Oracle attack hits Red Hat shares

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Shares in computer software provider Red Hat slumped 24% on Thursday after giant rival Oracle pledged to undercut its prices.

Red Hat distributes its Linux software for free - and makes money providing service and support.

But database giant Oracle now says it will offer maintenance services for Red Hat products at half Red Hat's prices.

It marks the latest aggressive move by Oracle, the world's second biggest software provider behind Microsoft.

Security implications

Red Hat said that Oracle would not be offering support for some if its key products.

On its website it urged customers to stay loyal, arguing that Oracle procedures could expose users to additional security risks and might damage compatibility between products.

But investors began selling shares in Red Hat as analysts pointed to the grave threat that Oracle's move posed to the business.

"Current and prospective Red Hat customers now have an alternative for support from a larger, more experienced vendor and can easily convert their support contracts to Oracle, save money, and receive more important benefits," said Jason Maynard of Credit Suisse.

Red Hat shares closed $4.68 lower at $14.85.