LOS ANGELES (MarketWatch) -- Red Hat Inc.'s shares jumped on Monday after the maker of open-source software said it would acquire closely held JBoss Inc. in a cash-and-stock deal worth around $350 million.
Red Hat (RHAT : ![]()
RHAT29.69, +2.26, +8.2% ) , the leading player on the market for the Linux operating system, said the planned acquisition would help accelerate a shift towards service-oriented architectures.
red hat inc com
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JBoss makes open-source middleware products that help software applications work together. Its products, including application servers, compete against offerings from the likes of Oracle Corp. (ORCL : ![]()
ORCL13.83, +0.08, +0.6% ) , BEA Systems Inc. (BEAS : ![]()
BEAS13.39, +0.24, +1.8% ) and International Business Machines Corp. (IBM : ![]()
IBM82.28, -0.20, -0.2% )
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Raleigh, N.C.-based Red Hat's shares climbed following news of the deal that's expected to close around the end of May. The stock put on $2.34, or 8.5%, to $29.77.
Red Hat said the deal would be comprised of 40% cash and 60% of its common stock. Additionally, it will pay another $70 million if Atlanta-based JBoss hits certain future performance targets, Red Hat said.
The deal is expected to dampen slightly Red Hat's results for its quarter ending Aug. 31, though it's not expected to affect earnings and cash flow for the whole full year. Red Hat said it the deal would add to both its earnings and cash flow for the following fiscal year, ending in February 2008.
"Red Hat and JBoss are fully aligned around the belief that the open-source development model continues to change the economics of enterprise IT in favor of the customer," said Matthew Szulik, Red Hat chairman and chief executive. "And we truly believe in the potential of software innovation, once freed from the fetters of proprietary development."
Open-source software, like the Linux operation system, sprung up as an alternative to proprietary software from companies like Microsoft Corp. (MSFT : 
MSFT27.30, +0.05, +0.2% ) , which dominates the market for software used to power the world's computers.
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Service-oriented architecture, or SOA for short, is a method of building tech systems that deliver applications as loosely coupled, highly interoperable services.
UBS analyst Heather Bellini said the acquisition would help broaden Red Hat's product lineup, allowing it to be "more than just an operating-system company."
"We believe this is the right strategic move for the company as it seeks to expand beyond the OS stack," Bellini told clients. She rates the stock buy with a $34 target price.
Oracle, the Redwood Shores, Calif.-based software giant that has led a wave of consolidation in the business software industry, earlier had been widely speculated as a potential suitor for JBoss. 