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Dell Founder Dropped $100M Onto Red Hat
diegocgteleline.es writes "Via google news, I found a article at MSNBC claiming that Michael Dell, Dell's founder and chairman, has droped $100M into Red Hat (Michael himself, not his company). Analyists say that "Dell - neither the person nor the company - is interested in acquiring Red Hat", but one wonders what's behind of this move. A fight against their competence in the server market?"
"Competence" = competition
In Spanish, competencia means both, hence this is an easy error for native Spanish speakers to make in English.
What if I do the same thing, and I do get different results?
Sigh. Editors.
Even then, Dell might make money on the deal: .
Envy my 5 digit Slashdot User ID!
Actually at the time MSD procured the shares it made a lot of sense. ES3 was set to turn a massive userbase into a load of paying users. It was everyone's ecpectation that a significant portion of professional non-paying RedHat Linux 9 users would convert their systems to the paying model. At the time the expectation was that RedHat would thus generate a healthy amount of liquidity and that is always good for share prices. The market didn't quite play out that way but that is of course with hindsight. MSD's decision was a rational investment. Getting Michael Dell a say in the shareholders meeting is of course the priviledge of wealth and there can be no doubt that Dell's views on the market are not without audience in Raleigh. For MSD to diversify his investements is just sound financial management, I mean would you hedge your entire financial future on Dell Computer?? ;)
speculation of Michael dell actually buying RedHat is, on this information, totally unfounded.
-if at first you don't succeed, stay the heck away from paragliding.
Umm... actually that's not what they say. RTFA! Analysts do not see this as a sign that Dell is interested in acquiring RedHat.
By the way... Analysists? droped? Spellcheck!
$100M accounts for 1% of his estimated cash value... so not really a big risk for Michael.
That kind of money isn't chump change, so he must think it's a good risk.
When you have the kind of money he does, the correct phrase is "good enough risk." It probably just means that he thinks the probability of it going up, times the amount it would go up, makes it a worthwhile investment in comparison to the probability of the investment vaporizing.
And he's probably right. If I had a spare $100 million sitting around, I might do the same.
From The Article:
In a filing with regulators April 27, Red Hat said MSD Capital's $99.5 million worth of debentures would be converted into 3.89 million shares of the Raleigh-based company
denentures are debt. Michael did not invest in Red Hat in the sense that he bought into the companies long term success. He loaned them money. If they can't pay it back, Michael's $(99.5*10^6) may not be sunk. It might be a secured loan. I'll admit, I did not RTFA carefully enough to know if it is secured or not. Of course if the rate of return is high enough it's unlikely that RHAT won't be around long enough for principal recovery to be gravy on the steak.
:-)
My $12K in Novell stock is different. It represents faith in the company as opposed to faith in the company being able to pay me back.
Then again, Michael may be playing off Redhat against Microsoft to get bettr pricing, just like he does with AMD&Intel which could well result in the loan paying off many times over for his company, which he owns a lot of, in short order.
Nowthat Senor dillitante investor has spoken, let's here from some folks who know what they're talking about
See what I've been reading.
Micheal Dell is not the CEO of Dell, Inc.
Michael Dell is not a commodity manager for Dell, Inc.
Obviously he has input into the strategy for the company, but I don't think he single-handedly negotiates deals with suppliers.
Michael Dell only needs a single source for the OS on his personal computer. What Dell,Inc puts on their computers is unrelated to this story.
I don't know how much "muscle" Michael Dell has, but I'm sure he has enough "money" to afford the higher cost of a single personal copy of Microsoft Windows XP, if that is what you mean.
Consdiering that Bank of America and a few other major investment companies are all saying to buy Red Hat stock, it probably will sky rocket again. Rumor has it that 2008 is supposed to be a good year (how someone can forecast that far ahead is beyond me). Red Hat would have still been at $29 if a major person from the corporation didn't all the sudden up and leave, investors freaked and pulled out. Anyway... you can't judge the value of a company by its stock price alone. If I had to invest in any tech comapny now, itd probably be Red Hat, I've been following them for a while and they seem to have their shit together. And now they are majorly expanding in foreign countries and governments as well. Red Hat has always been good to me and they have my full support. You really can't get quality like Red Hat's anywhere else in the market (the closest is Suse, but then no other distro even comes close and yes I've had to do professional evaluations for many distributions to find out which was best for our company which has pretty generic needs). For those who are going to complain about Red Hat's prices, Suse cost just as much if you get business level support and its support is not up to par with Red Hat from what I've seen. Also, Fedora was a great move despite all the nay-sayers. This would be why Fedora usage is already over 200,000 servers and growing over 3 times faster then any other distro (the next fastest being Gentoo, but they only have about 45,000 servers). Red Hat enterprise linux along with Fedora have 1.8 million servers, Debian is their closest competitor with 800,000 followed by Suse with 450,000 (this is all according to Netcraft).
Regards,
Steve
Michael Dell has an investment foundation called MSD investments that has 70 Wall Street investment professionals working for it. Notice that I said "it" and not "him". This is because his foundation is an independent entity that makes decisions based upon increasing the value of his holdings. It's clear that the fund employed an arbitrage strategy by buying the bonds and simultaneously shorting the stock. An alternative to this story could have been that "MICHAEL DELL SHORTS $100MM OF RED HAT'S SHARES!!!" or even further "MICHAEL DELL LOSES $50MM IN CONVERTIBLE BOND VALUE!!!". The truth is most likely along the lines of "MICHAEL DELL EMPLOYS A CONVERTIBLE BOND ARBITRAGE STRATEGY IN RED HAT THAT YIELDS A NEARLY RISK-LESS RETURN OF 11.4% OR 5.3% OVER PRIME!!!". This was not a bet on Red Hat being a good investment, this was a bet to exploit a pricing differential between bond and equity markets.
In other words: Dell is NOT buying Red Hat. Please proceed to pull all panties out of wadded areas.
You are confusing Dell Unix with WebObjects made by Next which ran on Dells ecommerce site until recently when it was switched to .net.
But nextOS was ported to x86 when it was dieng a year before Apple bought it in order to convert it to MacOSX.
http://saveie6.com/