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This is from their employees, if you have any hard fact showing they lie, show them or shut up.

It's a matter of public record that Cygnus was a money-losing business. Take a look at the Red Hat quarterly statement after the acquisition. The so-called lameness filter insists that it contains too many "junk characters", so I can't give you the table here. Search down for "3. BUSINESS COMBINATION (CONTINUED)". Cygnus lost $1.5M in fiscal 1996, $2.9M in 1997, and $5.8M in 1998. Its losses were nearly doubling every year. It was headed for yet another record loss when it was bought in 1999.

As he said, they have been around forever. That is an indication (not a proof) of profitability. If you have seen anything indicating otherwise, show them, otherwise it is just fud.

"Since 1994" is hardly "forever." It's seven years. Cygnus was around longer than that and they were bleeding money like a stuck pig. As I suspected, you can't support claims of their profitability.

A rule of thumb you might find helpful: When software companies are profitable, they don't remain private. There's no good reason not to take the IPO route and make the big bucks if you're profitable.

No, [Penguin] just had big layoffs

Big layoffs and profitability are not mutually exclusive.

If you're bucking for a (+1, Funny), you're out of luck....

Tim

Before you get too carried away...

Apparently you haven't been paying attention to the way accountants keep track of earnings for publicly traded companies. RedHat did the same thing that everyone from Microsoft and GM on down do: they reported their earnings and losses for the quarter, as well as any other earnings and losses that are required to be accounted for in the current quarter, even though they may have been accrued in previous quarters and years.

To get a better picture, go to the SEC EDGAR database and search for Red Hat's latest 10-Q filing (the latest one I found was filed in July for the quarter ending May 31st, 2001). If you read through the 10-Q filing, you'll see that in any given quarter, half of Red Hat's expenses are from the write-down of investments (ie: the stock market has tubed in the last year) and the amortization of goodwill and intangibles (ie: artificial value of companies during a merger). This is Generally Accepted Accounting Practice (GAAP) -- Red Hat traded millions of shares away to aquire Cygnus and other companies, and instead of realizing all of the associated costs of those mergers in a single quarter, the costs are spread across several quarters.

Look at the bottom line -- at the beginning of the quarter, Red Hat had $72,459,166 in the bank, and even if they lost $24 million, that still leaves them with $48 million in the bank, and these paper losses will be ending in another quarter or so, which will leave Red Hat breaking even. Pretty good for any tech company in the current economy.

Before you get too carried away...

Apparently you haven't been paying attention to the way accountants keep track of earnings for publicly traded companies. RedHat did the same thing that everyone from Microsoft and GM on down do: they reported their earnings and losses for the quarter, as well as any other earnings and losses that are required to be accounted for in the current quarter, even though they may have been accrued in previous quarters and years.

To get a better picture, go to the SEC EDGAR database and search for Red Hat's latest 10-Q filing (the latest one I found was filed in July for the quarter ending May 31st, 2001). If you read through the 10-Q filing, you'll see that in any given quarter, half of Red Hat's expenses are from the write-down of investments (ie: the stock market has tubed in the last year) and the amortization of goodwill and intangibles (ie: artificial value of companies during a merger). This is Generally Accepted Accounting Practice (GAAP) -- Red Hat traded millions of shares away to aquire Cygnus and other companies, and instead of realizing all of the associated costs of those mergers in a single quarter, the costs are spread across several quarters.

Look at the bottom line -- at the beginning of the quarter, Red Hat had $72,459,166 in the bank, and even if they lost $24 million, that still leaves them with $48 million in the bank, and these paper losses will be ending in another quarter or so, which will leave Red Hat breaking even. Pretty good for any tech company in the current economy.

Redhat mainly lives on selling other peoples work. They are not paying the thousands of programmers who make the software.

OUR RELIANCE ON THE SUPPORT OF LINUS TORVALDS AND OTHER PROMINENT LINUX DEVELOPERS COULD IMPAIR OUR ABILITY TO RELEASE MAJOR PRODUCT UPGRADES AND MAINTAIN MARKET SHARE

We may not be able to release major product upgrades of Red Hat Linux on a timely basis because the core of Red Hat Linux, the Linux kernel, is maintained by third parties. Linus Torvalds, the original developer of the Linux kernel and a small group of independent engineers are primarily responsible for the development and evolution of the Linux kernel. If this group of developers fails to further develop the Linux kernel or if Mr. Torvalds or other prominent Linux developers, such as Alan Cox, David Miller or Stephen Tweedie, were to join one of our competitors or no longer work on the Linux kernel, we would have to either rely on another party to further develop the kernel or develop it ourselves. We cannot predict whether enhancements to the kernel would be available from reliable alternative sources. We could be forced to rely to a greater extent on our own development efforts, which would increase our development expenses and may delay our product release and upgrade schedules. In addition, any failure on the part of the kernel developers to further develop and enhance the kernel could stifle the development of additional Linux-based applications.

WE MAY NOT BE ABLE TO EFFECTIVELY ASSEMBLE AND TEST OUR SOFTWARE BECAUSE IT CONSISTS LARGELY OF CODE DEVELOPED BY INDEPENDENT THIRD PARTIES OVER WHOM WE EXERCISE NO CONTROL, WHICH COULD RESULT IN UNRELIABLE PRODUCTS AND DAMAGE TO OUR REPUTATION.

It's not, in general. There's the Investment Advisor Act, but that regulates people who charge fees and have clients. There are laws against insider trading, but you have to be an insider and you have to trade in the stock of the company of which you are an insider to violate them. There are laws against stock manipulation, but you have to have a financial interest in the outcome. And truth is an absolute defense to libel in the US.

I run Downside, and I get occasional threats from companies. But they've never actually done anything. I'm not anonymous, I'm not an employee of any of the companies mentioned, and I don't trade in those companies. (I'm into "value investing", companies with, like, profits.) Companies hate it when you point out that their business model is totally bogus, or that their CEO put in a golden parachute scheme just when the company was tanking. But somebody has to do it.

• Service revenues $ 3,231,000
• Cost of service revenues $42,341,000

This looks something like a concept I've been working on for a little over a year. I call it " openreference ".

It's basically just "object-oriented" hypertext.

In the browser the interface could look something like the Windows SendTo menu. (The equivalent of the Unix Pipe.)

If anyone has ideas or is interested in helping out, send me an email.

I noticed that you've never posted the SEC filings of any BSD companies. Afraid of what you'll find?

--Brett Glass

Naw. That's not misinformed at all. I read Interplay's licensing agreement on http://www.sec.gov. What's funny about this, is that Shiny could go to another publisher and publish The Matrix with them since they're the ones who were awarded the rights to develop The Matrix in the first place. Microsoft assumes that Interplay has the rights, which they don't. Unfortunately I don't think Shiny would jump developers, despite the fact that that would be the smart thing to do (Interplay is financially a sinking ship. They've been having business trouble for at least three years now and it looks like it'll just get worse. Just looking at their ghetto-looking booth at E3 is proof of this fact.). Ah well. If Shiny wants to go down with Interplay, be my guest. Shiny hasn't really put out a decent game since MDK and the original Earthworm Jim games. Anyways, it's nice to see that Microsoft is back to its predatory licensing practices again. I was hoping to see that end with the PC OEM manufacturers. Guess not. :/

We have an engine which processes such data, but it's slow, because it's in Perl. Most of the time goes into modules recommended in this book, like HTML::Parser. The big problem is that simple tokenizing, like extracting HTML tags, is incredibly slow in Perl. The classic "get next character, get character class for character, switch on character class" operation is something Perl does very badly.

Yes, you can write low-level C functions and call them from Perl to deal with such problems, but that kills portability.

Also a part of this is the "retail level" ISPs who buy the wholesale DSL from those folks. They either can't pay their bills upstream to the wholesalers or have the wholesalers fold on them and leave their (the ISPs) customers up a creek.

The twin swords of culling and consolodation are flashing through the market place.

Back in 1999, when we were trying to decide who to go with for DSL, our choices were PacBell, Covad and Northpoint. PacBell were the only folks who returned our calls (!). What decided us toward going with PB in the end was looking up info on Covad and Northpoint in Edgar and deciding their business plan made no sense. It required too much money, too many years running at an insane money burning loss, and we just couldn't see things going that way forever.

Too bad, because PacBell the company really, I mean, really, sucks. But despite all that, my ass kicking staff has managed to get over 800 folks onto DSL in the last 15 months in our one little county.

A couple of other things are happening:

• ILECs and CLECs (PB & Covad) are eschewing truck rolls in favor of self install kits
• Consumer DSL modems + filter kits are coming down in price, you can find them for about $170 now, so they'll be down to the cost of a 56k modem in a year or so.

It could end up the DSL market looks like the dialup market, ISPs selling the IP on top of the circuit provided by the ILECs and the remaining CLECs.

any company who is publicly traded must file very detailed and very audited reports to the SEC, the Securities and Exchange commission, and these documents can be searched through Edgar. These reports tell the entire financial situation of the company. As a part of these reports a detailed income statement (where the profit and loss are calculated) and a balance sheet (assets vs. liabilities) must be included and must meet certian guidelines. These companies are audited at least yearly, and must follow striclty enforced accounting principles.

a list of Red Hat's SEC filings since day one can be found here

their most recent quarterly statement can be found here

for a bit of a legend on how to browse the archives, 10-q are quarterly statements, 10-k are annual reports, and the others are usually stuff like amendments, purchasing other companies, and etc..

hope this helps clear some of this up. mba's are good for something i guess

any company who is publicly traded must file very detailed and very audited reports to the SEC, the Securities and Exchange commission, and these documents can be searched through Edgar. These reports tell the entire financial situation of the company. As a part of these reports a detailed income statement (where the profit and loss are calculated) and a balance sheet (assets vs. liabilities) must be included and must meet certian guidelines. These companies are audited at least yearly, and must follow striclty enforced accounting principles.

a list of Red Hat's SEC filings since day one can be found here

their most recent quarterly statement can be found here

for a bit of a legend on how to browse the archives, 10-q are quarterly statements, 10-k are annual reports, and the others are usually stuff like amendments, purchasing other companies, and etc..

hope this helps clear some of this up. mba's are good for something i guess

any company who is publicly traded must file very detailed and very audited reports to the SEC, the Securities and Exchange commission, and these documents can be searched through Edgar. These reports tell the entire financial situation of the company. As a part of these reports a detailed income statement (where the profit and loss are calculated) and a balance sheet (assets vs. liabilities) must be included and must meet certian guidelines. These companies are audited at least yearly, and must follow striclty enforced accounting principles.

a list of Red Hat's SEC filings since day one can be found here

their most recent quarterly statement can be found here

for a bit of a legend on how to browse the archives, 10-q are quarterly statements, 10-k are annual reports, and the others are usually stuff like amendments, purchasing other companies, and etc..

hope this helps clear some of this up. mba's are good for something i guess

The ones I really like are the fraud spams by people claiming to represent some government agency in Africa, who just need assistance in transferring money out of the country. The great thing about this is the appearance of truth (Africa is unstable), the appeal to greed (the finder's fee), and the whiff of illegality to keep you from passing it on to your local SEC office.

Me, I just redirect them to the SEC, knowing that not only do they frequently arrest these scoundrels, they use the fines to pay off the national debt.

Here's the FCC must carry regulation. Note section 76.64, Retransmission Consent:

(b) A commercial broadcast signal may be retransmitted without express authority of the originating station if-- (1) The distributor is a cable system and the signal is that of a commercial television station (including a low-power television station) that is being carried pursuant to the Commission's must-carry rules set forth in Sec. 76.56

and also Sec 76.60 Compensation for Carriage:

A cable operator is prohibited from accepting or requesting monetary payment or other valuable consideration in exchange either for carriage or channel positioning of any broadcast television station carried in fulfillment of the must-carry requirements, except that (a) Any such station may be required to bear the costs associated with delivering a good quality signal or a baseband video signal to the principal headend of the cable system; or (b) A cable operator may accept payments from stations which would be considered distant signals under the cable compulsory copyright license, 17 U.S.C. 111, as indemnification for any increased copyright liability resulting from carriage of such signal.

I failed to find a reference to the FCC decision regarding a station's right to either elect coverage under must carry or receive compensation, but not both, but I did find this interesting tidbit in a VIACOM SEC filing

Commercial stations have the additional right to elect either to require a multichannel distributor to carry the station pursuant to the must carry provisions of the Act or to require that the cable operator secure the station's "retransmission consent" on a negotiated basis before the station can be carried (i.e., retransmitted) on the cable system. All of the Company's television stations are carried on cable systems serving the communities in the stations' markets. Certain of the stations obtained carriage by asserting must carry rights and other stations granted retransmission consent. Failure to be carried on cable systems could be detrimental to the business of a television station. The application of must carry requirements to additional services which a broadcaster might transmit over the digital spectrum is to be decided by the FCC except that the 1996 Telecommunications Act expressly provides that any "ancillary and supplementary" services provided by broadcasters in that spectrum will not be entitled to mandatory cable carriage. The must carry rules have been challenged by cable program services and cable system operators.

First, the FTC is collecting info, for possible action.

Forward the spam, with All Headers visible (different choices on browsers), to:

uce@ftc.gov

Secondly, if it is an attempt to solicit money for supposed investment purposes, it's the SEC's job to police these babies. Go to www.sec.gov and find the email address of your regional SEC office. Mine, for example, is sanfrancisco@sec.gov, but yours may differ. Then forward, with All Headers visible, the spam you get concerning investments (usually fraudulent) to that email address.

Why make the government do the work? Because until enough people complain and help all those Level 9 operatives, nothing will be done.

If using PINE, then just bounce the email to that address.

Also, always forward to the abuse@yourisp.com (or abuse-nonverbose@yourisp.com if they're smart) any such emails. And any legitimate ISPs (hint, not wierd ones, they may be spam collector sites) along the trail the email came. This helps them shut down those loopholes.

Most of my spam mail originates from a uu.net address. Which is kind of ironic, cause I own 400 shares of Worldcom, who own UU.NET in the first place. If something isn't done soon, I'm filing a shareholder's proposal at the next Annual Meeting ...

• 1. There was something like a 'friends and family' program with the VA Linux IPO, where certain people got shares of VA Linux at the IPO price (this is common in IPOs).
• 2. VA Linux's underwriter, Credit Suisse ('CS') had a 30-day option to sell even more shares of VA Linux at the IPO price, up to 15% of the number of shares in the original IPO (this is also common in IPOs; the underwriter generally exercises the option and sells the shares if the IPO is a hot one).
• 3. The complaint basically says that these 'friends and family' shares and option shares were sold by CS to certain people in ways that gave CS extra benefits, hurting investors who could not buy these shares at the IPO price from CS.
• 4. This has been a sore topic for the SEC lately, where certain people get shares at the IPO price, and then can turn around and tell them immediately after the IPO, turning a very large profit, quickly.
• 5. It really has nothing to do with VA Linux itself, other than the mechanics of VA Linux's IPO.

The address to write to isn't slashdot. It's enforcement@sec.gov. ESR has been playing fast and loose long enough, and it's long past time he got called on it.

Currently I'm running the updates as a batch job, but I'm thinking of adding the ability to accept a ticker symbol on the web site and get back a death date prediction.

It's all written in PERL, including my SGML parser.

Nothing? Guess you should have checked out the Culture Jamming: Scams & Frauds page instead.

I believe it was BSD based, sorta. We used it at my first job out of college back in 1987. (God does that make me feel old!)

I am curious as to why they placed "open-source" participants into a smaller pool, and scrutinized them specifically. I did not participate, so I didn't see the questionnaire. I wish you could post a copy of it, or at least that subjective question.

Why would E*Trade want to profile open-sourcers? Did RedHat know about this? Where's the 200,000 shares? If they were sold, who made the money?

Their SEC Central Index Key is 0001015780 -- perhaps something enlightening can be dug up in the Edgar database, but I doubt it.

________________________________________

http://www. sec.gov/Archives/edgar/data/1083392/0000912057-00- 020438.txt

DATABASE RESEARCH AND MARKETING. We intend to require each user of our technology to provide basic individual information in order to register and activate our :C.R.Q. and :Cue:C.A.T. technology. Additionally, we plan to offer promotional and other incentives to encourage users to provide more detailed individual information. We plan to use this information to develop a substantial database of demographic information reflecting users' interests and preferences, and tracking Internet behavior related to :Cues and viewing patterns of Internet Enhanced content. This information will be used to better tailor our Virtual Network banner ads and special vendor offers to each user, as well as to generate summary demographic data reports for advertisers and merchants. These firms would use our reports and data collection expertise to tailor advertising campaigns, banner ads and website content to appeal to targeted consumer segments. Under our privacy policy, individual user information will not be made available to outside parties and will only be used internally by us with a user's express permission. Some summary demographic data will be provided to purchasers of :Cues free of charge. For more complex or detailed demographic data, we intend to charge advertisers a flat fee per month, plus a small charge per record.

OUR RIGHT TO KEEP INFORMATION COLLECTED IN OUR DATABASES MAY BE CHALLENGED IN THE FUTURE. We intend to use our :C.R.Q. and :Cue:C.A.T. technology to develop and maintain a substantial database of consumer demographic information that our customers can use with our permission to conduct advertising campaigns. In particular, we intend to require each user of our technology to provide basic individual information in order to register and activate our :C.R.Q. software application. Under our privacy policy, individual user information will not be made available to outside parties and will be used internally by us only if a user gives express permission for such use. Some summary demographic data, however, may be made available to outside parties. Privacy concerns may cause users to resist providing the personal data necessary to support this profiling capability. More importantly, even the perception of security and privacy concerns, whether or not valid, may inhibit Internet user acceptance of our technology and products. Furthermore, users may bring lawsuits against us seeking to prohibit us from collecting this data. Even if without merit, lawsuits could impair Internet user acceptance of our technology and products. In addition, legal requirements may heighten these concerns if businesses must notify Internet users that the data captured after visiting certain websites may be used by marketing entities to direct product promotion and advertising to that user. We are not aware of any such laws currently in effect in the United States. Other countries and political entities, such as the European Economic Community, have adopted these types of laws. We cannot predict how the international roll-out of our technology will be affected by these types of laws.

Securities and Exchange Commission (SEC) rules mandate some restrictions on e-mail for brokerage firms.

The yahoo article has numerous references to information that was divulged in Transmeta's S-1 filing. If you want to look for yourself, you can find it here.

They passed him on to the president? That's amazing. I usually have to go to the SEC's list of corporate filings that include the names of company executives. These are for public, stock, corporations. For private companies, I'd have to dig deeper.

Well, one thing they do is manipulate inventory to make it appear as if their inventory costs are high

The only way you have make your inventory appear to be higher is if you are in a period of rising prices and you use a FIFO inventory method for accounting, but I doubt this applys in Amazon's case.

Incidentally, even as they can orchestrate a bogus negative on their income statement, this "loss" is tax deductable over time.

Tax losses are only deductable to the extent that you have profits in the future. Gratned, if you are having a particularly bad year you may jam as many additional expenses as you can into the year to maximize this credit for future years, but you don't go years at a time showwing losses as some sort of tax avoidance strategy.

However, they do have good prices on books and DVDs so I hope they hang on for quite a while :)

I'm sure they will, makes u wonder how they can keep offering such bargains given their "losses".

Well, if you look at their EDGAR filings here, you will see exactly how they do it... leverage the hell out of themselves with debt and sell as much equity as you can. I'd like to thank everyone with investments in Amazon for subsudizing my DVD and Book collection.

Well who are these guys then? They've been filing 8-K reports for three quarters now, but I can't find the quote anywhere.

(1) It shouldn't surprise you that a brief is very readable; after all, it's intended to persuade. Some briefs are less readable by non-lawyers because they don't go into detail on concepts that lawyers and judges take for granted (e.g., rudiments of contract law or civil procedure). In general, however, a well-written brief or judicial opinion should be quite comprehensible to the intelligent nonlawyer. An unreadable brief is a bad brief.

(It's not always the case, however, that well-drafted statutes and contracts are readily comprehensible, though there's considerable interest in improving the present state of affairs. If this interests you, I particularly recommend taking a look at the SEC initiative on the use of "plain english" in disclosure documents.)

(2) I agree that the description of linking is a bit verbose. (E.g., instead of saying that HTML "allows Web authors to format text to add emphasis or design layout," why not say that HTML "allows Web authors to specify how their text should appear on the page"?) That's basically nitpicking, though. The real question is whether such a description was necessary, and whether a demonstration or the like wouldn't be preferable. In my view, the description was necessary.

A couple years ago, some lawyers got very excited about the possibility of putting together multimedia briefs, which would supposedly be far more informative than text on paper. The truth is, however, that a 25MB .AVI of a plane bursting into flame conveys far less significant information for legal urposes than a declaratory sentence such as "Because of a design flaw in the frobulator, Flight 123's fuel tanks caught fire, causing the plane to burst into flame on the runaway, killing all passengers and crew." Likewise, persuasive writing strips away nonessential information to focus on key facts. Here, the key fact that hyperlinks -- however implemented -- are nothing more than references to other documents just like citations in legal briefs. You might guess that to be true from seeing a web browser in action, but then again, you might not.

Ok, so it's 50K. Now I'm wondering just how Red Hat determines how much to give. I mean, is there some kind of function key on an HP that you can use to calculate how much to donate? I thought this was the kind of thing that would show up in Edgar for filings to the SEC, but I don't see expenditures for charitable contributions or the like.

Cash and cash equivalents $11,997,157
Short-term investments $7,630,705
Total assets (including the foregoing, and a good deal else) $110,297,650

In the startup phase, there are companies that need repeated rounds of financing to cover their expansion-phase losses. They assume that 1) someday there will be profits, and 2) they will be able to obtain repeated additional financing until then. Those are dangerous assumptions from a stockholder perspective. Even if the company gets financing, it either dilutes stockholder equity or adds a debt load.

I'm not singling out CAIS Internet; there are all too many companies in this boat. CAIS's numbers look particularly bad because they had a forced payout to preferred stockholders in the first quarter. Nevertheless, their latest 10-Q filing is a painful read.

The analysis I'm doing simply assumes that losses will continue at the current rate, and big trouble will come when the cash runs out. This is a classic cash-flow analysis. One can make more optimistic assumptions, but when you see a company out of cash in the near future (or the recent past!) it's an indicator of, well, problems.

Check out Corel's April 19 10-Q Filing with SEC.

"If the proposed merger with Inprise Corporation does not occur, other sources of financing are not secured and/or Corel's operating results do not improve, a cash deficiency may occur within the next three months."

Unless something has changed, they've got about 2 months left...

The Register has "an article linking to a RAMBUS filing with the SEC describing why Intel is required to push Rambus memory thru the end of 2002. I can't read stockbrokerese, so I'm taking the Register's word for what this document says.

When you read McCrabb's comments in the context of SCO's statements in their 10K they make sense. SCO (1) sells server operating systems (2) focuses on Intel processors (3) owns the UNIX IP from AT&T (4) supports open standards such as I20, XPG-4, Spec 1170, DCE and OSF/Motif(R) POSIX(R), FIPS and Internet standards, and (5) talks about "leveraging the open source and Linux opportunity." (The "Leveraging" discussion is in SCO's 1999 annual report page 11, available in PDF on SCO's Web site.) Their basic business model is to sell proprietary based server solutions to companies who are big enough to pay the freight. Their 10K says "SCO's mission is to create, market, and support the server software that system builders choose for networked business computing." To the extent that SCO can guide Linux in a direction that favors SCO and hurts NT they will be right in there pitching. Don't count on them doing anything that will make Linux a substitute for SCO products rather than a complement. SCO also has a page on Linux which I read to say "we can help you install Linux instead of Windows and then talk to an SCO based server." SCO is not a big company. They had worldwide sales of $223 million in FY1999 and competes with UNIX/RISC server software on one hand and NT/Intel software on the other. They have an installed base and a set of third party ISPs that they are totally dependent on. I expect they see SGI's example as exactly what not to do.

Microsoft SCHEDULE 13G

Per your Schedule 14A, Microsoft owns 4,217,606 (11.9%) shares in The Santa Cruz Operation. This makes Microsoft one of the two largest shareholders in SCO.

How has SCO handled the investment of Microsoft, while at the same time offering a competitor to Microsoft. In addition, does the investment of Microsoft cause problems when dealing with the Open Source Community. Specifically, does the Open Source Community have reservations dealing with SCO because of their connections with Microsoft.

Why of course! May 99 10-Q skip to part II-other information. Down where it says "Submission of matters to a vote of Security Holders." it says "Adopt Anti-Slave Labor Policy." It was voted down 88m to 700m. If this doesn't show that Lucent "employs" slave labor, I don't know what does. :(

If you want information about donations to charities on a specific company check out their Annual Report and SEC 10-K filing. Donations will be listed in one of both of these. They can usually be found at a companies web site. If not there check the SEC site at http://www.sec.gov/.

The SEC has an extensive database of public documents they have recieved.

I'm not saying AOL's list is incomplete -- intentionally or by mistake -- but it is a PR site and as such can't be as reliable as the SEC itself.

I have been perusing this thread briefly, and I'm astonished at how outraged some people appear to be at Netappliance's decision: I think they ought to take one step back at look at this from a more rational perspective:

The quoted $99 price is obviously a massive loss-leader, as I'm sure is the higher $199 price that they 'reduced' from. This is trivially obvious to anyone who has ever bought PC components (flat panel displays are not cheap; even mediocre quality 10" 800x600 versions). Even deep bulk discounts have to be played off against the system integration costs. In fact, even Netappliance acknowledge this fact in their S-1 filing with the SEC (page 3, under Risk Factors).

The business model is familiar: sell for a loss (or, indeed give it away), and then recoup from the recurring cost of the service. This model is at least as old as the disposable razor-blade, and will be familiar to many who read this forum as the same one used to sell cellular telephones, AOL (400 free hours! etc....), and so on.

So what's the problem? Well, so far as I can see, there are really two objections here, which I'd characterise as 'Naive' and 'Not So Naive'.

The Naive objection

The 'Naive' objection is 'I paid $100 for this, I own it, and if I don't want to use their internet service, I don't see why I should have to pay for it'. Usually, these objections include appeals to the illegality of the action. This is in line with the razor-blade model, where Gillette doesn't mind too much if you buy a single Sensor Excel razor and never buy another blade.

Of course, it's not illegal effectively to bundle a service contract with a purchase (at least, not in my jurisdiction, and I'm pretty certain it isn't in the USA either). If, at the time of purchase, you sign up for a years' worth of their ISP service at $21.95 a month, you've entered (of your own free will) a perfectly legally binding contract. This is the cellular phone model: if you don't pay for your service contract, Netpliance will chase you in the courts, and you will lose.

Summary: the Naive objector understands the razor business model, but not the cellular phone model.

The Not So Naive objection

The 'Not So Naive' objection is 'I paid my $99 for this, so I own the box. I'm quite happy to pay a few hundred bucks over the course of the year in ISP charges, it still works out a good deal, and it's a neat toy! Why would they want to stop me throwing NetBSD on it?'.

The reason why Netpliance don't want you to buy the box and not use their service is more subtle. Their business model doesn't just depend on recurring subscriptions (blades, airtime...) but also on their ability to attract advertisers, sponsors and other value-added services. Their ability to do this is predicated upon the ability to establish a large user base for their service.

As such, they're going to need to demonstrate that supporting their company is going to result in a significant number of imprints for their advertisers and so on. In their S-1 filing, they acknowledge that their success will depend almost entirely on branding and high-quality content.

Summary: the 'Not So Naive' objector hasn't read Netpliance's business plan...

What does this all add up to? Well, it's all quite obvious: Netpliance doesn't want you just to buy an i-Opener, they want you to use it, and with their services. If the product, as was previously shipping, was going to compromise their business model in some way (and the weight of the evidence here is that it probably was!) then they have a common-sense responsibility to emend it.

Yes, it sucks that we can't have our cake and eat it, but I don't think it's fair to rag on Netpliance for doing right by their shareholders. If I were them, I would do the same thing.

Potentially Interesting Resources:

• Gillette disposable razor business model in the context of high-tech industry
• i-Opener specifications
• SEC S-1 Filing for Netpliance

*will* be tracking the number of clicks made on each URL in the database

Well, unless someone else here can prove me wrong, they can't actually tell how many times people clicked on an link. The only way to do it is to redirect the URL through a CGI script, and they aren't doing that yet. If there is another way, please let me know!

Besides, the SEC filing mentions nothing about tracking clicks -- the company seems more concerned about getting people to come to the site and buy products through an affiliate network.

This seems like a really weak company to me -- they at least have to find a way to make enough money to pay Google and for bandwidth, otherwise they are going under mighty fast.

You can find the inside scoop through the company's SEC filing. They are planning to generate revenue through their "virtual bookstore". They're just an Amazon affiliate.

Looks like a pretty weak business model to me...

You can read about TopClick's financials and future plans through their SEC filing. Note that they have no revenue.

Also, they are apparently planning to "replace the existing search-based site [...] in February, 2000" (oops) at which time "the existing search-based web site will be retired from service". So don't get too hooked on their search engine!

The specific text from the filing is on page 69 and 70 of the document, on my printed copy it was pages 74 and 75 of 393...

They say half of the 10% Directed Share Program goes to company employees and insiders and the other half to the Linux community via a program at Wit Capital. Apart from needing to fund a $2,000 account at Wit Capital, there is no more information about the program. I have an email in to ask of this at Wit.

Anyone have more details?

Here goes:

Directed Share Program. At our request, the underwriters have reserved for sale, at the initial public offering price, up to ten percent of the shares of common stock offered in this offering under a directed share program. We currently expect that approximately half of these shares will be offered to directors, officers, employees, business associates, and related persons of Caldera Systems pursuant to a directed share program being administered by FleetBoston Robertson Stephens Inc., and that approximately half of these shares, pursuant to a directed share program being administered by Wit Capital Corporation, will be offered to open source software developers and other persons that we believe have contributed to the success of the open source software community and to the growth of Caldera Systems. We cannot assure you that any of the reserved shares will be so purchased. The number of shares of common stock available for sale to the general public in this offering will be reduced by the number of reserved shares sold. Any reserved shares not purchased will be offered to the general public on the same basis as the other shares offered in this offering.

Purchases of the reserved shares pursuant to the directed share program administered by Wit Capital are to be made through an account at Wit Capital in accordance with Wit Capital's procedures for opening an account and transacting in securities. In addition, Wit Capital is an underwriter of additional shares in the offering. A prospectus in electronic format is being made available on an Internet web site maintained by Wit Capital. In addition, all dealers purchasing common shares from Wit Capital in this offering have agreed to make a prospectus in electronic format available on a web site maintained by each of them. Other than the prospectus in electronic format, the information on the web site and any information contained on any other web site maintained by Wit Capital or any dealer purchasing common shares from it is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter and should not be relied on by prospective investors. The National Association of Securities Dealers, Inc. approved the membership of Wit Capital on September 4, 1997. Since that time, Wit Capital has acted as a co-lead managing underwriter on one offering, a co-managing underwriter on 61 offerings and a dealer on 107 offerings.

Second, support is expensive. Minimum wage laws, overhead, mandatory benefits, training costs, and high turnover make it difficult to do technical support at a price consumers are willing to pay.

Third, remote support is difficult and time-consuming. As anyone who has done tech support knows, most computer users do not know the names of the items they see on their screens -- or even that they have names. Absent a remote control system (which may not work if the machine is disabled), even an expert technical support staffer can take hours to diagnose a simple problem on the phone with a customer.

Red Hat, the "poster child" for distributors of GPLed software, has lost millions of dollars per employee over its lifetime.

This is why Red Hat wrote, in its most recent Form 10-Q:

OUR BUSINESS MAY NOT SUCCEED BECAUSE OPEN SOURCE SOFTWARE BUSINESS MODELS ARE UNPROVEN

We have not demonstrated the success of our open source business model, which gives our customers the right freely to copy and distribute our software. No other company has built a successful open source business. Few open source software products have gained widespread commercial acceptance partly due to the lack of viable open source industry participants to offer adequate service and support on a long term basis. In addition, open source vendors are not able to provide industry standard warranties and indemnities for their products, since these products have been developed largely by independent parties over whom open source vendors exercise no control or supervision. If open source software should fail to gain widespread commercial acceptance, we would not be able to sustain our revenue growth and our business could fail.

This is not surprising. What's more, due to the GPL, Red Hat does not even own its own products free and clear! In fact, it has virtually no assets. No assets? No profits? This doesn't paint a very promising picture.

And what about the future? Again, let's hear the story straight from the horse's mouth. Red Hat says that it's not sure it will ever make money:

WE EXPECT TO INCUR SUBSTANTIAL LOSSES FOR THE FORESEEABLE FUTURE

We have incurred operating losses in four of our previous five fiscal years, including our most recent fiscal year ended February 28, 1999, as well as in the nine months ended November 30, 1999. We expect to incur significant losses for the foreseeable future, as we substantially increase our sales and marketing, research and development and administrative expenses. In addition, we are investing considerable resources in our web initiatives and to expand our professional services offerings. As a result, we cannot be certain when or if we will achieve sustained profitability. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview", "--Results of Operations" and "--Liquidity and Capital Resources".

None of this should be surprising. The purpose of the GPL is not to enable software businesses but to destroy them. This was its explicit intent, and this is what it's doing. If you hope to make any money, better make it by buying and selling stock and taking advantage of gullible investors. You won't make it on GPLed software.

--Brett Glass

If this is true, you'd better tell the SEC! The latest SEC filings clearly show the links between the two companies. --jasper

Here's the link to both the original S-1 and the S-1/A amended form.

According to the forms, the underwriter is:

CAPITAL WEST SECURITIES, INC.
One Leadership Square, Suite 200
211 North Robinson
Oklahoma City, OK. 73102
Telephone: (405) 235-5728