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SmartMoney.com: Inside the Linux Paradox

Jan 07, 2000, 08:21 (0 Talkback[s])
(Other stories by Ian Mount, Cintra Scott)

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"In the Biblical software tale in which the Redmond Goliath - a.k.a. Microsoft (MSFT) - terrorizes the land, the open-source Linux operating system plays David. And you know how Americans love an underdog. Just look at the recent performance of risk-laden Linux IPOs. First there was open-source software packager Red Hat (RHAT) in August. It shot up 272% in a day and has soared another 400% since then. The most recent Linux slingshot has been VA Linux (LNUX), a company that made IPO history when its stock popped 698% on its first day of trading."

"Of course, investors have every right to be confused by Linux-related valuations. After all, the operating system - born of the unpaid work of Finnish grad student Linus Torvalds - is freely copied and modified. At its core, there's nothing proprietary about it. Developers around the world work in a cooperative fashion - usually for free - on Linux-related software improvements via the Web, each perfecting one or another part of a larger product. No central company, no Goliath. Of course, plenty of companies are stepping forward to organize a part of this sprawling Linux network. One is VA Linux, which sells Linux-based hardware, software and services. The company had $17.7 million in revenue in its last fiscal year (ended July) and lost $14.5 million. But it has its sights set much higher."

"In a wide-ranging interview at SmartMoney's New York offices on Wednesday, we talked with VA Linux founder, president and CEO Larry Augustin about what made Linux tick as a concept - and an investment. It's a brain-teasing topic: Augustin's $7 billion company is benefiting from a community of 3,000 software developers currently working on 700 projects who aren't being paid. On the flip side, developers use the resources of VA Linux's recently unveiled SourceForge site (for example) at no cost. Where is the profit-potential in all this pro bono work? We'll let Augustin explain."

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