Shares of Red Hat (RHT) are up 24 cents, or 0.6%, at $40.82 despite JP Morgan’s John Difucci today cutting his rating on the stock to Underperform from Neutral, writing that the company’s projected free cash flow growth of 25% is unlikely to materialize.

At the current price, writes Difucci, the stock is being valued based on future free cash flow growing at 25% per year. However, the company’s only been increasing free cash flow at about 8% per year, he writes. He gives the company the benefit of the doubt that it can increase that rate to more like 15% for a couple of years beyond 2012, which would imply, he believes, a stock value of $32. Should the company not pick up its growth rate, it could be worth as little as $27.

Since growth is unlikely in the company’s core middleware and Linux operating system license businesses, Red Hat would have to materially increase its sales of “virtualization” software, he writes, which he deems unlikely.

“We believe it is risky to assume Red Hat will become a meaningful player in server virtualization at this time,” writes Difucci, noting that customers seem mostly fairly happy with the titan in the business, VMWare (VMW), and that Microsoft (MSFT) and Citrix Systems (CTXS), and Oracle (ORCL) also have designs on that market. Red Hat has no clear advantage over those other contenders, he writes.

Key to Difucci’s analysis is that its “billings” — the amount of revenue it books, plus the amount of deferred revenue it brings in — has yield less profit as the years have gone by. The company produced 27 cents for every dollar of billings in 2010, down from 28 cents in 2009 and 46 cents back in 2006. He sees the rate dropping to 26 cents this year.

Difucci also notes that Red Hat has a free cash flow yield (divided by enterprise value) of just 3.4%, which is less than some other small- or mid-cap stocks, such as BMC Software (BMC), at 8.5%, and Quest Software (QSFT), at 8.9%.

Lastly, Difucci disputes Red Hat’s value as an acquisition target. He notes that operating system software can be less profitable than other types of software a company may acquire, and that the “neutrality” of the company would be compromised by an acquisition by some vendors, which would take away a good chunk of the company’s value. Also, Oracle, for one, is unlikely to pay the lofty premium the stock implies, especially given that it sells support for its own Linux operating system distribution.

Article courtesy of Tech Trader Daily

Leo Apotheker’s first quarter results as chief executive of Hewlett-Packard have a bit of a Mark Hurd feel to them.

HP’s revenue was up 3.7 percent to $32.2 billion in its first quarter of the 2011 fiscal year, up from $31.2 billion the same quarter in its 2010 fiscal year. But the company’s operating profit shot up 16 percent to $2.61 billion in the first quarter of its 2011 fiscal year, compared to $2.25 billion the same quarter a year earlier.

That’s because HP’s gross margins rose by 1.5 percentage points to 24.4 percent — meaning the company was operating more efficiently despite slimmer revenue growth. Despite the strong showing, HP trimmed its outlook for the full fiscal year — saying they would be around $2 billion short of their original expectations from Wall Street analysts. That weakness will probably come from PC sales — since consumers are still limiting their discretionary spending — and from their services sector, Apotheker said on the company’s quarterly conference call.

Mark Hurd, HP’s former chief executive, also had a penchant for cutting costs where he could to bring about a higher profit and a cleaner balance sheet — sometimes at the expense of research within the company.

It’s a whale of a chip. Intel is announcing today the 10th generation of its Itanium chip, which is a 64-bit microprocessor aimed at the very high end of the corporate computer market.

The chip is a modern miracle in many respects, with more than 3 billion basic components known as transistors. It is one of the highest achievements in technological design, but it’s also a relic of an age when power consumption didn’t matter. As such, the chip is confined to a small, high-end segment of the computing market at the high end.

Not that the high end isn’t lucrative. Itanium is attacking the reduced instruction set computing (RISC) market, which generates about $15 billion in revenues a year.

But Itanium launches, while technically impressive, are always tinged with regrets about what might have been. When Intel began working on its 64-bit chip architecture with Hewlett-Packard in 1994, the goal was to create a chip that would become the future of all computers. It was supposed to debut in 1999, but the first chip, code-named Merced, came out in 2001, just in time for the 9/11-instigated recession.

The first Itanium was power-hungry and slow at running 32-bit applications compared to Intel’s 32-bit Pentium 4. Software makers had to recompile their programs — a lot of work — to get them to take advantage of 64-bit computing.

Intel continued to invest, even though the potential market was diminished. It did so as a challenge to RISC chip vendors such as Sun Microsystems, Silicon Graphics, and IBM. Some of the rivals capitulated rather than invest billions in their own chips. But Intel’s biggest competition remains its still-successful 32-bit Xeon family of server chips, which are made in very high volumes.

The code-named Poulson chip that Intel is unveiling at the International Solid State Circuits Conference today is a big leap forward from Tukwila (pictured at top), which was released as the Itanium 9300 in early 2010. Tukwila was very late, but Poulson has stayed on schedule, said Rory McInerney, vice president of the Intel Architecture Group, in a conference call with reporters. He isn’t saying yet exactly when Poulson will be available for sale.

“We are targeting mission critical applications,” McInerney said.

The chip has eight computing cores, or brains, and can issue 12 instructions at a time, compared to four cores and 6 instructions for the previous generation. Poulson has 54 megabytes of cache memory directly on the chip for storing frequently accessed data. It can move data along its internal freeways 33 percent faster than before.

The chip is built with Intel’s 32-nanometer manufacturing process, compared to 65-nm for Tukwila. That means it’s easier to miniaturize circuits on the chip and pack more of them closer together. All of that results in a chip that is more power efficient, smaller, and cheaper to make than the previous generation. While Poulson has 3.1 billion transistors, Tukwila had 2 billion transistors. Power efficiency is anywhere from 30 to 70 percent better for Poulson.

Intel remains committed to Itanium, as it is working on another design code-named Kittson, which will ship after Poulson. These chips are used in huge corporate servers and supercomputers. They are meant to run enterprise-wide resource planning applications, giant corporate databases, and data warehouses.

One of Poulson’s features is a much higher reliability, or RAS technology. It also has error correction, which ensures that there are no errors in crunching vast amounts of data.

Intel competes with rivals such as Advanced Micro Devices, Oracle and IBM in the RISC market. Intel notes that market researcher IDC reported Itanium-based computer revenues were bigger in 2009 than AMD’s Opteron server chip business.

Tags: Itanium, Merced, Poulson, Tukwila

Companies: advanced micro devices, IBM, Intel, Oracle

People: Rory McInerney

Article courtesy of VentureBeat » deals

Hewlett-Packard announced today that it will acquire Vertica, a provider of analytics and data management software, for an undisclosed sum.

Vertica develops software that’s used to index and call up information on databases with massive amounts of data. The software works on both in-house servers and cloud infrastructures — meaning the data is stored on remote servers and accessed through the Internet. The company also provides its clients with a set of analytics tools to find problems in the storage systems and quickly address them.

The data management company serves as a nice complement to HP’s other recent acquisition, cloud storage provider 3Par. HP has been ramping up its cloud storage services to stay competitive with the likes of Amazon and Salesforce, which are rapidly becoming more popular because they offer cheap alternatives to companies that would otherwise have to buy and manage large servers in house.

It’s all part of HP’s strategy to hold its own in the enterprise space. Oracle hasn’t kept secret that it wants to take down HP and claim its number two spot in the server manufacturing business. Oracle and HP have a bit of a catty history — HP chief executive Mark Hurd joined the database manufacturer after a public scandal forced him to step down from his top spot at HP. But Oracle has made it clear that it wants to focus on in-house databases and servers for large gobs of data — so there’s some wiggle room for HP if it offers cloud storage.

The deal with Vertica is expected to close in the second quarter this year. Billerica, Mass.-based Vertica has around 300 customers and has clients like Twitter, Aol and Groupon. Vertica has raised $30.5 million across two rounds of funding from investors like Kleiner Perkins Caufield & Byers and Highland Capital Partners.

HP also remains one of the largest manufacturers of computers and devices for typical consumers. The company announced a new lineup of smartphones running on Palm’s WebOS mobile operating system — the Pre 3 and HP Veer — and a WebOS tablet computer — the HP TouchPad.

[Photo: Docklandsboy]

Tags: cloud computing, cloud storage, enterprise

Companies: Hewlett Packard, HP, Vertica

Article courtesy of VentureBeat » deals

IT search engine provider Splunk is opening an office in Seattle, Wash., to try to acquire some of the talent in the area — and will be competing with a number of Web 2.0 titans and tech giants to do so.

Splunk provides IT professionals with ways to log any piece of information and quickly index it, find it and run a number of analytics functions on it. That can be GPS data, data from customer relationship management (CRM) software from Oracle or cell phone data — basically anything, as long as it has a time stamp. The service has a bit of a cult following among IT professionals and is a pretty strong candidate for an IPO this year.

Splunk is basically making a statement that it can compete with the likes of Google, Microsoft, Facebook and other Web 2.0 titans — all of which have offices in the Seattle area — for talented developers and engineers. The competition for talent in Silicon Valley is even more fierce, with basically every tech company in existence running a San Francisco- or Bay Area-based office.

It wasn’t a move to save money, either, said Splunk co-founder Erik Swan. The new office will serve as a home base for Brad Lovering, a Microsoft technical fellow that Splunk just hired, and as a recruiting central for the area. Splunk considered Los Angeles and Austin, Texas, as potential locations for new offices. Each spot has its own quirks and types of engineers and developers, and Seattle ended up being the best fit, Swan said.

Microsoft had a lot to do with that culture, said Swan. Founded in 1975, Microsoft has been based in Redmond, Wash., since its inception. Microsoft, along with Amazon, has attracted a large amount of system administrators and developers to the Seattle area, he said.

“Microsoft has done a brilliant job of building people who understand the developer ecosystem, what it means to support developers,” Swan said. “Much more so than the Valley.”

Splunk has raised $40 million in venture funding from Ignition Partners, August Capital, JK&B Capital, and Sevin Rosen Funds. The San Francisco, Calif.-based company brought in $66 million last year in revenue, up 96 percent from 2009, and signed on an extra five Fortune 100 companies as clients. Splunk currently has around half of the Fortune 100 companies as clients, and 2,500 customers overall.

The company has around 260 employees and also has an office in Hong Kong.

Tags: CRM, customer relationship management, hipster startup, IT, obscure, Seattle, silicon valley

Companies: Facebook, Google, Microsoft, Splunk

People: Brad Lovering, Erik Swan

Article courtesy of VentureBeat » deals

Shares of SAP AG (SAP) are up $1.07, or almost 2%, at $56.24 after the company this morning reported Q4 revenue above estimates, as previewed by the company a couple of weeks ago, even though EPS appeared to miss estimates on a litigation charge from its suit with Oracle (ORCL).
Q4 [...]

Article courtesy of BARRONS.com: Tech Trader Daily

Shares of Oracle (ORCL) have held up quite solidly today following last night’s better-than-expected fiscal Q2 results and bullish Q3 outlook.
As with the flurry of positive notes about Research in Motion (RIMM), which also beat last night, price targets and estimates are going up across the board.
Brendan Barnicle, Pacific Crest: Reiterates [...]

Article courtesy of BARRONS.com: Tech Trader Daily

Hewlett-Packard? They’re just a minor roadblock, according to Oracle CEO Larry Ellison.

After easily beating the expectations of many analysts with its most recent earnings report, Oracle is setting its sights on capturing market share and claiming HP’s spot of number two database hardware and software provider behind IBM.

Net income for Oracle jumped 28 percent to $1.87 billion in its second quarter of 2011, up from $1.46 billion in the same quarter a year earlier, according to its most recent financial statement. Oracle’s operating revenue also rose 47 percent to $8.6 billion in its most recent quarter, compared to $5.9 billion in the same quarter a year earlier.

Oracle continues to successfully fend off the public cloud  (which allows developers and companies to offload storage and heavy-duty computing to remote servers at a lower cost) said Oracle president Mark Hurd on the company’s earnings conference call. Some of its servers and accompanying software can cost upwards of $1 million. But the strategy seems to be working. Its most recent line of servers and software is able to run more than 30 million online transactions per minute, shattering the previous record of 10 million transactions per minute set by IBM.

“We expect overall that our new generation of SUN machines, Exadata, Exalogic and SPARC will enable us to win significant share in the high-end server market,” Ellison said. “That will put us in the number 2 position very soon behind IBM, then we’ll fight it out for the number 1 spot.”

Despite the popularity of the public cloud, servers and databases that are run in-house are usually faster and easier to access. A number of security concerns prevent some of the largest companies in the world — big targets for Oracle’s hardware and software products — from jumping on board the public cloud. Those are companies that can afford the massive price-tags of Oracle’s software and hardware and have the staff to install and maintain them.

HP, which is second in market share at this point because of its legacy in servers, came a distant third in speed with 4 million transactions per minute, Ellison said. Despite the presence of former HP CEO Hurd on the conference call, Ellison did not mince words when it came to HP’s servers. He said they were downright terrible when compared to Oracle’s new products and IBM’s servers and software.

“HP’s servers are slow, expensive and have little or no software, that makes them vulnerable to market share,” Ellison said. “All our new servers are engineered to run databases and middleware faster than HP and IBM.”

But even with its success with on-premise database hardware and software, Oracle isn’t going to shy away from the public cloud. It’s releasing a suite of applications called Oracle Fusion that can run on in-house hardware and public cloud servers. Ellison said he expects it to compete with Salesforce and other public cloud applications beginning next year.

“You’re just seeing the beginning of us getting share in applications,” he said.

Investors loved the news, sending Oracle’s shares up about 4 percent to $31.45 in extended trading.

Tags: CRM, customer relationship management, database software, databases, private cloud, public cloud, servers

Companies: HP, IBM, Oracle, salesforce

People: Larry Ellison, Mark Hurd

Article courtesy of VentureBeat » deals

Hewlett-Packard? They’re just a minor roadblock, according to Oracle CEO Larry Ellison.

After easily beating the expectations of many analysts with its most recent earnings report, Oracle is setting its sights on capturing market share and claiming HP’s spot of number two database hardware and software provider behind IBM.

Net income for Oracle jumped 28 percent to $1.87 billion in its second quarter of 2011, up from $1.46 billion in the same quarter a year earlier, according to its most recent financial statement. Oracle’s operating revenue also rose 47 percent to $8.6 billion in its most recent quarter, compared to $5.9 billion in the same quarter a year earlier.

Oracle continues to successfully fend off the public cloud  (which allows developers and companies to offload storage and heavy-duty computing to remote servers at a lower cost) said Oracle president Mark Hurd on the company’s earnings conference call. Some of its servers and accompanying software can cost upwards of $1 million. But the strategy seems to be working. Its most recent line of servers and software is able to run more than 30 million online transactions per minute, shattering the previous record of 10 million transactions per minute set by IBM.

“We expect overall that our new generation of SUN machines, Exadata, Exalogic and SPARC will enable us to win significant share in the high-end server market,” Ellison said. “That will put us in the number 2 position very soon behind IBM, then we’ll fight it out for the number 1 spot.”

Despite the popularity of the public cloud, servers and databases that are run in-house are usually faster and easier to access. A number of security concerns prevent some of the largest companies in the world — big targets for Oracle’s hardware and software products — from jumping on board the public cloud. Those are companies that can afford the massive price-tags of Oracle’s software and hardware and have the staff to install and maintain them.

HP, which is second in market share at this point because of its legacy in servers, came a distant third in speed with 4 million transactions per minute, Ellison said. Despite the presence of former HP CEO Hurd on the conference call, Ellison did not mince words when it came to HP’s servers. He said they were downright terrible when compared to Oracle’s new products and IBM’s servers and software.

“HP’s servers are slow, expensive and have little or no software, that makes them vulnerable to market share,” Ellison said. “All our new servers are engineered to run databases and middleware faster than HP and IBM.”

But even with its success with on-premise database hardware and software, Oracle isn’t going to shy away from the public cloud. It’s releasing a suite of applications called Oracle Fusion that can run on in-house hardware and public cloud servers. Ellison said he expects it to compete with Salesforce and other public cloud applications beginning next year.

“You’re just seeing the beginning of us getting share in applications,” he said.

Investors loved the news, sending Oracle’s shares up about 4 percent to $31.45 in extended trading.

Tags: CRM, customer relationship management, database software, databases, private cloud, public cloud, servers

Companies: HP, IBM, Oracle, salesforce

People: Larry Ellison, Mark Hurd

Article courtesy of VentureBeat » deals

Shares of Oracle (ORCL) are up $1.28, or 4%, at $31.55 following better than expected fiscal Q2 results this afternoon, after management on a conference call with analysts said it expects total revenue growth in the fiscal Q3 ending in February, on a non-GAAP basis, of 31% to 35%, year [...]

Article courtesy of BARRONS.com: Tech Trader Daily