Softpanorama (slightly skeptical) Open Source Software Educational Society

May the source be with you, but remember the KISS principle ;-)

Linus Midas Touch and Linux IPO Casino

1999 Linux Gold Rush the Great Electric Kool-Aid Linux Hype Fest

" ...It's simply a critical note of the get-rich-quick-scheme that the market has become. In no way does this note reflect on the quality of the Linux OS, Bob Young's character, the open source community's willingness to contribute to the wealth of a select group of investment bankers, venture capitalists, and multi-billionaires, or the sex-appeal of TuX tHe PiNguIn.".

Disclaimer from the Slashdot post

Money, very big money. Great and not that great but now very rich  programmers (see also Linux Stocks Crush, and the Sunset of Linux Hype) Gold rush. Gold rush victims. Sound that it has nothing to do with open source? Read on. Here is the message from Linuxtoday forum about "absurdly rich" Eric Raymond" and VA Linux IPO:

Here is yet another interesting quote:

It scares me when people start saying they're rich when on paper it could be gone as quick as it came. Consider the fact that these overnight millionaires are really nothing but owners of a separate entity--the corporation. Now that corporation has to produce! There are many people that put money into it to make these people so called "rich". If it doesn't produce quickly (profits) the same people will become disenchanted and sell they're stock at discount to nothing. This could be extremely harmful for Linux. Unlike M$, which worked its way from obscurity to power marketing--Linux has done it the hard way. I worry whether this will corrupt those in the Linux community who have worked hard only to live a short reign of power before the whole market falls in! Consider that people are paying 3-4-5 hundred dollars per share with not even a clue of where $1 profit is going to come from. I suggest looking back to the great depression to see that an awful lot of people were hurt while only a few got rich. It's musical chairs--when the music stops who will be left standing--most of those silly enough to fall for the bazaar and the ridiculous. What will this do to Linux? It will give it a bad name. Instead, of IPO's working their way up in slow steady manner based on performance--we have the situation where I could take a spreadsheet and estimate whatever someone wants to hear and sell it as an IPO. Even Red Hat--what have they done anymore than anyone else? IPO's should be separated from any logically minded market and kept from the general public for at least a two year period. At this point, they would only be represented by their closely held owners. We could then see what they're going to do with their money and not someone elses. For those that have gone out on a limb to support this kind of marketing glitz, good luck! But like anyting else, if the home town team doesn't win the fans quit coming!
More power to companies like Corel who have already been there and done that. The rest are nothing but winners of a lottery but with a catch. How long can they promote blue sky? Hackers now over the control of new corporation are no longer strictly dealing with their first love. Only marketing will be able to promote their product and time will tell! I hope the general public has not been taken for ride. 8^(

All of this OSS wealth is going to be an interesting social experiment. Current valuations on Linux-related companies can be found at LWN Stock Page. I generally agree with Corel CEO Michael Cowpland who remarked that Red Hat should be valuated lower then Corel, but not in a sense that Corel is undervalued, but that RHAT is overvalued. Still RHAT probably will be able to preserve some positive difference with pre-IPO price($18) and despite losing market share to Mandrake and Corel on the desktop it still can benefit from name recognition and high-end server deals. I am not that sure about VA Linux($30 but for some it was $320). Compaq and IBM might eat VA Linux market share for lunch. This is not a good thing. Not for the investors, the market, or Linux.  As one Slashdot reader put it : " They don't actually do anything other than sell Linux boxes, right? Or is there something else they do that I'm missing? Looks to me like Linux is becoming far too much of a buzzword for its own good. Perhaps the reason it did so well is because VA Linux is the only Linux IPO recently to actually have the word "Linux" in the company name..."

Investment in Linux became a great sport and I'm sure will remain that way until the first serious bear market comes along, and then things will change in a hurry. I would like to repeat here an advice from one Slashdot posting "affection does not necessarily translate into a good investment.":

by dgb2n (bassett@NO.t-onlineSPAM.de) on Thursday January 20, @07:35AM EST (#30)
(User Info)

Once again, I feel obliged to post a warning about these Linux IPO stocks. As much as we may like a company like LinuxCare that contributes to the "Linux Community", that affection does not necessarily translate into a good investment.

Don't confuse buying their stock with furthering their cause. Once the shares of LinuxCare are sold to the large brokerage houses through the IPO process, the amount of money that LinuxCare receives is fixed. Sure, if the shareprice rises, it means profits for the original shareholders but the company doesn't have more money to pour back into into Linux development (except if they use their company stock as capital to make additional investments. i.e. AOL buying Netscape).

Look at some of the figures for this company. Their revenue for the first 9 months of 1999 was only $304K. They are now $7 Million in debt. Even if revenue grows 10X next year, their revenue will still be only $3MIL. Take a close look at the market capitalization before you buy. With revenues so low, you can't really justify the huge market caps of a Red Hat (17 Billion dollars on 16 Million in sales).

Look at a well established software company like Compuware that is heavy into providing services. Its market cap is $9BIL on just under $2BIL in sales. Compuware is growing at 35% per year. Sure, there will be growth in Linux. Huge growth. But consider how much you might be paying for so little revenue let alone actually showing a profit.

This isn't a technical question or a moral one.
Linux activism can only go so far.

Dave

General

"Looks like a lot of you folks that bought high may never see your $$$."

Linux Today - CNET News.com Cowpland steps down from top spot at troubled Corel

Gartner analyst Chris Le Tocq blames Cowpland for Corel's many missteps in the marketplace. "All in all, it's been Cowpland's company, and maybe it's time for him to move on," he said. Le Tocq added the company is a good acquisition candidate for a business that wants to take Corel's software and rent it over the Web. "The company that acquires Corel could use the expertise within Corel and use it to build Web-based services," he said."

"At least one analyst said Cowpland's biggest mistake was his decision to invest all the company's efforts on the emerging desktop Linux market. "Corel essentially bought the farm with moving applications to Linux, and the Linux desktop marketplace has not appeared," Le Tocq said. "And who knows if it will ever get on stage. The Linux desktop market is a non-starter in the United States."

Slashdot RemarQ.com Shutting Down

 "You mean I can no longer expect to enjoy a grossly overinflated market cap for my unprofitable, $200-million-in-debt Internet start-up? That's not fair!" -- Onion

Linux Today - Linux Magazine Investing For All the Wrong Reasons

It's fun to think about the fact that the stock market, if for ever so fleeting a moment, believes that businesses fundamentally based on Linux and open source are worth billions of dollars. Maybe you met a Red Hat employee at a conference or LUG meeting who you're certain is a paper millionaire. You like to keep informal tabs on his wealth so you can congratulate or needle him, depending on how things are going. Or maybe you just get a kick out of knowing the up-to-the-minute market cap on RHAT or LNUX or CALD or COBT.

For the most extreme example, of course, check LNUX, or VA Linux if you don't read ticker talk. VA sold shares to IPO participants for $30 each. The very first third-party trade (shares changing hands from an IPO participant to someone else) was for $299 a share. Who feels dumber than that guy? The poor slob whose order shortly thereafter priced out at $320 apiece. Times have changed: LNUX even briefly traded below its IPO price in recent months. I sincerely hope that the people who made those ridiculously overpriced purchases were thinking with their brains and not their hearts, but unfortunately I suspect that an awful lot of Linux hearts have been losing money the past few months.

"But unless you plan to acquire enough stock to plop yourself on the board of directors, don't waste your time investing in stock to support technology. Remember, on any given day a massive financial institution could buy up millions upon millions of dollars worth of a stock to put in a mutual fund or pension plan. And yes, such major trades cause short-term spikes or dips. But the long-term meaning of stock value is set by just that-the long-term. Trying to jigger a stock price is a losing proposition unless you're backed by Gordon Gekko. If you don't believe me, consider a sad tale from not so long ago."

vnunet.com (Internet) How stable is that dotcom

Recent calculations by Fletcher Advisory for PricewaterhouseCoopers found that seven out of 28 internet companies floated on London's stock exchanges would run out of money within six months, unless they received more backing from investors. The researcher divided the amount of cash on the company's most recently published balance sheet by its losses - operating costs minus gross profits. The time until burn-out averaged 15 months.

Anthony Miller, an analyst with Richard Holway, said the idea that dotcom firms are risky should not be news. "We've been saying this for the last couple of years," he said. "We did not see how you can spend more than you're earning but stay in business. It's almost like pyramid selling - a circle of talking the company up, the share price going up, and people taking profits. And then share traders take fright, as has happened recently."

And, of course, conventional firms are less likely to go bust - they are businesses which exist to make profits, not just bubbly share prices. "The companies with the best chance of survival are the bricks and mortar companies moving into the dotcom world," said Miller.

... ... ...

You can spot the warning signs of risky ventures. "A company would ring alarm bells if it hasn't looked at its target market. If we can list five competitors off the top of our heads, we ask what can they do that is different," he said.

"Often there's a degree of confidentiality surrounding venture capitalists," he added, but this should only apply to the identity of the funder. Even if they can't say who the venture capitalist is, they should have a date.

... ... ...

It also makes sense to avoid business-to-consumer startups. Miller said business-to-business sites are more secure, but there are even better options elsewhere. "The companies that we are backing are the ones that provide services for the dotcoms - building the websites and handling the transactions," he said. "These are the ones that probably have more to gain. If all these dotcoms are determined to spend themselves out of existence, perhaps you should be one of the ones accepting the cash, rather than handing it over."

AFR Information - Linux down as Microsoft holds up

...Now, the optimism has cooled as Linux companies lose money and Microsoft holds onto market share, even as the US Government considers a two-way split of the world's largest software maker.

"Linux has lost its allure with investors," said Mr Walter Winnitzki, an analyst at Chase H&Q. "It needs to regain that allure with good solid earnings."

Investors initially saw Linux as a major development in software...

...Microsoft's battle with the Justice Department initially encouraged Linux investors. The Government has proposed dividing the software powerhouse into a company that makes the dominant Windows operating system and another that makes applications including spreadsheets and word processors.

Any split would divide Microsoft's management team, duplicate costs and hinder the new companies' ability to develop and sell applications, analysts have said. Its shares have fallen 47 per cent this year.

Microsoft has held fast to its market share, though, and investors started backing away from Linux stocks at the start of this year. Windows captured 87 per cent of the market for personal computer operating systems in 1999, compared with 86 per cent in 1998, according to researcher IDC.

Linux doubled its slice of the market to almost 4 per cent last year, but most of its new users were not former Windows customers.

Mr Dan Kusnetzky, IDC's vice-president of systems software research, said many Linux consumers were "computer hobbyists" who were not interested in running the desktop personal computer applications that are Microsoft's stronghold. "We're not seeing Microsoft lose market share to Linux," he said.

Investors grew concerned about how Linux companies would make money on software that is available free. "It was more hype than reality," said Mr Christopher Bruner, of National City Investment Management Corp. "Making money is difficult," he said.

[May 28, 2000] Linux Magazine Web Exclusive Straight Outta Compton Investing For All the Wrong Reasons

Stock-price watching is fast replacing baseball as the American national pastime, but years before cab drivers and fry cooks were discussing the Nasdaq, computer geeks had their eyes locked in on the stock of their favorite companies. This is how it happens: Every so often, some geek becomes an amateur investment advisor and tells his fellow geeks that the best way to support their favorite company, in good times or bad, is to buy stock in Company X. This is why any decent Macintosh site will tell you how AAPL did today.

The desire to effect technology companies through investment runs deep. Hacker News Network's Dr. Z, for example, recommends that you buy up the stock of your least-favorite Big Business, just to have the satisfaction of heckling the corporate officers at their annual stockholder's meeting. (If this sort of expensive fun appeals to you, that's your prerogative.)

Alternative OS fans are no different. On the eve of the Red Hat IPO, one Slashdotter announced his intention to place an IPO-day order for RHAT, "because I am a believer in Linux and Red Hat." Another Slashdot poster related how he bought Be, Inc. stock (yes, it's not a Linux company, indulge me) on the strength of "I had tried out BeOS a while back and really really liked it, so I plunked down the majority of my money into it."

Delusions of Grandeur

Yes, it's true, on some levels stock price does matter to a company's well-being. Generally speaking, a company with a hot stock has more financial options and greater flexibility than a company with its ticker in the toilet. And yes, the fate of a company or group of companies can have a personal and professional impact on its customers and adherents.

But unless you plan to acquire enough stock to plop yourself on the board of directors, don't waste your time investing in stock to support technology. Remember, on any given day a massive financial institution could buy up millions upon millions of dollars worth of a stock to put in a mutual fund or pension plan. And yes, such major trades cause short-term spikes or dips. But the long-term meaning of stock value is set by just that-the long-term. Trying to jigger a stock price is a losing proposition unless you're backed by Gordon Gekko. If you don?t believe me, consider a sad tale from not so long ago.

The bottom line is that companies need revenue, not stock trades. If you want to make a difference, go buy something.

Back in the early '90s, Amiga users frittered and fretted over Commodore's stock price, which had been declining for some time. The company had mounting debts and couldn't execute on new products -- and when it did, they were overpriced and underpowered. So someone got the terrific idea to coordinate a bunch of Amiga users to buy Commodore stock on a particular day, to try to blow a little wind into the sails of the company.

The stock did close higher following this grass-roots buy-in, and the people involved claimed victory. Not that it mattered. In April 1994, Commodore went bankrupt and the rank-and-file common shareholders (including our would-be heroes) were completely out of luck. Their holdings were worthless.

Of course, if Commodore had somehow pulled off a spectacular turnaround, the makeshift investment club would have looked like a stroke of genius because the stock they had bought for peanuts would have been worth gobs of money. That wouldn't have made their effort a success, just a well-timed investment. The ultimate fate of the company was completely unrelated to the grand gesture of well-meaning but misguided fans.

But I know why you do it. I know why, even if you don't own any Linux stock, you pull up the quotes every day to see how things are doing.

Invest With Your Head, Not Your Heart

It's fun to think about the fact that the stock market, if for ever so fleeting a moment, believes that businesses fundamentally based on Linux and open source are worth billions of dollars. Maybe you met a Red Hat employee at a conference or LUG meeting who you're certain is a paper millionaire. You like to keep informal tabs on his wealth so you can congratulate or needle him, depending on how things are going. Or maybe you just get a kick out of knowing the up-to-the-minute market cap on RHAT or LNUX or CALD or COBT.

For the most extreme example, of course, check LNUX, or VA Linux if you don't read ticker talk. VA sold shares to IPO participants for $30 each. The very first third-party trade (shares changing hands from an IPO participant to someone else) was for $299 a share. Who feels dumber than that guy? The poor slob whose order shortly thereafter priced out at $320 apiece. Times have changed: LNUX even briefly traded below its IPO price in recent months. I sincerely hope that the people who made those ridiculously overpriced purchases were thinking with their brains and not their hearts, but unfortunately I suspect that an awful lot of Linux hearts have been losing money the past few months.

So please. Do yourself a favor. Don't buy stock in a Linux firm for the sake of the company, the operating system, the company's merger target, the open source movement, or the community. Buy it for yourself, or don't buy it at all. The bottom line is that companies need revenue, not stock trades. If you want to make a difference, go buy something.

[May 18, 2000] Linuxtoday.com.au - Article - What Now Corel

It's time to ask some serious questions about the future of Corel. In February the line put out by Corel's in-house propaganda department was that the proposed merger with Inprise (the developer formerly known as Borland) would create 'a Linux powerhouse'.

Now the deal is scrapped does that mean Corel is finished?

Only weeks ago Corel was saying the completion of the deal was 'critical to the company's continued operation'. In an April 19th statement Corel announced that the corporation was only months away from running out of cash unless the merger.

Forget the corporate spin about 'synergy', the real reason Corel wanted Inprise was to get its hands on the US$200 million stuffed under Inprise's mattress. Any technology considerations were only secondary.

Although the two companies say they terminated the deal by 'mutual agreement' it's not hard to see why the merger failed. It all comes down to cold, hard dollars. At the time the deal was originally proposed, Corel was set to pay the equivalent of US$1 billion in stock for Inprise. By the beginning of May the plummet in Corel's share price meant the effective buy price was below $400 million - that's considerably less than a broken up Inprise would fetch on the market.

Not surprisingly Inprise's share price rose on the news. Here we have a company with a solid product range and a long, somewhat rocky history that finally seems to be getting back on its feet.

The last thing Inprise needs at this stage is to hitch itself to a three-time loser. Corel is the original one-hit wonder. After years of trying, the company still hasn't come up with anything better than its original Corel Draw program. And that's no longer a market leader.

This is an outfit that has, over the years, released one horrendous flop after another. Hellfire, Corel's dumbmeisters even managed to turn the brilliant Wordperfect into an also-ran - though admittedly Novell did a lot of the preparation for them.

You know the saddest thing about this is that Corel should be on a roll now that the US government has tamed the Microsoft beast. But frankly, it is because Corel and some of the other PC applications companies like it are so stupendously badly managed that Microsoft built a monopoly in the first place.

Oh and one more thing. Forget about that so-called Linux Powerhouse nonsense. It's just hot air. Between them Inprise and Corel derive less than 5% of their revenues from Linux related products.

High Technology - Ottawa Citizen Online Red Hat boss looks through rose-colored glasses (interview with Robert Young).

Q: How has the Linux stock boom changed the industry? (In February, Mr. Young and his wife sold Red Hat stock worth $30 million.)

A: This isn't the business I knew when we used to run it out of our homes. We didn't come to a trade show to spend money; we came to sell boxes over the counter in order to get the money to pay hotel bills at the local Holiday Inn, if we were lucky.

Q: Red Hat and other Linux company stocks have plunged almost 80 per cent since December. What do you tell people who bought Red Hat at high prices?

A: Keep in mind that, in the short term, stock prices are being driven by day traders. I believe there is an efficient stock market which holds true in the long term, but not in the short term.

The message I give to our shareholders is that our goal is to build a great technology company ... and we figured it would take us 20 years. The IPO was simply a tactical step on that road. So whenever someone asks me about the share price, I basically say check back with me in five years. I'll take responsibility for the stock price in five years; I can't take responsibility for daily fluctuations.

Q: There are a lot of Linux companies now. What are the differences?

A: There are two big myths about the business, and the first is there is a single Linux operating system. Linux is a 16-megabyte kernel of the 600-megabyte operating systems that companies like Corel and Red Hat make. Linux might be the engine of your car, but if you plunk an engine in your driveway, you're not going to drive your kids to school.

Our job is making people understand this revolution is about open-source software and it is not about Linux at all. Linux is simply the poster boy for this movement. The other myth is that Linux is being written by 18-year-olds in their basements when actually most of it is being written by professional engineering teams.

Q: What is your formula?

A: We have been consistent all along that our competition is not other open-source vendors. Our goal has never been to be a big fish in a small pond. So my job as chairman is not worrying about the size of the Red Hat fish at all but exclusively is focused on the size of the pond.

You talk to me, to Mike Cowpland (of Corel), to Larry Augustin (of VA Linux) and you will get slightly different views of the future. But only one of us is right. In fact, maybe none of us is right and the future may be something else again. The guys who succeed are the guys who are going to figure this out faster.

Q: Several Linux companies including Corel are betting on products for the desktop computer market.

A: We think the value in future computing is on the server side. The desktop is 1980s technology. It is sort of a brain-dead operating system based on the premise that all computers had to be inexpensive and provide low performance. The value is on the server side because it will drive everything from the Palm Pilot to the wireless Internet.

[Apr. 20, 2000] How VA Linux, once a soaring IPO, crashed back to Earth (4-19-2000) by Scott Herhold

if  you need a poster child for the volatility of the market this year, you might choose VA Linux Systems Inc. (LNUX), the Sunnyvale company that produces workstations and servers embedded with the open-source code first developed by Linus Torvalds.

VA Linux Systems' great success might have been its greatest curse. Four months ago, it was labeled the most successful IPO in history, soaring 700 percent above its offering price of $30. Its first-day close was $239.25.

The stock has slipped relentlessly since, finishing at $38 Wednesday after dipping below its IPO price Friday. A child prodigy has become an ordinary teenager. A Mozart suddenly is churning out Muzak.

What happened? Well, it's useful to begin by pointing out what didn't happen: There were no debilitating changes at VA Linux Systems. The company reported encouraging revenue numbers in its last quarter, $20 million, a huge increase over the $3 million in the quarter a year before. And it made the kind of acquisitions that analysts stand to applaud.

For that matter, VA Linux Systems, which also offers services and consulting, can boast of great lineage. Its CEO, Larry Augustin, was once a partner with Jerry Yang and David Filo in organizing a Web site list that became Yahoo (YHOO). And he's assembled a first-class team, including vice president of engineering Gregg Zehr, an Apple veteran, and chief technology officer Leonard Zubkoff, a former member of the inner circle at Oracle Corp.

None of those credentials could stop it from becoming the most prominent victim of the flavor-of-the month mentality that now rules the market. Like three other Linux companies that recently went public, Red Hat Inc. (RHAT) of Durham, N.C.; Caldera Systems Inc. (CALD) of Orem, Utah; and Andover.net (ANDN) of Acton, Mass., it has fallen faster than gravity would dictate.

``The reason they were valued so highly was, in part, speculation,'' says Andy Rappaport, a general partner with August Capital, a venture firm in Menlo Park. ``I think the investment thesis was that if Microsoft is worth $500 billion, then Linux should be worth 10 percent of that.''

Now I'm tempted to pour scorn on investors who thought VA Linux Systems was a good buy at $240, or that Red Hat made sense at a split-adjusted $143. After all, last quarter, VA Linux lost $11.5 million. And lest anyone forget, the Linux companies face a wounded but still fearsome competitor in Microsoft.

But my scorn is tempered by the nagging feeling that something less appetizing is at work. In an era when an IPO has become an essential marketing event, a whole cadre of forces -- investment bankers, VCs, entrepreneurs and yes, the press -- is fanning that speculation. Those forces find an eager audience in a public that is turning away from mutual funds in droves to invest by themselves online.

Consider this whole drama from the standpoint of the established players. What looks like something supremely irrational -- how can VA Linux Systems be worth $10 billion in December and $1.6 billion in April? -- suddenly begins to assume a vulgar rationality.

Remember, the fund managers and institutional buyers who participated in the IPO got the stock at $30. And they were able to ``flip'' it for a big profit on the first day. Because supply was kept low -- only 4.4 million shares were allowed to float initially -- the demand insured a steep opening price. The stock cost $299 per share the first time the public could buy it. And many did, simply on the belief that it would go higher.

For that matter, at least some of the institutional players and investment bankers were in a position to sell the stock short, which means they could make money as the shares declined in value. With more information about who was buying and who intended to flip, they could make better judgments than the average investor. The identity of short-sellers isn't public, but the latest reports show that 1.6 million shares of LNUX are being held in a short position.

Given the market's short attention span and sales from the flippers, it was almost inevitable that the money-losing Linux companies would come back to earth. The essential thesis that the Linux companies were worth a percentage of Microsoft was flawed. And even superb marketeers like Red Hat's chairman, Robert Young, faded into the noise.

``They (the Linux companies) may end up being a viable alternative to MS-DOS,'' says author Michael Perkins, who co-wrote the ``Internet Bubble,'' a book that forecast the deflation of many Internet stocks. ``But it was another one of those momentum vehicles that people jumped on.''

Naturally, the decline in stock price has an impact on employee morale. And it may make acquisitions, like VA Linux's announced plan to acquire Andover.net, a bit thornier. But fundamentally, most of the VA Linux people aren't hurting. CEO Augustin is worth $250 million on paper instead of $2 billion. OK, maybe he can't afford a pro basketball team. But he's hardly in a bread line.

For that matter, VA Linux has taken a smart approach toward keeping morale on an even keel. ``The things we focus on internally are really on helping our employees understand what the company's about, educating them and focusing on our execution as a company,'' VA Linux's CFO, Todd Schull, told me. ``Those are the things we can control.''

Even the company's investors, which in this case include Sequoia Capital (9 million shares) and Intel Corp. (3.2 million shares), can't be called damaged. Remember, they bought their shares cheap (in Sequoia's case, for 46 cents apiece initially). By my math, Sequoia has still made nearly a 100-fold return on its initial investment.

As for the press, well, we've had a very good story to cover. Few things are better than a David and Goliath tale, particularly when much of Silicon Valley roots for David to slay Goliath. So David isn't quite as fearsome as advertised. So he left his slingshot at home. All the better. The story might have a sequel.

In fact, the only people who don't benefit from this cozy arrangement were the investors who bought VA Linux during its first four months on the market. And as I say, it's hard ordinarily to feel that sorry for people who swallow the hype. I just wish there wasn't such a cottage industry producing it.

[Apr 18, 2000] Forbes: Wall Street Sours on Linux

"Easy come, easy go. That's the story of Linux stocks, which were Wall Street darlings last year but have been absolute poison ever since."

[Apr. 16, 2000] End of Linux gold Rush ?

Linux seller Caldera Systems, which debuted at $14 a share in its IPO less than a month ago, closed regular trading today at $9.56, down 11 percent. Andover.Net, the collection of Linux and programming Web sites that launched in December at $18 a share, closed at $10.13, down nearly a third. And VA Linux Systems, the Linux computer maker whose $30 IPO price soared a record 697 percent to close at $239.25 on its opening day, today sank to $28.94, a drop of 19 percent.

Quote Snapshot RHAT 24.12 -3.88 CALD 9.56 -1.19 ANDN 10.12 -4.88 LNUX 28.94 -6.88 CBT 25.56 -1.62 Enter symbol: ·  Symbol Lookup Quotes delayed 20+ minutes

The market hammered all technology stocks this week, but it's not unusual for prices to settle after an IPO spike. The Linux stock slide has been going on for months. Still, the continuing decline will likely force investors to revisit the ongoing debate surrounding Linux: How does one make money from software that can be obtained for free? Other Linux companies aren't faring well.

Red Hat, the purveyor of Linux software and services, closed at $24.13, down 13 percent for the day. Although today's price bests Red Hat's split-adjusted $7 IPO price, the stock was trading near $80 last month.

Even Cobalt Networks, which builds special-purpose Linux servers that are a prominent part of the booming "server appliance" trend, has seen better days. After a December IPO--in which its share price was set at $22 and then rose to $128.13 on opening day--it plunged 23 percent to $41.50 today.

Linux Magazine January 2000 TAKE THE MONEY AND RUN (RELIABLY) Venture Capital Prospecting in Open Source's Wild Frontier

Paul Vixie, CEO of Vixie Enterprises, says his company has had better experiences with individual investors than with venture capitalists. "The VCs all want to hear a big story," he said. "They want to hear about paradigm shifts and about how you're going to be the next Netscape or Microsoft. Then they want to replace your management team and want an exclusive on subsequent funding rounds. And they want to bring in their cronies as managers and co-investors -- all without ever understanding a single word you've told them except 'we're going to be bigger than Netscape.'"

Vixie says venture capitalists have their place only after a company is large enough to manage the relationship with them. "Every single VC I've ever talked to wants to be more than just money, but only one so far actually has anything to offer except money."

Slashdot Articles Linuxcare Business Shuffle (UPDATED)

[Feb 20, 2000] The New York Observer The Latest Rip-offs From Dot-Com Land Include Juno, Etoys by Christopher Byron

The great thing about Wall Street in a bull market is the sheer inventiveness of the place. No matter how troubled a company is—or how bleak its future looks to be—you can always count on the investment banks of Wall Street to keep dreaming up new ways to put a fresh dusting of rouge on the face of the corpse, hawk more of its stock in the market and pocket the fees. This week: a roundup of ripoffs from dot-com land—two from New York (Juno Online Services Inc. and Ivillage Inc.) and three from out of town (Etoys Inc., VA Linux Systems Inc. and Andover.net Inc.).

Like innumerable other Internet companies, these five are all new to the market as publicly traded companies. Yet, thanks to the helpful guidance of their investment bankers, they’re learning to play the Wall Street money game. In the world of the new paradigm, it’s a game that boils down to three simple steps: Raise as much money as you can, spend it as fast as you can, then repeat steps one and two as many times as you can get away with it.

Incredibly, this sort of financial promiscuity is now regarded among dot-com investors as evidence of managerial prowess, even though the companies keep burning through their equity capital, and corporate insiders cash out of their shares soon after a public market for them exists...

...One of the most cynical deals recently involves the merger of two software companies trying to cash in on the Linux operating system craze: Andover.net Inc. of Acton, Mass., and VA Linux Systems Inc. of Sunnyvale, Calif.—which went public within 24 hours of each other back in early December. Less than eight weeks later, on Feb. 3, the two companies announced a stock-for-stock merger in which the California company has agreed to acquire the Massachusetts crowd for about 6 million shares of VA Linux and $60 million in cash.

The cynicism in the transaction is not simply that the deal took place so shockingly soon after the two companies wrapped up their I.P.O.’s, but that the transaction included what amounted to a legalized bribe on the part of the VA Linux bunch to get the Andover.net crowd to accept the offer.

The deal means that the $60 million in cash from VA Linux will go directly to Andover.net’s shareholders, at $3.81 per share, in effect handing over the same amount of money Andover.net raised in the I.P.O. only weeks earlier. Prior to the I.P.O., the company’s insiders had only paid a grand total of $15.7 million in cash into the company. Now they are being handed back $60 million as compensation. What a deal.

As for investors in VA Linux, they are getting hosed. The company’s stock was priced in the I.P.O. at $30 per share, but opened for trading at $299 and instantly shot to $320, then collapsed like many of the others and eight weeks later is now selling for $110. Faced with 39.7 million total shares outstanding already—of which only 4.4 million are held by the general public—investors in the stock can now look forward to the imminent registration of 4 million more shares by the company, which will doubtless come pouring into the market soon thereafter, thanks to the Andover.net deal.

In other words, the only really valuable asset Andover.net ever had—its cash from the I.P.O.—was creamed off by the company’s insiders almost the very instant they got their hands on it, leaving VA Linux’s shareholders to face a 100 percent increase in the float of their own stock for the privilege of winding up with the worthless trash that the Andover.net bunch dumped at the very first opportunity...

...Bottom line for these companies and the countless others like them? Nothing is ever really free in life—even the money that the companies of dot-com land have been harvesting from Wall Street by simply printing up stock and selling it to the public. In time, too much of anything will lower its price, and that goes doubly so for companies that are burning their own equity simply to keep warm.

[Feb 8, 2000] Et Tu, Slashdot

Last week VA Linux announced that it was acquiring Andover.net, the publicly traded company that owns, among others properties, Slashdot. The reaction from many in the geek community was, in my mind, bewildering. Some wished the new company luck, while others commented on the savvy of the merger. Jon Katz, Slashdot's self-appointed crusader against corporate misdeeds, has been silent on the matter.

Any unbiased appraisal of this merger, however, will yield one difficult but inescapable truth: The camaraderie and high spirits engendered by Linus and his band of programmers will soon be replaced by the same rancor and factiousness that permeates the rest of the capitalist world. And Slashdot, which is so highly revered by its readers and those who know its mission, will soon lose its trust, reputation, and standing.

It was all fine and good, especially since there was no need for Slashdot's original goal to change; it could continue to serve the community as best it could. As a content site, the better its information, the happier its readers. And happy readers mean return visits, which in turn lead to advertising revenue.

But this simple equation (good content = good money) no longer applies, because Slashdot has ceased to be a part of an over-valued content company and now belongs to the content arm of a ridiculously over-valued software company. At the time of this writing, VA Linux had a market capitalization of about US$5 billion. To justify that valuation, VA will have to compete effectively against some formidable competition: Dell, Compaq, HP, and others are trying to get a piece of the growing Linux market. More important, companies with open-source credentials, including Red Hat, are in direct competition with VA.

What will VA do to keep its stock price high and its CEO, board of directors, and stock holders happy? It'll market, innovate, and compete as hard as it can. And in the end, VA's success may very well be come at the expense (or eventual demise) of companies like Red Hat.

Remember that Red Hat did its best to reward Linux programmers with bargain stock prior to its IPO. But the spirit behind that move, the same spirit that draws the Slashdot faithful, must now be ignored. After all, there's a fortune at stake. If the managers at VA fail to compete effectively against all rivals, stock holders will rightly demand they be fired and replaced by people deemed capable.

Eventually, factions led by stock holders will defend the products and actions of their favored companies. And this, I believe, will inevitably lead to a divide in the development community.

Given this survival-of-the-fittest environment, is there any way Slashdot can help but show extra favor to VA and its products? Yes, the site is largely dedicated to discussion, but remember that someone (someone with potentially lucrative stock options) chooses the topics for discussion. So what will wind up on the Slashdot frontdoor: the flawed feature from VA or the slightly better version from Red Hat? Even if the VA implementation is superior, will the readers be able to continue to trust the motives driving the site's editors?

For content sites (like the one you're reading right now), credibility is everything. Webmonkey is owned by Lycos, and our overlords have desires. They wish for you, our readers, to search the Web using HotBot, set up your Web site using Tripod, and buy trinkets using LycoShop. Thankfully, these services do not conflict with our core mission: providing information for Web developers.

If we were owned by, say, Microsoft, our readership might suspect cronyism in the conclusions drawn in an article like Server-Side Scripting Shootout or the latest coverage of Mozilla. Moreover, I doubt Redmond executives would be thrilled with the situation that now exists on Webmonkey, where there are two PHP articles for every one that covers ASP.

As hard-core capitalism drives the future of an increasing number of community-based sites and companies, this is a sad time for the Linux faithful. If they're lucky, they at least own some stock in the company that will come out on top.

Slashdot discussion: Negative Webmonkey Editorial on Andover-VA Merger

Follow the money (Score:1) by RobotWisdom on Wednesday February 09, @08:38AM EST (#99) (User Info) http://www.robotwisdom.com

"I wonder if Rob and Co will now disclose their stock holdings in the companies they report on (like most respectable journalists)." To me this seems like the critical question-- if a negative story about VA will cost Rob&c money, then we have to expect they'll spin it in the other direction. These lines: "I almost quit when I heard about the merger... Since then I have been personally reassured by Larry Augustin..." also give me pause, because *persuasion* is what makes capitalism run, and there's no way to draw a line between a little 'safe' persuasion and a whole lot of utter-crap persuasion.

Possible Meaning of this (Score:4, Insightful) by Dicky (slash@vmlinuz.org) on Wednesday February 09, @06:51AM EST (#24) (User Info) http://www.vmlinuz.org

<ADVOCATE STYLE=DEVIL> So, this is a negative post about VA & Andover. And it's posted with a very obvious piece of editorialising which tells a very obvious story. VA get to add positive comment to their stories before they get posted. Do Redhat get the right to reply to stories in the headline? Do Penguin get that right? I doubt it. Alternatively, this is a slightly more subtle attempt to avoid discussion on this subject. By making the headline a mini-feature in itself, a large portion of the discussion will be about Roblimo's comments, rather than about the original story. They're trying to manipulate us!. </ADVOCATE> My actual opinion on this? I think the quality of Slashdot has declined somewhat since I first started reading it, which was quite a long time before anyone had heard of Andover. I miss things like the war against using www.slashdot.org instead of slashdot.org aka TDwww(TMS). On the other hand, I have also changed a lot in the time since I started reading here, so it is just as possible that the 'problem' is with me, not Slashdot. I'm glad to see the guys who put this thing together get their just rewards. I think that the code is finally open, VA are a well-known and well-respected company in the community, and there is certainly no more need to worry now than there was about Andover, and they don't seem to have (directly at least) caused any problems. This is my normal sig - it just happens to fit this posting well: Paranoia isn't an infectious condition, it's a way of life

but you see that is the problem (Score:4, Insightful) by Hobbex (i_read_replies_to_my_posts) on Wednesday February 09, @07:02AM EST (#41) (User Info)

I'm posting this story, even though we've been over this ground before, primarily so that we don't get accused of bias by not posting it. You can't force yourself to be impartial, and in the end, if the /. article writers are always worrying about not seeming biased, it will be just as bad as if you blatently were. You can't post every article that is negative about VA, but whenever you don't, I can promise people will jump on you for it. Having a communal site like Slashdot owned by strong corporate interests is simply a bad idea, and I just don't think it can work out in the long run. There is an element of trust in the fact that community is willing to let a couple of people decide over what topics will be discussed here, and that trust is human, not corporate. I think the reason there is so much antagonism against Jon Katz here is that many of us feel he is abusing that trust, using Slashdot as a pulpit for his own preachings rather than choosing stories for us. Having Slashdot owned by Andover was one thing, because Andover was a web company based on the idea of selling banner ads, and therefore had the very clear of objective of getting as many readers to return here as often as possible. With VA it is a lot more fuzzy. VA obviously do not have banner adds as their main source of income, so they have other agendas for wanting to own (even if you keep claiming they have no control over) the backbones of the community. The relationship between the Slashdot community and VA Linux is somewhere between mutualistic and parasitic, and I share many peoples concern that it is leaning toward the latter. I guess it should come as a bucket of cold water to those who keep claiming that the influences of corporations and money will not harm the open source community, that they started by grabbing our favorite node for discussion right from our grasp... - We cannot reason ourselves out of our basic irrationality. All we can do is learn the art of being irrational in a reasonable way. - Huxley

Moderation... (Score:1) by javilon (javier.santosxNoSpam@Intel.com) on Wednesday February 09, @08:33AM EST (#96) (User Info)

Disclaimer: I don't think this will happen but... There are a number of clever and subtle ways to bias the discussion and some of them include the way you choose the people that will get the moderation points, without touching the editorial part of the news. Lets say that the administrator is interested in putting out more articles about "enterprise computing" (something VA could possibly be interested in doing, if they where unethical) as opposed to "civil rights disscusion": All you have to do is to change the algorithm that chooses moderators and make it give more points to people that did post on enterprise computing threads. This will mean that the next round of moderators will "probably" give more points to people talking about enterprise computing (generally that is what they would be interested in and good at because otherwise they wouldn't post to the enterprise threads) who in turn will come back to talk more often because the good posts get moderated up!. You do the opposite for the "Civil rights" type of guy, so he doesn't get a chance of doing moderation, and is less likely to be moderated up (or down, but this would only show to him that there is no interest on this threads). After some time of running this system you would have a site where there is a lot more talking about enterprise computing and the community would just think that _they_as_a_community_ stopped being interested in civil rights or whatever. It would be very dificult for anyone to be able to tell that the way moderators are chosen is twicked because the results are just probabilisticly leaning towards some spin, and this spin is coming from commentators, not from editorialists. VERY paranoic but there you go... Pirilon Pirilуn

Ode to Greed (Score:0) by Anonymous Coward on Wednesday February 09, @09:48AM EST (#137)

There once was a man from Andover Who asked Slashdot to bendover He bribed them it seems And fulfilled all their dreams But slashdot as we knew it is over

Malda is fat open source cat and that's the proble (Score:0) by Anonymous Coward on Wednesday February 09, @10:47AM EST (#168)

Open source and big bucks are pretty problematic mixture. I remember Bezroukov's paper about this and he suggested that open source is an academic community and like science should strive for independence and should not mix with big bucks. A good test would be to see how GNU will be treated on Slashdot.

Two Cents (Score:1) by Fezzik (fezzik.DONTSPAMME@rocketmail.com) on Wednesday February 09, @09:23AM EST (#125) (User Info) http://www.cs.jhu.edu/~fezzik

Two cents: 1) Obviously the article itself is rather hypocritical. As the author himself comes close to mentioning, the same is true of just about every content site. Witness that amazing article in Time magazine a while back where the author attempts to figure out who exactly he works for. 2) Regarding a "personal assurance" from the President of VA Linux: I think this misses the point. As the author mentions, it isn't about people any more, it's about stockholders. Nobody who works for VA Linux is in *any way in charge*. This is important to remember. As a public company, Slashdot and VA Linux are responsible to their shareholders - and that responsibility entails making money. The personal opinions or mores of anyone working for either company no longer matter, in a very real sense. That is why content sites often go the way of the commercial junk heap. The players tried to take the field. The marching band refused to yield...

Merger??? Wasn't it an acquisition????? (Score:0) by Anonymous Coward on Wednesday February 09, @09:28AM EST (#131)

Something that brings a slight smile to my face is the persistant use of the word "merger" by the Slashdot/Andover people, and the use of the word "acquisition" by everyone else (including VA Linux). It almost sounds like Slashdot is trying to put a spin on it like they are partnering with VA or something, to kind of keep it looking "impartial". VA *owns* Slashdot. There is no merger. Slashdot will continue to be a better-than-average news source. The "community" is going to have to look elsewhere for "community-ness" because "community" and big-business don't mix, whatever Slashdot or Andover or VA has to say. Look at various movements that started as a "community" and where they are now. Aren't the roots of the PC in a "community". Look at the PC industry now...

 

[Feb 7, 2000] Story The VC Explosion Don't Get Hit by the Shrapnel

...A PricewaterhouseCoopers Money Tree survey put venture capital funding at $9 billion for Q3 of '99. The bulk went to high tech. Click for more. Most analysts put the total VC raised in the first three quarters of 1999 at $21 billion (compared to $14 billion for all of '98). It seems everyone is jumping on the VC bandwagon. For instance:

• IBM recently announced a $500 million fund to work with VC firms to help Net startups with IT needs. Click for more.
• Andersen Consulting created a $1 billion VC fund for Web startup and new technologies. Click for more.
• Even the CIA has started a VC firm. Click for more.

Sounds great, all that money looking for a place to land. But watch out. There's too much money and too few good ideas. Here's what you need to know to avoid the pitfalls:

IF YOU ARE A VENTURE CAPITALIST
My good friend Rafe Needleman from Red Herring says you need to watch out for VUI -- venturing under the influence. Click for more. Symptoms include:

• Investing in a company with a bad (or no) business model
• Investing in an unoriginal business idea with no barriers to entry
• Investing in a particular category just because other VCs are doing it (think about all those pet e-tailers)

IF YOU ARE SEEKING VENTURE CAPITAL
The experts at Red Herring also have tips if you're looking for VC. Click for more.

• Keep it simple. VCs don't have much time. Forget 50-page biz plans. Think 20 slides in a PowerPoint presentation
• Narrow your targets. Limit your pitch to five or six firms culled from your personal and professional network. VCs are more apt to deal with someone who's referred. And do your homework. Know who the decision makers are
• Don't forget teamwork. Make sure the VC knows the strengths of your team. Why? Talented teams attract talent. Consider including key execs in investor meetings. Commitment and loyalty are also success indicators

FYI, you'll find more tips like these in Lawrence Aragon's regular column. Click for more.

Now hit the TalkBack button below and give me your venture capital thoughts. I'll post responses beneath this article. Or go to my Berst Alerts forum where a discussion is underway.

My advice: Unless you're an investment professional, take your $75 to Vegas. The odds are about the same.

PS: The AnchorDesk gang is hosting a discussion over at SmartPlanet this week. It'd be great to have you join us. Click for more.

[Feb 6, 2000] Companies - Live by Linux, die by Linux by David Einstein

Question: How can a stock trading at more than three times its asking price just two months after going public be a dog? Answer: When it belongs to VA Linux Systems.

The upstart computer maker set a record on Dec. 9, 1999, when its newly minted stock came out at $30 per share and closed at $239--a first-day gain of roughly 700%. Since then, however, the shares have slid downhill faster than Alberto Tomba in the giant slalom, falling to as low as $107.88 on Tuesday. On Wednesday, the stock surged $29 to $136.88 as the entire Linux sector rallied.

Ironically, what has brought VA Linux (nasdaq: LNUX) down to Earth (or as close to Earth as you get in today's tech market) appears to be the same thing that turbocharged its stock in the first place: the explosive popularity of Linux. A free operating system (OS) that's easy to use and reliable, Linux is being championed as a rival to giant Microsoft (nasdaq: MSFT) in the corporate world.

...VA Linux went public at a time when the market's obsession with Linux had reached a fever pitch, fueled by last summer's monster initial public offering by Red Hat Software (nasdaq: RHAT).

But investors weren't the only ones infatuated by Linux. Other computer makers were also starting to get free-OS religion. From Hewlett-Packard (nyse: HWP) to Compaq Computer (nyse: CPQ), they began to trot out systems optimized for Linux, and soon ever major PC maker had a Linux offering.

The extent of Linux-mania was apparent this week at the LinuxWorld trade show in New York, where the supercharged atmosphere was reminiscent of Windows shows in the early '90s. IBM (nyse: IBM) trumpeted thin-client Linux servers meant to run Internet applications. Dell Computer (nasdaq: DELL) unveiled new Linux-based notebook PCs. And Compaq and SGI (nyse: SGI) talked about Linux products and services that they hope will give them a foothold in the Linux market--and invigorate their stocks.

All the interest in Linux has been great for VA Linux financially, putting it in position to post more than $50 million in revenue in its first full year as a public company. But the flood of new competition has weighed heavily on the minds of investors and dragged down the company's stock. How, they ask, can VA Linux go up against industry giants providing the same basic technology, especially when companies like IBM can offer software they've converted to work on Linux?

"The question is what does VA Linux have that distinguishes them," says analyst Dan Kusnetzky at International Data Corp. "They have been competing on the strength that they do only Linux, and that gives them better focus and a better understanding of it. But it's really hard to say that VA Linux could even come close to the wealth of software that IBM can offer."

...However, with IBM, Compaq, SGI and others promoting their own services it's hard to see where the advantage lies for VA Linux. Moreover, the strategy of tying its flag to open source could prevent it from carving out a reputation as a mainstream company and tag it as a fringe player.

"VA Linux happened to go public at a time when investors felt they had to get on board because if they didn't they'd miss the Linux opportunity," says analyst Rob Enderle at Giga Information Group. "But since then, the company hasn't been all that visible. And part of keeping the stock price up is keeping yourself in the minds of investors and looking like one of the major competitors."...

[Feb 5, 2000] LinuxWorld Expo Recap

After VA's big IPO last year, their stock has been dropping from a high of 320 right after the IPO in December to a low of 105-1/2 last month. A market capitalization in the billions (between $5 and $15 billion, depending on when you looked at it) just doesn't make long-term sense for a company that had $30 million in sales last year. The trick is to take some of that extra money, and go buy someone (or something) that helps make you look bigger.

Andover can offer the first step for VA. Their purchase of slashdot.org and other web sites offers them a lot of web traffic and has made them well-known among Linux geeks. While there is little financial data available about them yet, in the fourth quarter of calendar year 1999 they had about $2 million in revenues and $15 million in losses. While this doesn't sound like a good buy, it makes sense because the Andover web sites will offer the traffic VA needs.

[Feb 3, 2000] Salon Technology The shape of open source to come -- it's about money; so editorial independence is of secondary importance for all players including Slashdot founders.

For me, as was no doubt the case with many of Slashdot's fans, the news, coming right in the thick of the LinuxWorld convention taking place in New York, was a bit of a shock. Wasn't VA Linux one of the companies we depend on Slashdot to cover? I immediately flashed back to the last time I had seen Slashdot founder Rob Malda, at last August's LinuxWorld in San Jose.

Back then, sitting on a bean-bag chair on the exhibition room floor, Malda looked like the proverbial cat who ate the canary. It wasn't just that Slashdot had been purchased a little over a month earlier by Andover.net, netting Malda a tasty bucket of cash and stock options.

[Feb 3, 2000] CNET.com - News - Enterprise Computing - Andover.Net deal makes some wealthy, others disappointed CmdTaco became rich; some investors not quite so...

"This is unprecedented," said Richard Peterson, an IPO analyst with Thomson Financial Securities Data. "That deal went public a couple months ago and already they're tossing in the towel.

"Usually an IPO is a long-term process where you build shareholder value. But they didn't give it enough time to put the foundation down on shareholder value."

Although Andover.Net's transformation from IPO to acquisition was quick, it's not the first time such a fast ascension has happened in the high-tech realm. Mede America, which hit the public markets last February, announced in April that Healtheon would purchase it.

The acquisition has created two classes of Andover.Net investors. Some will be bitter because they bought the stock near its high and are facing a loss (unless VA Linux shares rise dramatically). Others will reap a sweet reward because they bought the shares during the past few weeks in the $30 range--or because they got in with the company on the ground floor.

Under the terms of the deal, which is valued around $1 billion, each share of Andover.Net's common stock will be exchanged for $3.81 in cash and 0.397 a share of VA stock. Based on yesterday's closing price for VA Linux, that values Andover.Net's shares at $58.17; Andover.Net's shares jumped nearly 30 percent today to about $46.

Before the acquisition announcement, Andover.Net shares had lost roughly two-thirds of their value since their IPO last December.

The shares were sold to institutional investors and company insiders for $18. In their first day of public trading, they jumped to $63.38 and subsequently reached $90.

But since then, the stock has fallen steadily, closing yesterday at $36.

Bruce Twickler, Andover.Net's 53-year-old founder and chief executive, will see his 12.6 percent stake valued at $131 million. Based on his ownership stake and the $60 million in cash that VA Linux is paying, Twickler will receive $6.7 million in cash and the remainder in VA Linux shares.

...Although Green and Twickler are netting big returns, some individual shareholders who bought shares near their high feel they have been left holding the bag.

"Geeze! This...couldn't even get bought out for what it traded at the first week of the IPO," said one message posted on the Raging Bull Web site. "Looks like a lot of you folks that bought high may never see your $$$."

[Feb 3, 2000] ZDII Inter@ctive Investor  -- Slashdot changes hands again and became part of VA Linux. Andover.net owners will get $60 millions in cash. Creative control of Slashdot will remain where it always has been ;-)

Here's how officials detailed the deal on a conference call: Based on VA Linux's closing price of 137 Wednesday, Andover.net shareholders would get $3.81 in cash a share and .397 of VA Linux stock. The deal values Andover.net just above $54 a share. Andover.net shareholders will own 13 percent of VA Linux. Andover.net closed at 36 Wednesday. The final price will be determined when the deal closes in VA Linux's third quarter. The second quarter ended Jan. 31 for VA Linux.

Andover.net, which went public Dec. 8 just a day before VA Linux's record IPO, peaked at 90.

...On a conference call, CEO Larry Augustin said the deal creates "the Yahoo! for open source developers" with 70 million page views a month and additional revenue streams.

In a recent interview with ZDII, Augustin said VA Linux was providing the Linux community with new tools such as Source Forge, a database of open source tools. VA Linux already owns the Linux.com domain.

Augustin also said VA Linux, which primarily relies on hardware for its revenue, plans to expand its services portfolio to boost profit margins.

"This acquisition moves VA Linux forward on the path to being the biggest name in Linux and Open Source," said Augustin, in a statement.

Among the benefits highlighted by VA Linux, the company said it will accelerate services offering and consolidate its Web offerings into one portal. Andover.net and VA Linux operate the Linux.com, Sourceforge.net, and Themes.org, Slashdot.org and Freshmeat.net sites and account for almost two-thirds of Linux traffic.

Officials said the Andover.net acquisition would be accretive to earnings and revenue.

For the first quarter ending Oct. 29, sales were $14.8 million, seven times greater than sales in the same quarter of 1999. VA Linux lost $10 million in the first quarter.

[Jan 20, 2000] Slashdot:  LinuxCare goes the IPO way -- Linux commercial space became even more crowded.

Do NOT invest in this company (Score:5, Insightful)
by Jon Peterson (jon@ssssssnowdrift.org (remove extra esses)) on Thursday January 20, @05:42AM EST (#17)
(User Info) http://www.snowdrift.org

This is a flame. It's also sarcastic in parts.

This company is really little better than LinuxOne. It is attempting to get rich off the backs of OS programmers everywhere, and trade on the popularity of the Linux name.

In reality, all this company does is sell support and consultancy. Like about, oh 2000 other companies. Except they focus on Linux, which as we all know is a radically new OS with hardly any similarity to any other OS, so re-training people to be Linux consultants will be REALLY hard, and other companies will find it SOO hard to catch up. Also, Linux is frequently used in massive fault tolerant systems where you really need expert help from the kind of people who understand the code at the lowest level. By contrast, Linux is hardly ever used for simple http and filesharing jobs where, frankly, you can get all the help you need in house or from contractors.

This company makes a loss TWENTY TIMES its REVENUE. That's like spending twenty pounds to make one pound. Bargain. I know, I'll ask LinuxCare to send me a cheque for 1000 quid, and I'll send one back for 100 quid, a deal apparently twice as good as the deals they are making now.*

72% of this company's revenue comes from three clients. That means that those clients hold an axe above the company's head. They are practically a division of their three main clients.

"If we fail to adequately promote and maintain our brand name or are unable to
continue using "Linux" as part of our brand name, our business may be adversely
affected.
"Ha ha ha well isn't that topical. Sorry, couldn't resist. Let's defend this company's use of 'Linux' because they are a really nice company that we all like.

". Mr. Linus Torvalds owns the trademark to "Linux" and has approved our use of the word Linux in our company
name as well as in the title of our websites.
"

Oh, that's all right then. So long as they have the Royal Warrant....

*My argument here argument is complete sophistry but it's fun so I put it in anyway.

In case you hadn't noticed, I REALLY AM NOT IMPRESSED by all these IPOs. And yes I'll bitch about it on Slashdot until they change the name from 'News for Nerds, Stuff that Matters' to 'Boring Industry Headlines and Capitalist Gossip and Speculation and Back Patting and Hype + some Interviews with My New Rich Friends and Reviews of Films and Books by my New Famous Friends.'

----- In jokes for outcasts

Be Careful (Score:4, Insightful)

by dgb2n (bassett@NO.t-onlineSPAM.de) on Thursday January 20, @07:35AM EST (#30)
(User Info)

Once again, I feel obliged to post a warning about these Linux IPO stocks. As much as we may like a company like LinuxCare that contributes to the "Linux Community", that affection does not necessarily translate into a good investment.

Don't confuse buying their stock with furthering their cause. Once the shares of LinuxCare are sold to the large brokerage houses through the IPO process, the amount of money that LinuxCare receives is fixed. Sure, if the shareprice rises, it means profits for the original shareholders but the company doesn't have more money to pour back into into Linux development (except if they use their company stock as capital to make additional investments. i.e. AOL buying Netscape).

Look at some of the figures for this company. Their revenue for the first 9 months of 1999 was only $304K. They are now $7 Million in debt. Even if revenue grows 10X next year, their revenue will still be only $3MIL. Take a close look at the market capitalization before you buy. With revenues so low, you can't really justify the huge market caps of a Red Hat (17 Billion dollars on 16 Million in sales).

Look at a well established software company like Compuware that is heavy into providing services. Its market cap is $9BIL on just under $2BIL in sales. Compuware is growing at 35% per year. Sure, there will be growth in Linux. Huge growth. But consider how much you might be paying for so little revenue let alone actually showing a profit.

This isn't a technical question or a moral one.
Linux activism can only go so far.

Dave

How consultants make money. (Score:2) by Hobbex (hobbex@fragzone.se) on Thursday January 20, @08:32AM EST (#40) (User Info)

Here is a simple equation: revenue = employed consultants * hours * fee In the Wallstreet bull market, many companies that are grotesquely over valued (and yes, that does include two Linux companies) often have their market caps defended by the fact that they could see "network effects" or "explosive growth". For Linuxcare to end up being valued as highly as Redhat and VA are today however, there would have to be the expectation that soon they would have more Linux consultants onboard then their are Linux users today (ok, not quite, but still). Consultant companies see neither network effects or value increases of their holdings and products, all they can do to make more money is hire more employees. I think that is worth considering when investing in this company. - We cannot reason ourselves out of our basic irrationality. All we can do is learn the art of being irrational in a reasonable way. - Huxley

GPL can be proprietary! (Score:1) by nevets (srostedt AT stny DOT rr DOT com) on Thursday January 20, @09:02AM EST (#42) (User Info) http://home.stny.rr.com/rostedt

Frequent mention is made in the filing of Linuxcare's plans to deliver its services via the Internet. They seem to want to automate as much as possible, thus reducing their personnel needs. They count heavily on their information systems development to bring this about. To the extent that they are successful in this regard, they may encounter some criticism from the Linux community - support databases and associated systems are a competitive advantage only if they are kept proprietary. I'm sorry, but I'm sick of people asking for things for free (as in beer). Those that want the slashdot code, have really no right to it, unless you bought the software or was given it. As RMS has stated, the GPL applies only to distributed software. Now if Linux Care does not distribute the software for these databases and associated systems then they don't have to give it away or give the source away. Same goes for /. If you were not given the software then you don't need the source. It is /. being nice that they give it away. Yes you can make money with GPL. But you don't have to give everything away! You only give the rights and the source of those products that you distribute. And it has been made clear that companies are an entity that can protect its software that is used internally, and externally as an interface and not a product (Like slashdots web page generation utilities that are internal and used externally). So if you complain that LinuxCare doesn't give away its internal software, then tough. They don't have to. Steven Rostedt -- "The MaTux has you." with Bob McLaren's Neo Tux!

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Save your $$$ (Score:0) by Anonymous Coward on Thursday January 20, @12:16PM EST (#48)

Once upon a time, my daddy told me that I'd never make any money selling my time. He should know - he's a lawyer. The moral of that story is, LinuxCare will never make as much as money selling time as a firm that sells hardware, software or in the case of many other .com companies, hype.

10 to Watch Bob Young -- If 1999 was the year of Red Hat's honeymoon, then watch for flying pots and pans in 2000.

That's why Red Hat needs to put its version of Linux in as many boxes as possible, then tout its Web site as an ad-driven service center. With revenue from PCs and servers scant so far, the company has its eye on non-PC devices.

"Our big-picture model is not to convince 400 million PC users to unplug Windows or Mac OS and install Red Hat Linux," says Young. "It's to help build appliances for the other 6 billion people who don't want to own a PC."

Easier said than done. This year, Red Hat can't count on the luxury of playing grassroots underdog to Microsoft (MSFT) . And expect established Unix server stalwarts, led by Sun (SUNW) Microsystems, to fight back as well, even as they align with Linux.

There's also dissent from within. Some voices in the Linux community wonder whether Red Hat's growing presence threatens Linux's health.

... ... ...

Factor in the investor hordes who've gobbled up anything Linux-related. If 2000 revenues don't climb well beyond the two previous quarters – $4.4 million and $5.4 million, with a most recent loss of $3.6 million – traders could get spooked. The company expects significant losses at least through February 2001, according to its latest financial filings.

Young says of Microsoft: "The reason it lives up to the hype is that it delivers on the promises." Now Red Hat must follow suit.

Redherring.com - Is Corel building a Linux house of cards - 01-15-00

Investors are impressed with Corel's (Nasdaq: CORL) continued push into the Linux market through startup investments. A cursory glance gives some the feeling that Corel is building a strong Linux business.

But the truth is that the four Linux companies Corel has invested in are long shots. Taken together, the investments offer little hope of nudging Corel toward profitability.

Corel has been hurting financially for some time. It lost money in all but three of its last ten quarters. Its fortunes appeared to be turning when it posted profits in its past two quarters, but it preannounced that it will lose about $9 million, or 14 cents per share, on sales of $61 million in its fourth quarter ended November 30.

Corel and its investors appear to be banking on the company's Linux strategy. This week Corel said it will acquire up to a 30 percent stake in Newlix, a server-software startup whose products use the Linux OS. It did not disclose the amount of the investment.

While Corel's money may give the eight-person Newlix some validation, the startup will be hard-pressed to build a big business. Instead, the fledgling company will battle a crowded market of competitors with finished products and stronger backers.

SMALL SERVERS, BIG MARKET
Newlix, derived from "New Linux," makes office-server software for small businesses. The company's software is designed to run on servers using Intel's (Nasdaq: INTC) x86 chip architecture and will be licensed to hardware makers and application service providers (ASPs). The software, Newlix Omega, provides e-mail, Web access, firewall protection, and other services to networked computers in a small office.

The good news: Newlix will find there's plenty of opportunity in this market. Pu Xiang, an analyst with Gartner Group Dataquest, says the all-in-one server market for small businesses hit $56 million last year and looks to climb to $1.1 billion by 2003. "This is really a nascent market and the market is just getting educated. Many small businesses aren't aware that such products exist," Ms. Xiang says. She adds that all-in-one server appliances offer small businesses easy access to