There's much concern in the information technology (IT) world. Might companies cut back on spending in light of the slowing economy?

Well, as for Red Hat (NYSE: RHT), the environment seems to be OK. For example, in Q4, the company posted a 27% increase in revenues to $141.5 million. What's more, bookings are bulging (above $200 million).

While RedHat has a strong business with its Linux offerings, the company is also seeing lots of traction with its middleware platform, known as JBoss. Interestingly enough, with Oracle's (NASDAQ: ORCL) buyout of BEA Systems (NASDAQ: BEAS), there's been a surge in downloads of JBoss. Basically, customers want an alternative.

Going forward, Red Hat forecasts revenues of $665 million to $680 for the upcoming year. Earnings are expected to range from $0.78 to $0.82 per share.

And Red Hat recently purchased Amentra, which is a systems services company. Basically, the deal will allow Red Hat to continue to turbocharge its sales of JBoss.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Shares of Oracle Corp. (NASDAQ: ORCL) are trading slightly lower today as traders prepare for the company's third quarter earnings release. The company is scheduled to report its recent quarterly numbers today after the market closes.

When the company announces its earnings, analysts are expecting to see earnings excluding items of 30 cents on sales of $5.4 billion, up from 25 cents a share and $4.41 billion in revenue reported in the same period a year ago.

Despite the weak market conditions and economic slowdown, Oracle has so far been able to beat or at least match analysts' expectations when it has reported earnings. For the current quarter, the company also expects strong earnings results. This might be due to the company's recent acquisitions whose maintenance revenue help offset weak earnings coming from its customers affected by the tumbling economy.

MOST NOTEWORTHY: Novartis, AIG, Diageo, and BEA Systems were today's noteworthy downgrades:

• HSBC downgraded Novartis (NYSE: NVS) to Underweight from Neutral, as they believe the company's mid-single digit pharma sales growth is not sustainable.
  
• AIG (NYSE: AIG) was downgraded to Market Perform from Outperform by Keefe Bruyette due to their concerns about the company's deteriorating profit trends.
  
• Diageo (NYSE: DEO) was lowered to Neutral from Buy by Goldman Sachs to reflect a lack of near-term catalysts.
  
• Deutsche Bank downgraded BEA Systems (NASDAQ: BEAS) to Hold from Buy, as they believe it is likely that the acquisition will close in April.

OTHER DOWNGRADES:

• Live Nation (NYSE: LYV) was dropped to Hold from Buy by Morgan Joseph.
• Jackson Hewitt (NYSE: JTX) was dropped to Neutral from Buy at FTN Midwest.
• Roth Capital downgraded Collagenex (NASDAQ: CGPI) to Hold from Buy.
• Credit Suisse lowered MFA Mortgage (NYSE: MFA) to Neutral from Outperform.

MOST NOTEWORTHY: Canadian Solar, Qimonda and Eagle Test Systems were today's noteworthy upgrades:

• Oppenheimer upgraded shares of Canadian Solar (NASDAQ: CSIQ) to Outperform from Perform after channel checks indicated the company's internal cell ramp is proceeding on plan. They are more positive on shares following the recent pullback.
  
• Qimonda (NYSE: QI) was upgraded to Buy from Neutral at UBS, as they expect the DRAM supply/demand to balance out in the second quarter 2008 followed by undersupply.
  
• Broadpoint raised Eagle Test Systems (NASDAQ: EGLT) to Buy from Neutral after the company reported Q1 results.

OTHER DOWNGRADES:

• EADS (OTC: EADSY) was upgraded to Buy from Sell at ABN Amro.
  
• Jefferies upgraded Unisys (NYSE: UIS) to Hold from Underperform.
  
• BEA Systems (NASDAQ: BEAS) was upgraded to Market Perform from Underperform at Bernstein.

MOST NOTEWORTHY: Biogen Idec, Western Union and Tibco were today's noteworthy upgrades:

• Banc of America upgraded shares of Biogen Idec (NASDAQ: BIIB) to Buy from Neutral as they believe the company's three year growth strategy and the approval of Tysabri for the treatment of Crohn's disease will support a higher valuation.
  
• Oppenheimer upgraded Western Union (NYSE: WU) to Outperform from Perform, citing improving operating margins, easing comps, and improvement in Mexico.
  
• Tibco Software (NASDAQ: TIBX) was raised to Buy from Hold at Citigroup. The firm upgraded shares following the acquisition of BEA Systems (NASDAQ: BEAS) to reflect the company's takeout potential and limited downside.

OTHER UPGRADES:

• Royal Ahold (OTC: AHONY) was upgraded to Hold from Sell at Deutsche Bank.
  
• Bear upgraded eBay (NASDAQ: EBAY) to Outperform from Peer Perform.
  
• Morgan Stanley raised Boston Scientific (NYSE: BSX) to Overweight from Equal Weight.

Symantec Corporation (NASDAQ: SYMC) shares are trading higher this morning on news of two buyouts in the software industry. Sun Microsystems (NASDAQ: JAVA) announced this morning that it has agreed to buy open-source software maker MySQL AB for $1 billion, and Oracle (NASDAQ: ORCL) reported this morning that it has agreed to buy BEA Systems Inc. (NASDAQ: BEAS) for about $8.5 billion. Investors might think that SYMC could be an eventual buyout target. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on SYMC.

After hitting a one-year high of $21.32 in October, the stock hit a one-year low of $15.15 last week. SYMC opened this morning at $15.16. So far today the stock has hit a low of $15.57 and a high of $16.16. As of 11:00, SYMC is trading at $16.12, up $0.72 (4.7%). The chart for SYMC looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

Oracle Corp. (NASDAQ: ORCL) will be buying competitor BEA Systems, Inc. (NASDAQ: BEAS) in a deal worth about $7.85 billion, both companies announced early this morning. BEA makes software that connects Oracle's market-leading database software to the vast array of business software applications that millions of workers use daily.

Although there had been some dispute over the value of BEA in recent months, the $8.5 billion deal does give a 24% share premium to Tuesday's closing price of $15.58 for BEA common shares. This morning, however, BEAS is up more than 18% at $18.45 on the takeover news. Activist investor Carl Icahn even blessed the merger by saying he would vote his 13% BEA stake in favor of the combination: "This transaction is an excellent example of the great results that can be achieved for all constituencies when the shareholder activist is able to work cooperatively with management."

Oracle, the world's second largest software maker after Microsoft Corp. (NASDAQ: MSFT), was interested in BEA back in October of last year, but the company rejected its offer of $17 per share (total value: $6.7 billion). The latest offer from Oracle, which is pegged at $19.375 per share, won unanimous approval from BEA's board of directors. Oracle's continuation of billion-dollar acquisitions of late have added some pretty decent heft to its offerings. The company has acquired competitors PeopleSoft, Siebel Systems and Hyperion Solutions -- and now, BEA.

[The author holds a long position in MSFT]

BEA Systems (NASDAQ: BEAS), Oracle (NASDAQ: ORCL) announced it will acquire all outstanding shares of BEAS for $19.75 in cash, an $8.5 billion deal.

BEAS board of directors unanimously approved the transaction.

BEAS option volume was heavy with 54,526 contracts trading on January 15, 2007. BEAS January straddle was priced at $1.10. BEAS February option implied volatility of 55 is above its 26-week average of 40 according to Track Data, suggesting larger price movement.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Before the bell: Futures lower after Intel, ahead of CPI

Seems there's no stopping Larry Ellison, not a bear market, not a possible looming recession. Oracle Corp. (NASDAQ: ORCL) agreed to buy BEA Systems Inc. (NASDAQ: BEAS) for $8.5 billion, or a per-share price of about $19.38, after raising its original price of $17 per share to win over the board. According to Oracle, the transaction should add as much as 2 cents to per-share profit, excluding some items, in the first full year after its completion, probably by mid-year. Trading in BEA, which closed at $15.58 Tuesday, was halted. ORCL shares are down nearly 2.4% in premarket trading (7:35 a.m.) to $20.80.

Airbus said Wednesday it trailed Boeing Co. (NYSE: BA) in logging new orders last year by a total of 72 civilian jets -- 1341 for Airbus vs. 1413 for Boeing -- but beat its U.S. rival in terms of deliveries -- 453 to 441. For 2008, the planemaker expects orders to exceed deliveries.

Apple Inc.'s (NASDAQ: AAPL) Jobs failed to wow Street in his keynote address at Macworld Tuesday. Apple shares closed down 5.45% to $169.04. So while TechCrunch wonders whether Apple TV will indeed be able to take online movie rentals mainstream, CrunchGear has already dubbed the MacBook Air, MacBook AirHead, saying it is basically useless. You can go read the reasonings. Apple shares are declining another 2.2% in premarket trading.

As BEA Systems (NASDAQ: BEAS) management attempts to justify its decision not to let shareholders decide the fate of their company with regard to a takeover offer from Oracle (NASDAQ: ORCL), CEO Alfred Chuang has taken an unusual step.

He has given shareholder and vocal opponent of his strategy, Carl Icahn, confidential information that purportedly shows that Oracle's bid "significantly undervalues the company."

No word yet on King Icahn's reaction, but he probably isn't buying it. In an October letter to the company, he wrote that "I view your public declaration of a $21 per share 'take it or leave it' price as a management entrenchment tactic, not a negotiating technique."

He's probably right. Some of the most trenchant analysis of the BEA situation comes from our own Georges Yared, who said this:

BEA Systems (NASDAQ: BEAS) finds itself defending its rejection of Oracle's (NASDAQ: ORCL) takeover offer of $17 per share as the stock plummets -- and with good reason. Take a look at the chart comparing the return BEA Systems has provided for its shareholders, and compare it with the return Carl Icahn's company, Icahn Enterprises (NYSE: IEP) has provided. Note: Icahn Enterprises recently changes its name and ticker from American Real Estate, ticker ACP to IEP. The ticker used in the chart is ACP.

Having looked at the chart, ask yourself: Who was better poised to make a decision about shareholder value? The company's outside shareholders including Mr. Icahn, or an entrenched management team that has simply failed to generate value?

I have been following BEA Systems (NASDAQ: BEAS) since the mid 1990s. What was once a cutting-edge, leading applications infrastructure play has turned into a me-too, has-been company. The worst part of it all, BEA thinks -- it actually thinks -- it is good! It's an arrogant company led by an arrogant management team.

I visited BEA three times from early 2000 to late 2004, and guess what? BEA was for sale and looking for a suitor even then. Management gives the illusion of wanting to go it alone, and yet several managers made it clear to me and my clients at the time that they would "listen to anyone" -- you know, the old fiduciary responsibility line.

Oracle (NASDAQ: ORCL) has been rumored since 2002 to be buying BEA Systems. I think the rumors were promoted by none other than BEA itself. In the meantime, Oracle was attempting to "research and develop" a competing product set versus BEA, but with Oracle being Oracle, it was not to be. Oracle has adopted a more productive strategy of acquiring companies, especially beaten-down ones, rather than developing its own in-house applications. At the end of the day, Oracle is a master of the database world and a C player in the apps world.

U.S. stock futures were higher this morning, pointing to a similar start on Wall Street ahead this week's Federal Reserve policy meeting with hopes of another possible interest rate cut. Following gains in Asia and Europe, investors seem to have shrugged off oil's continued surge. A shake up at Merrill Lynch, weak dollar and high commodity prices are also in focus this morning.

On Friday, U.S. markets finished higher following Microsoft's strong results as well as Countrywide Financial's profit forecast. The Dow Jones industrial average climbed 134 points, or 0.99%, the Nasdaq Composite 53 points, or 1.94%, and the S&P 500 20 points, or 1.38%. For the week, the Dow ended up 2.11%, the Nasdaq 2.90%, and the S&P 500 2.31%.

While little economic news today, the market really is looking forward to the Fed's policy-making meeting Tuesday and Wednesday to discuss interest rates and other economic matters. Last meeting the Fed lowered rates by half a percentage point and this meeting many expect another rate cut of a quarter to half a percentage point as the housing market continues to struggle as do financial companies.

Oil prices rose above $93 a barrel to a new trading high in Asia Monday after Mexico's state oil company, Pemex, said it was suspending about a fifth of its daily oil production -- as much as 600,000 barrels -- due to a storm. Political tensions in the Mideast, a weak U.S. dollar and a tight supply outlook kept putting upward pressure on prices. With oil, gold prices rose, and the expectation is for a rally in commodity stocks as they have been leading market higher overseas.

The biggest corporate buzz this morning comes from Merrill Lynch (NYSE: MER), which after announcing a $7.9 billion writedown last week, is expected to announce the resignation of CEO Stanley O'neal today.

UBS AG (NYSE: UBS) warned it may have to take further charges from its exposure to the U.S. housing and mortgage markets, but hadn't changed its earlier guidance.

Oracle Corp (NASDAQ: ORCL) withdrew a $6.7 billion (or $17 a shares) bid for business software maker BEA Systems Inc (NASDAQ: BEAS) on Sunday, setting the stage for a proxy battle between activist investor Carl Icahn and the BEA board. Meanwhile, SAP (NYSE: SAP) reiterated it wasn't interested in buying BEA Systems.

Gap Inc. (NYSE: GPS) was hit by a report in Britain's Observer newspaper on Sunday that it had found child labor in clothing in a sweatshop in India, with children as young as 10 with working conditions of 16 hours a day. The clothing retailer said it will convene all of its Indian suppliers to "forcefully reiterate" its prohibition on child labor.

Oracle (NASDAQ: ORCL) had threatened to walk away from its $17 offer for BEA Systems (NASDAQ: BEAS) and it did. The larger company had set a 5 PM deadline yesterday for a response. "BEA shareholders should not assume that Oracle will renew its $17 per share offer in the future," Oracle said in a statement picked up by Reuters.

Adding to the pressure, BEA shareholder Carl Icahn has threatened a proxy fight if the company is not auctioned off. The company has lost most of its alternatives because no other firm would match the Oracle offer.

It appears that BEA gambled and lost. It must have believed that Oracle would raise it bid to lock in a deal for the company. The BEA board issued a statement saying that the company was worth $21. But no one seemed to buy that. The stock had not traded above $17 for about four years.

BEA is now left with few if any alternatives. Icahn may be able to force a sale of the company, but the only buyer would appear to be Oracle. In the meantime BEA shares are likely to take a sharp fall.

Douglas A. McIntyre is an editor at 247wallst.com.

The BEA Systems (NASDAQ: BEAS) board may think that their company is worth $21 a share. After consulting with their bankers at Goldman Sachs, that is the price they put on the company in a public letter to Oracle (NASDAQ: ORCL). The larger company has made an offer to buy BEAS for $17.

Oracle, as might have been predicted, says that $21 is absurdly high and has threatened to withdraw its offer.

Yesterday, Carl Icahn, who owned 15% of BEAS, told the company that it should take the highest best offer and be done with it. Reuters writes that he demanded in a letter to the BEA board that it let shareholders vote on the best bid that emerges from an auction. "It's completely insane to lose a stalking horse," Icahn said in an interview with the news service, referring to Oracle. He said he is prepared for a proxy fight to make his point.

Icahn is often right in these matters, but in this case he is especially right. BEAS is a fairly ordinary company.The company has not traded above $17 since early 2002. And, no other bidder has emerged at $17, although there was some speculation that IBM (NYSE: IBM) might step in. It would appear that other companies think that Oracle's current price point is rich and generous.

The BEAS board is wrong. If Oracle leaves the field, the stock will probably drop back to $12, where it traded in August. There will be no winners then, only losers.

Douglas A. McIntyre is an editor at 247wallst.com.