Red Hat Advances Virtualization Leadership with Qumranet, Inc. Acquisition

Raleigh

United States, September 4, 2008

Red Hat positioned to deliver comprehensive, reliable and open virtualization to Linux and Windows servers and desktops

Red Hat, Inc. (NYSE: RHT), the world's leading provider of open source solutions, today announced the acquisition of Qumranet, Inc. The acquisition includes Qumranet's virtualization solutions, including its KVM (Kernel Virtual Machine) platform and SolidICE offering, a virtual desktop infrastructure (VDI), which together present a comprehensive virtualization platform for enterprise customers. In addition, Qumranet's talented team of professionals that develop, test and support Qumranet solutions, and its leaders of the open source community KVM project, will join Red Hat.

This acquisition advances Red Hat's efforts to transform the virtualization market and drive comprehensive virtualization technology and management solutions into every system, from servers to desktops, on both Linux and Windows. Red Hat can now deliver what virtualization-only vendors cannot: a comprehensive solution integrated with the operating system, which can drive down IT costs while simultaneously enhancing the flexibility and responsiveness of IT infrastructure.

This acquisition adds to Red Hat's differentiated and comprehensive solutions portfolio for the virtual enterprise, enhancing the opportunities for customers to improve the productivity and reduce the cost of IT infrastructure. Red Hat's solution components include:

  • The industry's leading open source operating system, Red Hat Enterprise Linux, with built-in virtualization
  • An embedded hypervisor which supports all major operating systems
  • A consistent management platform for both virtual and physical systems, uniting servers, desktops, storage and networks
  • A defining cloud and grid management solution
  • Advanced, high-speed inter-application messaging
  • High availability clustering solutions
  • Integrated security infrastructure

These solutions will leverage the power of the open source innovation model, which permits the delivery of new capabilities faster, more reliably and with greater security and stability. All of the components of these solutions will also be delivered within an open framework to help promote plug-and-play compatibility with customers' existing infrastructure and third-party software.

Red Hat customers enjoy highly responsive, flexible and cost-effective IT infrastructures, said Jim Whitehurst, President and CEO at Red Hat. This acquisition furthers our capability to widen the gap between open source and proprietary infrastructure software. Put simply, Qumranet's KVM and VDI technologies are at the forefront of the next generation of virtualization. They represent an opportunity to raise the bar and meet the market's demand for virtualization solutions.

The Qumranet acquisition also extends Red Hat's virtualization solutions for managing Windows desktops. SolidICE is a high-performance, scalable desktop virtualization solution built specifically for virtual desktops, not simply a retrofit from server virtualization solutions. SolidICE is designed to enable a user's Windows or Linux desktop to run in a virtual machine that is hosted on a central server. It is based on the industry-leading Simple Protocol for Independent Computing Environments (SPICE) protocol, which overcomes key barriers to VDI adoption, including a superior user experience enabled by the SPICE protocol capabilities.

With this acquisition, Red Hat has clearly positioned itself as a competitor within the Virtual Desktop market, said Michael Rose, Research Analyst at IDC. KVM not only represents a competent platform for hosting virtual desktops and other workloads, but protocols such as SPICE will increase the performance that users can expect to experience from their server-based computing environments, making the platform viable for a larger set of users.

Red Hat is a global leader in innovative technologies and has collaborated enthusiastically with us since the very beginning, said Benny Schnaider, CEO at Qumranet. I, along with the entire Qumranet team, am pleased to be joining Red Hat to create market-leading virtualization solutions. Qumranet's technologies, when combined with Red Hat's business, product and channel capabilities, will be well-positioned to provide virtualization solutions that really meet customers' business needs — for the server and the desktop. And, equally important, Red Hat's commitment to open source means that our technologies can be shared, improved and enjoyed by the entire open source industry.

Under the terms of the transaction, Red Hat paid approximately $107 million in cash for Qumranet, a privately held company. The acquisition is not expected to contribute materially to revenue in the fiscal year ending February 28, 2009, but should add up to $20 million in revenue in the following year. Red Hat expects Qumranet operating expenses will be approximately $3.5-4.5 million per quarter before non-cash stock-based compensation expense, amortization expense and other charges resulting from the closing of the acquisition. The transaction is expected to be dilutive to FY09 GAAP earnings by $0.05 to $0.06 per diluted share and to FY09 GAAP cash flow from operations by $0.03-$0.04 per diluted share. UBS Investment Bank acted as the sole strategic advisor to Red Hat in this transaction.

For more information on Red Hat's embedded hypervisor solution, which is currently in Beta, please visit www.ovirt.org.

For more news about Red Hat, visit www.redhat.com. For more news, more often, visit www.press.redhat.com.

About Red Hat, Inc.

Red Hat, the world's leading open source solutions provider, is headquartered in Raleigh, NC with over 60 offices spanning the globe. CIOs have ranked Red Hat first for value in Enterprise Software for four consecutive years in the CIO Insight Magazine Vendor Value survey. Red Hat provides high-quality, affordable technology with its operating system platform, Red Hat Enterprise Linux, together with applications, management and Services Oriented Architecture (SOA) solutions, including the JBoss Enterprise Middleware Suite. Red Hat also offers support, training and consulting services to its customers worldwide. Learn more: http://www.redhat.com.

Forward-Looking Statements

ertain statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: risks related to the integration of acquisitions; the ability of the Company to effectively compete; the inability to adequately protect Company intellectual property and the potential for infringement or breach of license claims of or relating to third party intellectual property; risks related to data and information security vulnerabilities; ineffective management of, and control over, the Company's growth and international operations; adverse results in litigation; and changes in and a dependence on key personnel, as well as other factors contained in our most recent Quarterly Report on Form 10-Q (copies of which may be accessed through the Securities and Exchange Commission's Web site at http://www.sec.gov), including those found therein under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes. The forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of the press release.

LINUX is a trademark of Linus Torvalds. WINDOWS is a trademark of Microsoft Corporation. RED HAT, JBOSS, QUMRANET and SOLIDICE are trademarks of Red Hat, Inc. and its subsidiaries in the US and other countries.