Red Hat & VA IPO Speculation by CNET

diogenes write in to send us a CNet article that speculates wildly about the IPO Intentions of Linux Heavyweights Red Hat and VA Linux Systems. Red Hat denies it (as always) and VA Speculates (as always). Mentions Mandrake working at VA and wraps up with a bit about Cygnus. I wonder where Linuxcare fits into all this, but other than that, this a good summary of the picture right now.

Comments

Motley Fool is great site for new investors

[cpeterso]

This is an advertisement or anything, but I love the Motley Fool ( www.fool.com). It's an especially kind place for new investors. They have plenty of FAQs, analysis, and active message boards for every stock.

They also have a site called www.foolu.com targeted at students with questions about finances and investing.

RedHat

[jonl]

From the article: "and Red Hat, currently the most popular seller of the Unix-like operating system."
Perhaps that says everything about the future of this 'industry'. People are losing sight of the principles that
inclined them to choose linux in the first place.

Re:RedHat

[Wee]

I don't think people are losing sight of what Linux is all about. Linux is stable, free, robust, easy to use (well, getting easier -- thanks in part to companies like Red Hat), and a natural if you have any networking needs whatsoever. There's nothing wrong with Red Hat making money from Linux. The core of Linux is still the same: OSS and a worldwide cadre of developers doing what they love to do.

If you think that there is something inherently wrong with Red Hat selling (and therefore making money off of) Linux, consider my mother's situation. She owns a smallish clothing and furniture store in Phoenix, and she has a 20 user network, with print servers and the like, that currently runs Novell 3.something. A while ago, she was in Price Club and picked up a copy of Red Hat. Then she called me and asked me all sorts of questions about what Linux (she called it "Linux", not "Red Hat") could do for her and her looming network upgrade (what with Y2K coming up and all, it's time to ditch those old 486s).

To make a long story short, she's decided that Linux would make a great gateway/firewall machine, and is getting Cox's cable modem in her store. Now she'll be able to work from home. We're also toying with using Linux for a print server on one of the old clients. So now we have a new Linux convert, all because someone wanted to make money buy selling it (and justifiably put Linux in a box with a nice manual a person's mother can understand and sold a bunch to Price Club).

How can that be bad? Red Hat makes money, sure, but the entire Linux community gets another Linux user (instead of another NT user, which she was going to use). Do you think that my mom would have immediately thought of Linux for a gateway system and gone out and downloaded Debian? Not a chance. She saw it in the store (which makes it a "real" product in her mind), read the box and liked it. Plus, she knows she can get support from Red Hat (instead of just me or my brother). That support, probably more than anything else, put Linux right up there with Microsoft in her mind.

So I have no beef with Red Hat selling Linux, and I hope they sell a million more copies and get stinkin' rich in the process. It means that there will be more Linux users demanding (and writing) more Linux software. There'll be more hardware support (I, for one, long for the day when all hardware comes with Linux drivers and info -- kind of like Netgear cards do). It'll put the PC back in the hands of people instead of some stupid paper-clippish thing doing all the thinking for them. Someone's kid will play Quake 4 on a Linux machine and then get to toying around with the OS and might embark on a great new future. (Remember the C-64 and VIC-20? How many people do you think got their start because they got the "priviledge" of monkeying around with BASIC and writing new software for themselves? You think Windows 2000 will foster that same sense of power and curiosity?) These are all good things, and all of them are due in part to companies like Red Hat making money from Linux.

The more Linux the better, I say. And if people make money in the process, more power to them.

-B

Re:Do they need to?

[Mr. Morden]

Another possible reason for making an IPO and letting the "overspeculation of a million tech-hyper investors" is to finance the free software. Think about it... If you're working to produce the best OS in the world and you want to spend all your time on it then why not let some financial weenies from wallstreet pay your salary. Or you could offer your best people stock options to encourage them to stay with you and not bail out for higher paying jobs. This is after all still a competetive industry and our economy is still based on making money to pay the bills.

just my $.02

Well, you asked for it.

[chrisd]

Boy, I don't want to talk to much about this, as I have -no- clue as to what the SEC would see as illegal, so I'm not comforatble talking aobut actual shares and stuff. It's actually harder than just granting stock to developers because, in reality, where do we stop, I mean there are tens of thousands of them out there. So that is what we are wrestling with, how do we reqrd the commmunity while not alienating /insulting it with some bullsh*t token gesture. This is what I was hired to do (among other things)

In the short term, we are trying to payback the community from whence we came in the following ways

Hosting projects

Hardware donations (debian/fsf/others)

Outright hiring people to work on free projects (those that have somethign to do with va nad those that have little to do with VA)

Joining organizations that we feel are important to OSS (li,x/open)

Donating to FSF

Running linux.com in a very community way

Of course open sourcing whatever we do.

Helping new proejcts get off the ground

Helping out lugs (somethign near to my heart)

Helping prominant developers with travel/hotel for tradeshows and such.

But we are not really satisified with just this. I'd actually like to solicit help, if you have a good idea, email me at chris@valinux.com with your suggestion.

Post IPO, look for us to

Expand the above

Endow open source chairs at universities.

Offer Scholarships.

Expand how we can help out in the lugs and such.

Offering financial/hardware support to those projects that we have not been able to help yet.

and more, hopefully.

This is obviously only the beginning, so there you go. Email me :-)

Chris DiBona
VA Linux Systems

--
Grant Chair, Linux Int.
VP, SVLUG

Do they need to?

[Fizgig]

Do they even need to go public? As much as I would like them to offer me a job and make me rich, do they even need to go public? They have people like Netscape/AOL and IBM investing in them. They can live off that pretty well and continue to grow. The only reasons they would need to go public (correct me if I'm wrong) would be to raise more capital, which they seem to have plenty of, or to have their stock go sky-high and then bail out. This is what tech companies tend to do, but why should they? If Linux really is the next-big-thing, they can just wait until it really takes off, and then both Red Hat and VA (as well as their long-time employees) should be raking in big dough on their own merit, not because of the overspeculation of a million tech-hyper investors. Am I wrong here? Why should they go public? They have more than enough momentum and private investment that they can survive quite well until they hit the big time. True, they could become a billion-dollar company overnight if they went public, but they wouldn't own as much of that company any more. Why not wait a few years and try to become the billion-dollar company on their own merit?

Re:Do they need to?

[Fizgig]

I see your point, but I think a lot of people are missing the point:

Barring any deal to the contrary, it is "RedHat" which decides whether or not they go public.

It does not matter whether IBM would prefer stock or cash (though they can get a piece of the company even if it's not publically traded). It does not matter what the employees want. It does not matter what Linus wants. It doesn't matter what I want, though if anyone's listening, put the deed in the mail!

Whoever owns the company decides. IBM and AOL probably own a bit, though we don't know that. Young and the other founders probably own the rest. I don't know. We don't know. But whoever does own it decides, and whether or not they go public will be based on their self-interest (which could of course coincide with mine, Linus's, IBM's, and their employees' self-interests).

Re:Do they need to?

[Fizgig]

1) Employees. Oh yeah. They probably have stock options up the wazoo, making many of them probably paper millionaires.

True, but this is still the "bail-out" theory. If they have more discipline and enough resources, they can tough it out and just pay them more. Besides, it's not necessarily the employees making the decisions (well, I guess it is, but not necessarily all of them). It's the owners (who, again, happen to be the founders, who are still employees).

2) Netscape/AOL and IBM are going to want their money back. How better to repay then giving them x% of RH stock?

Why not just pay them back with cash? It's an investment. Of course, none of us knows the exact terms of the deals (at least I don't), so they might already own parts of Red Hat.

3) (did I say two?) Buy up smaller companies. Not a real advantage for RH and the technology it uses (since much of it is GPL), but stock swaps seem to be the way buyouts work.

This is a good point, I guess. They would need a lot of capital to buy other companies. I just don't know if that's enough.

The Timing is Right

[Aiantes]

It appears that we are at the beginning of an exponential growth in Linux distribution. That's precisely when an IPO is most useful, since value will continue to accumulate for a long time to come.

What puzzles me is why Augustin is puzzled over how to compensate Linux developers.

Well, let me back up: it's absolutely terrific that Augustin wants to secure some sort of compensation for Linux developers.

But why is he puzzled about it? The answer seems obvious. Dedicate a chunk of stock to be distributed across the developers. Stock can be gifted, you know. Perhaps someone from within VA (Chris?) could give us some insight on Augustin's thinking.

Then, when the company goes public, the developers can (after a year, I believe) get some monies out--perhaps to help support additional development.

Another interesting question is how the rest of the Linux--Open Source, generally--community can be allowed to get a stake in the growth of Open Source.

Perhaps a Linuxphilic Mutual Fund could be set up which invests largely in Open Source dependent companies.

Does anyone know how to go about doing this sort of thing?

Of more immediate concern are the impending IPO's.

Perhaps if a fund were set up to allow rabid open source fans like myself to collect together a huge amount of money, and then do the hardest thing possible--get in on the ground floor of an IPO.

To those who fear IPO's as risky: You are quite right to be cautious. But the growth of OSS, and the frankly astonishing growth of companies like VA (as I lovingly caress my VARstation) and Redhat, makes these IPO's a very different proposition from the typical IPO.

Keep in mind that stock markets are a good investment only so long as companies continue to grow. Can't we be somewhat confident that OSS will continue to grow?

I think we can. I've read the arguments in favor of OSS--I've even given some of them in my IT-Ethics class. The arguments in favor of OSS over CSS--some ethical, many economic--are all fo them sound. OSS will continue to grow.

It's time to hitch your wagon up to the OSS train.