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Red Herring: Cobalt burns hotter than Red Hat

Nov 07, 1999, 00:30 (3 Talkback[s])
(Other stories by Gracian Mack)

"In the latest chapter of the commercialization of the Linux operating system, the blue-hot arc of the Cobalt Networks (Nasdaq: COBT) initial public offering fried the first-day performance of rival Red Hat's (Nasdaq: RHAT) August IPO...."

"Cobalt, based in Mountain View, California, has taken the Linux operating system a step beyond Red Hat's CD-ROM and technical support package. Cobalt manufactures, configures, and sells complete computer systems preinstalled with one of the Linux distributions. These server appliances deliver single Internet-related applications, such as file serving, Web hosting, email, or electronic commerce. Cobalt, in fact, utilizes a version of Red Hat for its Linux software, for which it pays a license fee. Cobalt customizes the Red Hat version by eliminating large portions of general-purpose source code it deems unnecessary for a dedicated server appliance, thereby tailoring the remaining source code to work effectively with its dedicated hardware...."

"So far, Cobalt has yet to tap that rich keg. Since its founding in 1996, the company claims to have sold more than 17,000 server appliances in more than 65 countries. Yet for the nine months ended October 1, Cobalt posted a loss of $13.7 million on sales of $13.8 million. That dollar for dollar equivalent in sales and losses is actually a good sign compared to last year, when Cobalt posted losses of $6.6 million on sales of $1.5 million."

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