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LinuxStockNews: Linux Enters the Mainstream (June 19, 2000)

Jun 19, 2000, 11:01 (0 Talkback[s])

"Since we first informed you that large technology companies were joining the Linux revolution, many changes have occurred. However, the sector is hotter than ever. Remember back in January when VA Linux (NASD: LNUX) and Red Hat (NASD: RHAT) were the hottest stocks in the market? With the imminent breakup of Microsoft, it seemed like this duo were the next companies to ascend the throne as de facto rulers of the next generation of operating systems. These days, Microsoft is indeed breaking up but both Red Hat's and VA Linux's stock prices are shadows of their former selves."

"Why is this? Clearly each company is finding its own niches to dominate with Red Hat announcing a client services division and VA Linux continuing to build its Linux community into the largest on the Internet. It should be natural for these corporate movements to translate into higher stock prices."

"The truth of the matter is that Red Hat, VA Linux (and other Linux companies such as Caldera (NASD: CALD), Turbolinux (private), Linuxcare (private), etc.) are first of all victims of the negative market hype surrounding all Nasdaq-listed technology stocks, especially Web-based companies. Secondly, investors have made a "flight to quality", shifting to brick-and-mortar businesses that actually make profits and have more proven business models. Traditional businesses that have successfully integrated an Internet channel into their existing operations (or "bricks-and-clicks" businesses) are becoming especially popular in the markets. Thirdly, established traditional software and hardware producers have moved into the Linux sector in order to compete with the startups. In the spirit of traditional businesses opening Internet channels, traditional software and hardware companies have realized that in order to meet the needs of customers, they have moved applications and hardware to a Linux platform. As an example, IBM (NYSE: IBM) announced that it was adding Linux as an area of expertise within its professional services group and the company would be competing with Red Hat's newly formed professional services group (partially funded by Intel (NASD: INTC), Oracle (NASD: ORCL), and Netscape (NYSE: AOL)). This can be seen as a sign that IBM views professional services as a successful business within the Linux sector."

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