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LinuxWorld: How low can you go? - Linux-based rumors and facts collide for now

May 02, 2000, 02:11 (1 Talkback[s])
(Other stories by Eileen Cohen)


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"Remember a few years back when Apple Computer kept hemorrhaging dollars and its share price bottomed out? The media circled over it like vultures, drooling over its misfortune. Well, Apple just announced blowout profits for the second quarter in a row, and it's initiating a stock split. Almost all the analysts covering the stock rate it a buy or strong buy. No, that isn't Linux news, but those circling vultures remind me of the way some killjoy observers are licking their chops over the descending prices of the erstwhile high-flying stocks of Red Hat, Andover.Net, and VA Linux Systems. Linux, some are quick to extrapolate, has seen the end of its short heyday."

"Maybe it's just human nature to kick folks when they're down. But let's get a little perspective and try to remember the disbelieving euphoria -- euphoric disbelief? -- that accompanied Red Hat's opening day takeoff a million years ago during the August 1999 LinuxWorld Expo. Did anybody think then that the price could really stay that high? Ditto for the market debuts of Andover.net, VA Linux, and Cobalt Networks. Caldera's respectable but far from spectacular IPO in late March of this year had a more realistic feel to it. So how scary for the future of Linux is the fact that all those stocks have been trading recently at below IPO levels?"

"Being about as savvy about the stock market as Bill Gates is about sharing source code, I asked Jim Garden, vice president of finance and technical services at Technology Business Research, what he thinks the Linux stock freefall is all about. He pointed out that if you look at the trends for dot-com IPOs over the past year, hundreds of those companies' stocks are down from 60 percent to 80 percent off their peak. Linux companies, then, are "not alone in this situation where sky-high run-ups on their IPOs have all of a sudden come down to earth," Garden said. "Now their valuations are going to be built more on potential and earnings rather than on hype and spin."

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