November 16, 1999 2:10 PM PST

Linux server firm eSoft rockets on Intel stake

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LAS VEGAS--Intel has invested in eSoft, a maker of Linux-based servers for small businesses, the chip giant's fourth Linux investment.

The announcement at Comdex here shot eSoft's stock up more than double in trading. The stock rose 9.25 to 17.38, up 113.85 percent, an all-time high since the company began public trading in 1998.

The amount of the investment wasn't disclosed. Under a deal with Intel also announced today, Intel will help the company develop software for Linux servers designed to be used on the Internet.

"We are confident this support will enable eSoft to accelerate our future research, development and business expansion activities," eSoft Chief Executive Jeff Finn said in a statement.

Intel's first Linux investment was in Red Hat, the leading seller of the Unix-like operating system. Since then, Intel also has invested in VA Linux Systems, a maker of Linux computers that is about to go public, and in TurboLinux, another Linux seller whose strategy is to add proprietary software on top of the operating system.

The investments mark Comdex: Closing the millennium the continuing strategy of Intel in incubating Linux as one of the operating systems that runs on Intel chips. The open-source operating system also will run on machines using Compaq's Alpha, SGI's Mips, IBM's Power chip, Motorola's PowerPC, Sun Microsystems' UltraSparc and several other designs.

Intel isn't alone in investing in Linux companies. Other companies that have done so include Santa Cruz Operation, Motorola, SAP, Oracle, Novell, Dell and Netscape (now a part of America Online).

Wall Street apparently was happy with Red Hat's management change as well. Red Hat stock rose 14.25 to 119.63, a gain of 13 percent. Yesterday, Red Hat promoted president Matthew Szulik to chief executive officer. Bob Young, the former CEO, will retain his position as chairman and will focus on preaching the open-source gospel, but doesn't plan on leaving the company, he said in an interview yesterday.

 

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