Bluecurve Questions and Answers

Raliegh

United States, April 19, 2000

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 company's e-business.

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 Internet infrastructure.

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 services 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 delivery service.
  • 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 (Mar.).
  • "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 hat.com.

Q: Do you expect key personnel from either company to leave as a result of the acquisition?
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 time.

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.

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