Jefferies says Red Hat still well-positioned to capture share in Federal IT

Jefferies & Co. maintained its ‘buy’ rating on business software company Red Hat Inc. with a price target of $35.

“We believe Red Hat continues to be well-positioned to capture share in Federal IT, but the new 8 year, $2 billion social security administration (SSA) claims processing contract is likely to be spread across many vendors. If Red Hat does win a portion of it, they could be displacing International Business Machine Corp.,” said Katherine Egbert, an analyst at Jefferies.

Information Week on August 26 reported on an 8 year, $2 billion contract for claims processing at the SSA. The article doesn't name Red Hat specifically. $2 billion is the total value over 8 years. The total appears to include both SI and vendor costs. Lockheed Martin is the incumbent SI, Jefferies said in a report to clients.

The analyst dug up a previous article about a $100 million SSA project for claims processing that uses mostly IBM software. It went live in 2005.

The analyst said the social security administration in 2001 made improving service to its disability claimants a priority as it faced a pending wave of disability claims from the aging of baby boomers. Its goal was to make the processing of disability claims paperless.