November 18, 1999 Web posted at: 10:01 a.m. EST (1501 GMT) by Jack McCarthy

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LAS VEGAS (IDG) -- Stock in Linux seller Red Hat soared Tuesday on the strength of Monday's announcement of its purchase of another Linux company, Cygnus Solutions, for $674 million. Its stock on the Nasdaq exchange closed at $119.62, up $14.24, or 13.5 percent.

The acquisition makes Red Hat the biggest Linux services company in the world and will allow it to offer more complete services of the open-source operating system, Donnie Barnes, Red Hat's director of technology products, said Tuesday.

These are heady times for Red Hat, bolstered by the $84 million it raised in its initial public offering in August and by the burgeoning popularity of Linux, Barnes said in an interview near Red Hat's booth at Comdex.

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The company plans to ride the growth of Linux, particularly its use with Internet-based servers, to continued expansion and perhaps more acquisitions, Barnes said.

"We have a foothold in the mass Web-server space," he said. "Now we will move into the high-end e-commerce server space that must be up 24-7."

Red Hat's Linux sales and service business will be enhanced by Cygnus expertise in integrated development, its involvement with open-source operating systems in embedded devices and its development of customized compilers.

"Cygnus is very complimentary to our business," Barnes said. "They develop software and wrap services around it."

Red Hat also announced that Matthew Szulik is replacing Bob Young as chief executive officer. Young will continue as chairman of the board. "It was Bob wanting to move into a role where he is looking at the big picture," Barnes said.

Red Hat touts research by International Data Corp. that shows Linux as the fastest-growing server operating environment in 1998, increasing 190 percent from the year before. The open-source OS took 15.8 percent of the marketshare of server operating systems shipped.

As if all these positive developments weren't enough, Microsoft Corp., the king of proprietary operating systems, is suffering from pressure from the U.S. government's antitrust lawsuit. But Microsoft's problems have little impact on Red Hat, Barnes said.

"The lawsuit is certainly leveling the playing field in the industry," Barnes said. "But no matter what happens there, we provide better solutions."