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RED HAT, INC. TO ACQUIRE INTERNET PERFORMANCE MANAGEMENT PROVIDER BLUECURVE,INC.
RalieghUnited States, April 19, 2000
Will Expand redhat.com's Subscription-based Solutions with Web-based Performance Management Services to Help Companies Proactively Manage Internet Infrastructure
Red Hat, Inc the leader in open source Internet infrastructure solutions,
announced today that it has signed a definitive agreement to purchase
privately-held Bluecurve. Under the terms of the agreement, Red Hat will issue
up to 1,257,862 shares of Red Hat common stock in exchange for all of the
outstanding securities of Oakland, California-based Bluecurve. The transaction
will be valued based on an average closing price of Red Hat's common shares for
a five-day period ended April 24. The acquisition will be accounted for as a
purchase and is expected to be completed by July 2000, subject to approval by
Bluecurve shareholders and customary closing conditions.
Bluecurve's performance management solutions allow customers to simulate and
measure the transactions and user activity that place demands on Internet
infrastructure and applications. The resulting performance data provides
customers with the information they need to plan and scale their infrastructure
proactively to assure the highest levels of customer service. Red Hat will
leverage the software to create a powerful, open source, performance management
service to help companies build and manage scalable Internet infrastructures.
The new Web-based service will be offered as a subscription to customers through
redhat.com. In the meantime, Red Hat will support existing customers and offer
Bluecurve's solutions in their current form, ensuring that the acquisition does
not disrupt customer access to this functionality.
"Global 2000 and Internet Service Providers (ISPs) around the globe leverage Red
Hat's open source solutions as the backbone of their Internet and e-commerce
infrastructure. With the addition of Bluecurve's expertise and software, Red Hat
will be able to deliver a very powerful performance management solution to help
today's e-businesses automatically and proactively monitor their Internet
infrastructure," said Matthew Szulik, president and CEO of Red Hat. "The
addition of Bluecurve continues Red Hat's initiative to provide a complete range
of services to manage Linux servers." The new Red Hat performance management
service will allow enterprises to evaluate existing server, network and
application performance. In addition, the service will allow customers to create
simulated user activity to evaluate how the existing infrastructure and
applications would handle hypothetical traffic loads. "Today's e-businesses turn
to open source software like Red Hat Linux for its unmatched reliability and
flexibility for critical systems. These customers, who can't afford even a
single minute of Internet downtime, will now be able to leverage redhat.com and
powerful remote management services to take a proactive approach to managing Web
performance," said Tom Grubb, co-founder of Bluecurve. "Red Hat and Bluecurve
are redefining what it means to buy and use an Internet server OS." Red Hat is
the market leader in open source Internet infrastructure solutions, offering a
wide array of consulting, training, support and certification solutions for both
its award-winning open source Red Hat Linux OS and popular open source
applications used by enterprises worldwide. Bluecurve is the software technology
leader for solutions that measure distributed systems performance, availability
and reliability from the user's perspective.
Redhat.com and Open Source Momentum Redhat.com, the premier portal for a wide
variety of open source software and information solutions, attracts the largest
global audience of open source developers and users. Red Hat's subscription
service, introduced with version 6.0, offers continual updates to Red Hat Linux
users through an innovative, automated Internet delivery service. In February,
Red Hat unveiled Wide Open News (www.wideopen.com), an editorially independent
Web site for Linux and open source news and analysis. In March, redhat.com added
several new services, including: "What Can Red Hat Do for Me," which delivers
users a made-to-order report featuring the information, products and services
that are right for that customer's needs, and "Success Stories," which details
the business need, deployment and cost savings of Red Hat Linux for Internet
Infrastructure solutions. (And yesterday, the company unveiled the redhat.com
Marketplace, a perfect starting point for accurate, up-to-date information and
purchasing options for Internet infrastructure solutions that are based on or
support Red Hat Linux and other open source technologies.)
International Data Corp. (IDC) research states that paid Linux shipments grew
faster than any other server operating system over the past two years. IDC
preliminary figures for 1999 show Linux shipments hold 24.6 percent of the
server operating system market, up from 15.8 in 1998. IDC research also show 40
percent of all spending on Linux servers is for Internet-related applications,
making Linux servers firmly embedded in the Internet infrastructure. Research
firm NetCraft, Inc. (www.netcraft.com), states that 29 percent of all public Web
servers also run on Linux, making Linux the most popular operating system for
public Web sites.
FORWARD-LOOKING STATEMENTS Forward-looking statements in this press release are
made pursuant to the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934. Investors are cautioned that statements in this press
release that are not strictly historical statements, including, without
limitation, the combined operations of the two companies, product plans and
performance, management's plans and objectives for future operations, and
management's assessment of market factors, constitute forward-looking statements
which involve risks and uncertainties. These risks and uncertainties include,
without limitation, the difficulty of integrating the two companies, the
potential failure to achieve the beneficial synergies expected to result from
the acquisition, the ability to continue to develop the Linux kernel and other
software, Red Hat's dependence upon an open source business model, reliance upon
independent third-party Linux developers, management of growth, reliance upon
strategic relationships, expansion of Red Hat's business focus and operations,
the possibility of undetected software errors, the enforceability of the GNU
General Public License and other licenses under which Red Hat's products are
developed and licensed, the scarcity of Linux-based applications, the risks of
economic downturns generally, and in Red Hat's industry specifically, the risks
associated with competition and competitive pricing pressures, the viability of
the Internet, and other risks detailed in Red Hat's filings with the Securities
and Exchange Commission, copies of which may be accessed through the SEC's web
site at http://www.sec.gov.
Red Hat/Bluecurve External Q&A
Q: Why is Red Hat Acquiring Bluecurve?
Red Hat Linux and other open source server technologies are at the heart of
today's rapidly expanding Internet infrastructure. Companies are looking for a
simpler, easier way to test the scalability, reliability and overall performance
of those critical systems---before they affect a user's experience or a
Bluecurve has tremendous expertise and unique, powerful solutions for remotely
measuring the performance and reliability of the distributed systems running the
Internet. Red Hat will leverage this as a new, open source, services-based
solution through redhat.com. It will deliver organizations a powerful remote
performance management solution to help today's e-businesses automatically and
proactively monitor their Internet infrastructure.
Q: How does the combination benefit customers?
According to IDC Research, 40 percent of all spending on Linux servers is for
Internet-related applications. And many Internet Service Providers (ISPs) and
companies leverage Red Hat's open source solutions as the backbone of their
With the addition of Bluecurve's expertise and software, Red Hat will be able to
deliver a powerful performance management service to help today's e-businesses
automatically and proactively monitor their Internet infrastructure. Offered
through redhat.com, the service will enable both companies' customers to more
easily evaluate the performance of a wide variety of key Internet systems to
identify bottlenecks and better plan for growth.
Q: What is the value and what are the financial terms of the acquisition?
Under the terms of the agreement, Red Hat will issue up to 1,257,862 shares of
Red Hat common stock in exchange for all of the outstanding securities of
Oakland, Calif.-based Bluecurve. The transaction will be valued based on an
average closing price of Red Hat's common shares for a five-day period ended
April 24. (Because the market is closed on Friday, April 21, this means an
average of the closing prices for April 17-20 plus April 24.)
The acquisition will be accounted for as a purchase and is expected to be
completed by July 2000, subject to approval by Bluecurve shareholders and
customary closing conditions.
Q: How does this fit into the overall vision for redhat.com?
Today, Redhat.com attracts the largest global audience of open source developers
and users. During the past three months Red Hat has introduced several new, key
services through redhat.com that make it the number one delivery vehicle for
both Red Hat software and serviices AND all the information needed for companies
building their Internet infrastructure around open source solutions.
This includes the redhat.com Marketplace, which we unveiled yesterday (Tues.
4/18). The redhat.com Marketplace gives corporate users a perfect starting point
for accurate, up-to-date information and purchasing options for Internet
infrastructure solutions that are based on or support Red Hat Linux and other
open source technologies. Customers can choose from a wide range of products
from top computing companies worldwide in three major categories: hardware,
software and Web hosting.
Other recent additions to redhat.com include:
- Red Hat's subscription service, introduced with version 6.0, offers continual
updates to Red Hat Linux users through an innovative, automated Internet
- Wide Open News (www.wideopen.com), an editorially independent Web site for
Linux and open source news and analysis (Feb.).
- "What Can Red Hat Do for Me," which delivers users a made-to-order report
featuring the information, products and services right for that customer's needs
- "Success Stories," which details the business need, deployment and cost
savings of Red Hat Linux for Internet Infrastructure solutions (Mar.).
Q: How will the acquisition impact revenues?
The Bluecurve acquisition is expected to add a high-value, recurring revenue
stream to Red Hat's suite of software and services delivered through red
Q: Do you expect key personnel from either company to leave as a result of the
No, we believe that key personnel support this transaction and look forward to
the opportunity to build, launch and grow Red Hat's subscription-based business.
In addition, new employees will become shareholders of the combined entity.
Q: Is there any significant change in the management structure of Red Hat?
No. Matthew Szulik remains president and CEO of the combined companies and there
are no changes in Red Hat's board of directors.
Q: How and when will the new Web-based performance management service will be
offered to customers?
The service will be offered through redhat.com as a subscription to customers
beginning in Q3 2000. Bluecurve's customers have been asking for a
services-based solution and we expect a smooth transition as we migrate them to
the new redhat.com service.
Q: Describe the new performance services, and when will they be available? How
much will they cost?
The Bluecurve technology enables customers to simulate real world traffic and
load conditions for their Internet infrastructure. Red Hat will use the
technology to create various traffic scenarios and fire these off to customer
Web sites. Additionally, the Bluecurve technology will be deployed to enable
remote measurement of Web services performance and availability in near real
Pricing for these services will be announced when they become available.
Q: Has Red Hat made any other significant acquisitions?
Red Hat closed the acquisition of Cygnus Solutions and Hell's Kitchen Systems,
Inc. in January.