Why Red Hat's Better Than Microsoft

When the New York Stock Exchange needed an operating system to handle its innumerable amount of worldwide transactions, it didn’t turn to Microsoft. No, that honor went to Red Hat.

“The New York Stock Exchange would never run on Windows,” CEO and President Jim Whitehurst told Cramer Wednesday. “It crashes too often.”

Red Hat is an open-source software company that focus on enterprise solutions for businesses. In fact, it’s Red Hat’s proprietary Linux system that “never crashes,” Whitehurst said. A community of developers creates the software, and Red Hat gets it on the cheap. That way the company can charge its clients much less than competitors but still report the highest cash margins in the industry.

Big bad rivals like Microsoft and Oracle actually have a disadvantage when it comes to their respective enterprise operating systems – Red Hat’s main business – they don’t have as large a base of certified hardware and software that’s competitive with their product. Red Hat does. As Whitehurst pointed out, without that base, “What’s the value of the operating system?”

Whitehurst even went so far as to say Oracle really wasn’t a competitor. He quoted that company’s chief technology officer as saying, “There should be one Linux distribution and that should be Red Hat.” Whitehurst said that one of the primary functions of Red Hat is for running Oracle databases on top of it.

“So I see Oracle as more of a partner than as a competitor,” he said.

“Think about this one,” Cramer said. “Do some homework. I think Red hat is, despite its PE multiple, inexpensive given that growth rate.”

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