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SmartMoney.com: Inside the Linux Paradox

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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