Software Service Providers
Red Hat (RHAT )
Rapid subscriber growth continues to fuel 2004 growth rates of over 50%. EBITDA margin has been maintained at 20%. Still, debt to EBITDA is over 15x on a run-rate basis. Cash in excess of debt provides ratings support. Expectations are for measured acquisitions and share repurchases.
Reynolds & Reynolds (REY )
In the first quarter, revenues for the software solutions segment declined 3% year over year, the documents segment declined 5%, and the financial services segment declined 18% (to $7 million) for a consolidated 4% decline. However, cash flow generation supports the current ratings.
We expect Reynolds & Reynolds gradually to restore operating performance to histor