True valuation [LWN.net]

True valuation

Posted Nov 4, 2003 18:39 UTC (Tue) by freeio (guest, #9622)
Parent article: On Novell's acquisition of SUSE

The interesting point is that SuSE is going for $210M in cash. Valuations based on market capitalization or on the value of stock traded can be a bit deceiving. When one pays cash money, it is a far more accurate benchmark.

The fact that a Linux distribution company can be worth that much cash, in spite of releasing basically everything but YaST under GPL, is a testament to the utility of what they package and sell. Their product "just works" and represents a great example of just how easy Linux can be to install, run, and administer. No wonder Novell found them attractive.

(Log in to post comments)

True valuation

Posted Nov 4, 2003 20:20 UTC (Tue) by error27 (subscriber, #8346) [Link]

RHAT stock price has doubled in the last 3 months because <some financial firm> rated their stock as a "buy". Red Hat make 3 times as much revenue as Suse. Suse has had lay-offs and financial troubles in the past. RedHat made it through the past couple years pretty well compared to most tech companies.

I think these things explain the differences in the prices.

True valuation

Posted Nov 5, 2003 0:13 UTC (Wed) by vmole (subscriber, #111) [Link]

Let's see, based on the number in the LWN article above (very roughly, picking
specific values to make the numbers come out even, do the variations
yourself!):

SUSE: P/E = 210/35 = 6 - about right, maybe a bit of bargain.

RH: P/E = 2400/(35*4) = 17 - Woah!

Looks like a good time to get out of Red Hat stock.

(Which *should* have nothing to do with the success of the company,
unless they get more hung up on maintaining the P/E than on long term
profitabilty.)

Re: True valuation

Posted Nov 5, 2003 2:13 UTC (Wed) by larryr (guest, #4030) [Link]

E in P/E is earnings, not revenue, and a P/E of 17 is not high.
And RHAT P/E is a lot higher than 17.

Larry

True valuation

Posted Nov 5, 2003 21:36 UTC (Wed) by dkite (guest, #4577) [Link]

What did they buy? A name?

Watching this industry adapt to open source and free software is very interesting. And I grow
in respect for IBM, who instead of 'buying' something, spent money to contribute to projects
that mattered to them.

Why didn't Novell do that? $210 million would finish up a whole lot of desktop projects.

Derek