January 12, 2004 4:37 PM PST

Red Hat raises $600 million with bond

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Linux seller Red Hat raised $600 million Monday through a bond offering, bringing its cash reserves to about $1 billion.

The Raleigh, N.C.-based company announced a plan last week to sell $400 million of the bonds, but when they were priced Tuesday, there was demand for $500 million worth, Red Hat said. Then, the company exercised an overallotment program to bring the total to $600 million, Red Hat spokeswoman Leigh Day said

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The money will be used for acquisitions and international expansion, the company said in a statement.

Red Hat is the leading seller of Linux, an open-source operating system modeled after Unix. However, it faces stronger competition with Novell's acquisition, expected to close Monday, of No. 2-ranked SuSE Linux.

Novell brings to SuSE cash, server software products, a stronger U.S. presence and existing customer relationships.

Red Hat's new cash should help the company "broaden its global footprint at a faster rate and to be more productive in adding technology layers to its product offering," Sameer Nadkarni, a W.R. Hambrecht securities analyst, said in a research report. He expects Red Hat will acquire smaller companies such as those focusing on security, application server software and virtualization of computing resources.

Red Hat acquired one such company, storage management software maker Sistina Software, in December.


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