Red Hat Stock Rebounds; Company Plans Major Stock Buyback
Posted October 27, 2006 8:43 a.m. EDT
RALEIGH, N.C. — Battered by a 24 percent drop in its stock price on Thursday,
launched a counterattack Friday, announcing plans to repurchase $325 million in stock and debt.
The move ignited a rally in Red Hat (Nasdaq: RHAT) shares. In heavy trading, Red Hat hit a high of $16.20 before closing the day at $15.63. The 80 cent, or 5.39 percent, rally came in trading of 49 million shares, six times the average daily volume.
Red Hat saw a quarter of its market capitalization wiped out by Thursdays frenzied selling, which was ignited by software giant Oracles decision to launch services in Red Hats space. Oracle said it would offer support for Linux users at a substantial discount.
Also Thursday, Red Hat Chairman Matthew Szulik told cable news channel CNBC that his firm would not cut prices to match Oracles offer.
The Red Hat board authorized the repurchase of up to $250 million in stock and another $75 million in long-term debt.
Red Hat reported $1 billion in cash and investments as of Sept. 30.
"We believe this repurchase program is in the best interest of our shareholders," said Charles Peters, Red Hats chief financial officer. "It underscores our belief in Red Hat's future and represents an opportunity to enhance long-term shareholder value."