August 12, 1999 4:35 PM PDT
Red Hat surges on second day of trading
The stock was priced at 14 for its IPO, but it opened at 46 and closed at 52.06 yesterday. Today, the ascent continued as the stock soared 20.5, closing at 72.62.
Linux is a clone of Unix that's expanding from use primarily in servers to desktop computers and even gadgets. While Linux is popular among technology buffs, many of whom believe it could eventually unseat Windows as the dominant OS, the Red Hat IPO shows that it is also a hit with investors.
The IPO coincided with the LinuxWorld Conference and Expo in San Jose, California, the biggest trade show for all things Linux. The showroom floor is studded with the names of the largest computer companies, most of whom recently embraced Linux.
Red Hat's success could pave the way for numerous Linux-related companies that are eager to go public, among them VA Linux Systems, the biggest sponsor of LinuxWorld. VA chief executive Larry Augustin told CNET News.com last week that he believes his company will be the second Linux IPO.
Conference attendees, who normally spend their time attending demonstrations and collecting promotional trinkets, found the IPO to be an exciting sideshow.
"I'm really amazed," said engineer Ken Keller upon learning Red Hat's stock price had more than tripled. "It does nothing but bring more legitimacy to Linux." Keller has been monitoring Linux for several years, though, and expected Wall Street's embrace to occur earlier.
Jim Forrester, a computer technician for the Antioch School District in California, who sported a large foam Penguin hat on the show floor, said he expected the initial jump in stock value. However, he believes Red Hat likely will settle down to 25 or 30. Attendee Alana Dwyer said she was surprised how well the IPO went given the tepid performance of several recent high-tech IPOs.
Then again, Linux has some big-name support behind it.
IBM, a company that has long dealt with a multitude of operating systems, is one of the biggest and most visible adopters of Linux. Big Blue is porting its entire software library to Linux and used the show to demonstrate an early version of its Lotus Domino server software.
Linux is the most prominent example of open-source programming, in which programming blueprints are shared among thousands of software developers around the world. Linux software may be freely shared--indeed, other Linux companies use Red Hat-funded work, and vice versa.
Although Linux itself is free, Red Hat plans to sell services and technical support, advertising on its Linux portal, and packages of Linux and related software.
In addition, when a company such as Oracle announces that its software works on Linux, they usually tie their guarantee to a specific version of Linux to make sure a customer has installed the minimum necessary software. Red Hat leads over competitors Caldera Systems, SuSE, and TurboLinux in this certification process.