developer and services provider is riding high with good sales, has lots of cash, and is moving quickly to expand on opportunities in cloud computing while aggressively expanding overseas.

Munarriz cites Red Hat as one of his “5 Buyouts That Just Make Sense.”

Red Hat shares traded up Tuesday, counter to the overall markets. Shares closed at $33.01, up from $32.25. At one point RHT late in the day hit $33.13. Its 52-week high is $33.99.

More than 4.5 million shares were traded, compared to the average daily total of 2.9 million.

Consensus target price for the stock by Street analysts is $34.57.

All the action Tuesday followed numerous reports Monday about Red Hat buyout talk. Such rumors are hardly new, but they aren’t going away, either.

“I can definitely see this happening,’ Munarriz said of a Red Hat deal.

“Revenue grew at a healthy 20% clip in its latest quarter, and Red Hat's cash-rich balance sheet means that a company will have to shell out $800 million less than the ultimate buyout price,” he added.

Analysts certainly have a largely positive view of Red Hat.

In May, Jefferies upgraded Red Hat to a “buy.” In April, Oppenheimer moved Red Hat up to “outperform.” UBS launched coverage of Red Hat with a “buy” rating in April, and William Blair initiated coverage with an “outperform” rating in February.

Thomson Reuters reports six “strong buy” and eight “buy” ratings from analysts with 11 as “holds” and two as “sell.”

So, will somebody buy the whole company?

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The Skinny

WRAL Local Tech Wire Publisher and Editor Rick Smith dishes out tidbits from the local technology sector. Read more articles…