Red Hat to Acquire WireSpeed

BOSTON (06/14/2000) - Red Hat Inc. announced Wednesday that it has signed a definitive agreement to purchase privately-held Linux developer WireSpeed Communications Corp., a developer of software for embedded systems.

Red Hat is acquiring WireSpeed because of its development of network and telecommunications components for embedded systems software for semiconductor, Internet device and industrial control companies, according to Red Hat's Web site. The addition of WireSpeed, according to the Web site, will make Red Hat the leading source of custom Open Source development expertise.

"It is clear to analysts that we're going to see an increasing use of intelligent devices, whether cellular phones, PDAs (personal digital assistants) or set-top boxes. It is also fairly clear that one of the biggest opportunities for Linux is to be the software in those devices," said Dan Kusnetzky, vice president, systems software for International Data Corp. (IDC) in Framingham, Massachusetts. "Red Hat wants to lead the charge in that direction and has acquired a company with tools for that."

Under the terms of the agreement, Red Hat will issue 1,531,232 shares of Red Hat common stock in exchange for all the outstanding securities of WireSpeed.

The transaction will be valued based on an average closing price of Red Hat's common shares for the five-day period ended Thursday. According to the Nasdaq Web site, Red Hat's stock price for Wednesday closed at US$22.50, up 3.15 percent.

The addition of WireSpeed to Red Hat's Client Services Group, which is a source of custom Open Source development expertise in embedded, networked and post-PC devices, will help Red Hat continue to meet the demand for embedded development, Red Hat said in a written statement Wednesday. Red Hat also expects the acquisition to drive up revenues from the custom development of embedded Linux.

"Red Hat has a recognizable brand and has been careful" not to alienate the Open Source community, Kusnetzky said, adding that "Red Hat has done a good job of walking a fine line... making sure it's perceived as a member in good standing of the community." Red Hat needs to do this, according to Kusnetzky, because if they want support from the community, they need to have a good standing in it. The Open Source community is sometimes unpredictable with regards to companies making money off software they developed, he added.

This acquisition "will help the Linux market move forward... (but) there is always the threat that Linux will lose (opportunities on intelligent devices) to some other environment that is more mature," Kusnetzky said.

Matthew Szulik will remain president and chief operating officer for the combined companies, and Red Hat expects the board of directors to remain intact. The company will keep WireSpeed's Alabama office.

The acquisition of WireSpeed is expected to be completed by July 31 of this year, subject to customary closing conditions.

Red Hat, based in Research Triangle Park, North Carolina, can be reached at +1-919-547-0012 or http://www.redhat.com/. WireSpeed Communications, based in Huntsville, Alabama, can be reached at http://www.wirespeed.com/.

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