An “ouch” moment

/. indicated that as of this moment, Redhat is worth more (higher market capitalization) than Sun. So I checked it out.

As of this writing, RHT has a market cap of $2.62B, with $0.76B cash on hand. This suggests that the company has a value exclusive of cash, of about $1.9B. Not bad for a company that doesn’t actually make the technology behind its core product offerings.

As of this writing, JAVA has a market cap of $2.65B, with $2.63B cash on hand. This suggests that the company has a value, exclusive of cash, of about $20M.

I remember being at SGI when our market cap went below our cash.

IMO this makes Sun a ripe takeover target. A cash-poor/stock-rich company could swoop in, take over, and get capital. Once the market cap dips below the cash, I would bet that the phones of board members would be ringing from prospective purchasers who need cash, and maybe some sales folks. If this does happen, I would expect that quite a few people/products would be kicked to the curb.

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3 thoughts on “An “ouch” moment

  1. Not only does RHT not originate the technology, but they don’t really complete it either. They take raw technology in one end, and spit out barely less raw technology at the other end for somebody else to turn into something that’s valuable to somebody besides programmers. In an economy where it is more profitable to be a middle-man than a producer (or at least was until recently) I suppose this was inevitable. Is endlessly repackaging software going to be the twenty-first-century version of endlessly repackaging financial “products”?

  2. Hi,
    your math is broken.
    If you want to buy JAVA, it means, that you get:
    738.59M shares @ $3.58 = $2.64B – price of shares.
    You get $ 2.63B cash – AND:
    a “subprime-mortgage” of: $ 1.26B debt.
    makes a total: 0.01B + 1.26B => 1.27 GigaBucks USD.

    So if you want 1.27B debt – with “zero down” – Yeah – JAVA is the way.

  3. Erp … you are right.

    RHT: 785M cash – 258M debt = $527M available cash. Value exclusive of available cash = $2630M – $527M = $2103M

    JAVA: 2630M cash – 1260M debt = $1370M available cash. Value exclusive of available cash = $1280M

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