Red Herring: Cobalt burns hotter than Red Hat

“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
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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