LinuxStockNews: Open Source Commentary (July 17, 2000)

“We have seen much change within the Linux sector as the
operating system is beginning to achieve legitimacy in the business
world. Since the original distribution companies such as Red Hat
(NASD: RHAT), TurboLinux (private) and Caldera (NASD: CALD) started
distributing Linux, major companies such as IBM (NYSE: IBM), Compaq
(NYSE: CPQ) and Dell (NASD: DELL) have joined in, offering support
services, hardware and software for these distributions. At this
time, it is becoming clear that the large technology companies have
begun to dominate the sector, offering robust products that larger
businesses are beginning to show interest in. Although this is a
good sign for Linux as it is introduced to a more widespread and
mainstream audience, it does cause one to wonder if Red Hat,
TurboLinux, SuSe (private) and VA Linux (NASD: LNUX) will survive,
given that their business models are at least partially based on
giving their product away for free or at a low cost.”

“So what are the original companies that began distributing
Linux doing now? The purpose of this article is to shed some light
on this.“

“Red Hat was the first Linux Distributor to go public in
September 1999 and was a runaway success in the market, achieving a
market capitalization of over $6 billion before the end of the
month. The company seemed to have a great business model, giving
away its product and losing a lot of money in the process, and then
capitalizing on this large installed base in some way, shape or
form. Red Hat’s market cap achieved critical mass right away and
the company began to acquire other companies in order to buy
expertise to stay competitive in the market. Because Red Hat
allowed users to download its product via a corporate web site, Red
Hat was selling advertising on the site, thus generating
revenue.”

Complete
Story