Rumours that Linux software king Red Hat is to buy Corel (manufacturers of Corel Draw for the Mac) are rife among the financial markets. Speculation has grown to the point that CNN and CNBC have both reported the story.
As a result, Red Hat closed Monday up 98 per cent on the day, Corel up 48 per cent. Both companies denied that they had ever discussed anything, least of all an acquisition.
The Wall Street Journal ran by-lined copy from the Dow Jones Newswires. It was the only coverage to dampen the takeover speculation, with mention of the two-year-old insider-trading charges pending against Corel founder and CEO Michael Cowpland.
Red Hat's hometown paper, the Raleigh News & Observer, pointed out that the $1.6 billion jump in Red Hat's valuation on Monday exceeded Corel's entire market capitalization. The Ottawa Business Journal noted that the stocks of Corel and Red Hat had never been linked before, and speculated that US markets may come to see the two companies as representative of the Linux sector as a whole.
The irony of Red Hat's stratospheric valuation compared to Corel's caught the eye of Ottawa Citizen reporter James Bagnall. The Durham company is losing money, and it posted less than $5 million in sales last quarter; Corel is profitable and generates $70 million a quarter.
The Ottawa Sun's Kevin Bell found several people inside Corel dazed and confused by the sudden stock run-up, and noted that a blackout period forbids them from profiting immediately. The paper was guilty of some sloppiness, at one point saying that "Linux" has been snapping up companies when they meant Red Hat. But hats off to Bell for cornering the fund manager whose nod had initially electrified Corel's stock. Asked about the rumour, Tera Capital partner Duncan Stewart sputtered: "All I said was that the bloody thing wasn't necessarily ridiculous."