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

RALEIGH, N.C. – Wall Street analysts are expecting Red Hat (NYSE: RHT) to deliver another strong, profitable quarter today after the markets close. However, there is a big cloud on the horizon.

Rumors continue to circulate that Red Hat is a potential takeover target by a marh larger firm, such as IBM (NYSE: IBM) or Oracle (Nasdaq: ORCL). Both firms have been on a buying binge lately, and Red Hat is the leader in the globally growing market of Linux.

But perhaps a more near-term threat is the by VMware or IBM or another company. Under new ownership and with an infusion of capital, a revived SUSE Linux business could pose a threat to Red Hat’s dominance.

There also has been some talk that Red Hat, which is very profitable and flush with cash, could buy SUSE itself.

Wall Street analysts are forecasting a Red Hat profit of 19 cents on revenues of $211 million when earnings are disclosed after the markets close. Red Hat’s profit was 18 cents a share last quarter, and the company is growing at a record pace.

However, Jefferies & Co.’s Katherine Egbert sounded a note of caution in a research note on Tuesday.

“We anticipate a solid Q2 report, helped by a slight q/q FX [foreign exchange] tailwind on revenue and cash flow,” she wrote.

“Mgmt typically revisits annual guidance on the Q2 call.

“While enterprise server sales continue to ramp, RHT could see some weakness if SuSE is purchased by VMware or IBM.”

Egbert discounted talk Red Hat would buy SUSE.

"With all major news outlets now reporting that Novell is close to a deal to sell itself, we see headline risk for Red Hat," she said. "We don’t believe Red Hat is the acquirer, but SUSE makes sense within VMware’s and IBM’s existing portfolios.

"Either of these companies would create a significant new participant in the Linux market, but IBM’s long-term stewardship of Red Hat in particular could come under threat if Big Blue emerged as the buyer of SUSE."

IBM has been and continues to be a very close and valuable partner for Red Hat.

Hatter executives will host a conference call with analysts at 5 p.m. Earnings will be released right at 4 p.m.

The call could be very interesting as well if Red Hat execs are quizzed about whether the company is planning to move its headquarters or is just looking to expand with new offices in either Atlanta or Austin, Texas.

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