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VA Linux Systems Opens at $300
Well, I'm going to drown in submissions if I don't post the news that VA Linux Systems opened at 299$ a share, which is some sort of record, I'm sure. You can check it's current trading level as well, albeit with a twenty-minute delay. Congrats to all involved.
I'm really not surprised about the opening day so far. Red Hat was the first big deal like this, and all the people who missed out on that one are trying to jump in on this one.
But anyways, althought this situation is a good one that makes a lot of people happy, is still needs a least a little ribbing... So onto the Fake News:
Austin (Reuters) - As part of the ever increasing wave of Linux IPO's to hit wall street this year, linux hardware maker Joe Smarty announced a filing with the SEC to take his company "Joe's Appliance Shack and Pager Hut" public. The company will trade as JSHK.
"We're very confident about the stability of our business and our future product success." States Joe. "For example, take a look at our Linux Toaster. It makes 8 perfect pieces of toast a minute, our competitors can only get 4 pieces using WinCE. We made 20 G's off that baby this year alone."
When assistant manager Steven "Lord Gorth" Ackerman was asked what the new money would be used for, he had this reply: "well, we're looking to expand. Buy a bigger building, hire some new people. The toaster was great, it makes damn good toast, but the market place is so broad! And so much of it is just not being addressed at this time. With another 10, 20 or 5000 coders we could be making refrigerators that double as Quake servers!!! I'd want that. Wouldn't you want that? Everyone needs one of those. Not to mention what we could do with coffee makers..."
There has been some worry however that the hype surrounding IPOs would inflate the market capital of Joe's Appliance Shack hundreds, even millions, of times above the worth of what is still essentially a toaster company.
Joe has no problem sharing his future company strategy with worried investors. "Don't worry," says Joe, "Once we hit a market cap of 3 Billion, we'll buy AOL. Maybe Disney."
Sig:
Barbeque is a noun. Not a verb.
Put a Dell workstation and a VA workstation side by side, and yes the VA workstation will cost more. But for that price you get ECC RAM, SCSI tuned for Linux, a CD drive that rips audio properly, a sharper monitor (even if you decide to go with the 17 inch monitor against the Dell 21 inch), and a motherboard that won't break every year. (I'm speaking from personal experience here. Your mileage may vary.)
Maybe in the future things will change, but right now companies like Dell only pay lip service to Linux without actually committing to it. Dell picks hardware to run on Windows and slaps Linux on a few of their machines. VA picks hardware to run on Linux. I doubt that Dell will ever see enough Linux volume to justify the same level of commitment to Linux as VA.
Clearly if you don't have money you don't have a choice, but if you do have money and you want an x86, you can't go wrong with a VA Linux machine.
It went as high as $230 a share, and is now stabilizing a bit at around $265.
This puts VA Linux at a $1 billion dollar company right now as we speak. Not bad for a company with about $14 million in revenues (they did not profit) last year.... and they were initially trying to raise about $50 million.
Congratulations to those that weer able to get some at the offering... for those that got it afterwards, you may be in a bit of trouble!
what Louis Rukeyser is going to say about this, he's usually pretty OPTIMISTIC.
A lot of monied people have tried M$ and found it wanting - they probably know there's GOT to be something better - and Linux CAN fill that order.
Chuck
try { do() || do_not(); } catch (JediException err) { yoda(err); }
As you can expect, the underwriters are very busy taking and making confirmation calls. Don't worry about it, everyone will be contacted and every voice mail will be returned. we have 40 people on the phones at DBAB and they are all working as fast as they can.
If you are -hyper- paranoid about not getting through with your confirmation, feel free to email me at chris@valinux.com and I'll forward on your confirmation (if you are in the program only, of course) and answer any questions you might have.
Thanks!
Chris DiBona
--
Grant Chair, Linux Int.
VP, SVLUG
Co-Editor, Open Sources
Open Source Program Manager, Google, Inc.
"Not bad for a company with about $14 million in revenues (they did not profit) last year...."
EBIZ which runs TheLinuxStore had $15M in sales last year, yet they're trading at $4.5/share.
Clearly VA Linux is over valued. There is only so much money you can make assembling off the shelf components. They basically can only compete in three areas: price, quality, or service. Though my impression is VA Linux quality is higher than EBIZ, EBIZ has better prices. Quality I think is moot as they would have have to hire and train 100's (if not 1000's) of new techs to install and service new equipment if their sales were to get anywhere near where they should be to justify the stock price. Such a fast staffing-up will inevitably lead to some quality problems.
Another company that shows how overvalued VA Linux is, is SGI. SGI has something like 1.2M shares of VA Linux thanks to early capital investments. That stock now represents about 1/6 of the total value of SGI.
Work for Change & GET PAID!
It means that day traders have noticed the same thing most of the Linux stock
:)
watchers noticed the last week or two. So thay drove the price up to huge heights.
Now the ticker is ticking down from it $320 high....
Its at 247... as I type. People who wanted to earn a Ferrari for Christmas
got it, and now are running to the dealership.
So what to do? Hmmm, well one thing is sure. VA Linux is going to all
over the news tonight. Meaning that LINUX will be on the news
tonight. This again, will give the general public more information
about it and many more will see that Linux is a GOOD THING(TM).
This will drive more "Real" investors to Linux companies, which will drive
the Linux index up.
I predict that Linux companies will continue to grow at a faster rate
than the market. I'd even say much faster, but some of you might take
this against me, if it doesn't happen.
Anyway, these are just some of my thoughts after the $13->$23->$30->$250->$320->$247
ride of VA Linux (LNUX) this afternoon.
What to do?
Buy Linux/Open Source related companies at a price you feel comfortable
with. Just don't come to me and complain about losses.
I really think that this conformation from Wall Street means that Linux is
being taken seriously and that it will continue to prosper.
So what companies are we looking at?
Look here to get an idea about some of them.
I hope I didn't bore you with these comments.
Later
...Marko
P.S. And rember how Linus answers the question:
Uninformed Interviewer: What do you want to do with Linux?
Linus: World domination, asap.
:)
-- &&
My, all the doom and gloom.
:)
Yes, Linux stocks are vastly overvalued. Microsoft stock is too. I'd agree a correction is likely, and I share the hopes it won't be too drastic.
But not owning a share of stock myself, I can see this as simply good news. A bunch of people on Wall Street, one of the most conservative and change-hating bastions in mainstream America, are willing to bet a little money on Linux. Nay, they're tripping over their own feet to do so. Hah!
VA Linux and Andover both got considerable stocks of cash out of their IPO, and that won't go away even if the whole market goes south. Since those are two of my favorite businesses, good deal, and congratulations all around.
Andover's IPO may have been especially significant, even if not quite the record smasher VA's was because it is the first instance of a very successful Open IPO of which I've heard. Those who were toying with the idea of buying VA stock after it reached the public, only to find it opening at $300, will readily understand the advantages to regular people of a Dutch auction style IPO now. Andover not only made a bunch of bucks, but they found a way to share it with anyone who wanted to and could afford to buy.
Frankly, unless you've got stock in the market, it seems time to lighten up and enjoy the ride. It's not like it's slashdot reader's money driving the stock to these heights, there's nothing we can do to to slow it down now, and no lack of mainstream voices yelling about the overvaluation already.
I imagine the Linux companies are a bit nervous about the situation too. Who would want to be the one blamed for the stock market tumbling? Not the time for dumb moves or foot-in-mouth disease. Shareholders forcing proprietary schemes on Linux companies to preserve artificially high stock prices is the only conceivable downside I can see to this. Shareholders must be made to realize that proprietary scheming could tank their stock quickly thru developer boycotts and general bad publicity.
You know, I'm not a market expert either, but I don't think the bursting of the tech bubble will have serious economic consequences, except for individual investors who go out and buy yachts and multi-million dollar homes on the basis of all this paper profit. Yes, VA Linux has an $11 billion market capitalization. That will, at some point, collapse back to a reasonable $500 million - $1 billion market cap. That won't hurt VA systems, it won't hurt the overall economy (much) as it is a miniscule fraction of the GDP, even the whole speculative tech sector (.com's and linux specs) is but a small part of GDP. The people who will be burned is those who have thrown any significant part of their own assets into these. Unless you're on margin, you can't lose more than you bet. If you bet the farm on VALinux and don't have most of your money in a diverse portfolio of stocks, bonds, real-estate, and cash, then you will lose the farm. And you'll deserve it too.
It's my opinion that the VA Linux stock
is terribly overpriced. The fact is,
VA Linux is in a very competative marketplace
and their competitors (IBM, Dell, Compaq,
Gateway, etc) are better poised to capture
the Linux server market, should they decide
to.
Let's look at what VA does:
1) They make Intel desktops and servers
2) They produce a value-added linux distribution
that's tuned for their equipment, which generally
consists of widely available PC hardware.
Now the problems with their business model:
1) Their Intel desktops and servers are hardly
unique or exceptional. Having hands-on
experience with VA Linux equipment as well
as Dell, Compaq, IBM, and Gateway equipment,
I can say that I think VA Linux has a long
way to go before they catch those guys when
it comes to the quality of their servers.
Desktops may be a different story because their
quality varies widely from producer to produce
and even within product lines. On average
though, I'm not impressed with the quality of VA Linux's server hardware.
Additionally, Dell and the other big boys buy
their hardware in much larger volumes than VA
does. VA cannot hope to compete with them on price any time soon. If you don't believe me, price out a
two CPU rackmount server from VA and then price
one of IBM's models out and see who comes in cheaper.
A lot cheaper.
2) Their value-added distribution is not that "value
added". Since their tweaks to the kernel are all
open-sourced before they are sold, they are openly
available to their competition. It would not be
that hard for one of the bigger vendors to put
together a server based on well-supported hardware
and acheive the same performance that VA is getting
out of their boxes. In fact, it has already
been done.
I can see one of the big vendors getting into the Linux
market "big time" within the next few months. Essentially,
all they would need to do was hire off some of the kernel
developers out there and financially back a major Linux
software project like KDE and they would already be ahead
of VA Linux. Remember, these large manufacturers are
buying their components in much larger volumes than VA
Linux and can blow VA out of the water on pricing.
In conclusion, I think VA Linux is a really great
company, boldly breaking into a wonderful new market
but they don't have the garaunteed market that stock
traders seem to think they have.
I think it's all in the ticker and in the company's new name. Calling themselves "VA Linux" and LNUX is causing the unwashed masses to think they are Linux. All the hype that they've been hearing about? Oh, that's where this Linux thing comes from. This company called VA that makes an operating system called Linux. They must be the next Microsoft.
Was it wrong for VA to choose a ticker symbol that suggests that their company is all about linux, when actually their company is all about hardware? Perhaps.
Dell Computer is not considered to be a Microsoft Windows company. They're a hardware company that made a choice early on to install the Operating System that they believed in. Now they're also choosing Linux, but that's pretty recent.
VA is not Linux. Red Hat is much closer to "being" Linux than VA is, and they're certainly not Linux either. Linux is a group of people all over the world, and they can't be bought and sold on Nasdaq or anywhere else.
I'm done ranting, I think. If you made it this far, you might as well moderate my sorry ass up :)
RP
there are two types of sell you need to think about -- "market" or "limit". Just tell the broker which you want.
A market sell means to sell the stock at whatever the market is currently trading it at -- this may be higher or lower than your information, and it's intended for folks who want to cash in as QUICKLY as possible.
A limit says to sell at a certain point -- say, $250. That way, if it dips below $250 a share, your broker will sell it immediately. this is intended to keep you from losing value if the price drops. But if it goes up to $300 the broker doesn't sell. Then maybe you call later and raise the limit to $275, so if it drops down to $275 it will sell.
Recursive: Adj. See Recursive.
It's all going to go belly up some time in January or February.
:o/
Any dealer with a brain cell knows that certain sectors such as internet services and certain software stocks are massively overvalued. They also know that nobody is likely to bottle out just yet because, well, why should they? Thus they continue piling into hi-tech IPO's and anything with the trendy new open source label because they know from recent past experience that they'll make a quick killing.
At the same time they also know the market is expected to undergo occasional spontaneous corrections because it's chaotic and therefore unstable.
Brokers might be prepared to sail pretty close to the wire, but the key is to get out before everyone else does, so they're constantly sniffing for clues that the party is about to end. All it takes is for some news item to make a few dozen big brokers nervous at the same time, and they'll all start dumping stocks. And when one market starts this process, the others follow as the world turns.
Market falls are usually triggered by bad news of some global importance, but when stocks are overvalued it often appears that market reaction is still well out of proportion to the initial trigger. I'm thinking particularly of the 20% fall of the FTSE-100 (I think the Dow and the Hang Seng suffered about the same) during just a couple of days in 1998 because of a sudden loss of confidence. The real reason IMO was that a correction was simply overdue and somebody decided to get a head start on the others which got the ball rolling.
It's almost as if brokers in any given market share some sort of herd instinct. This is an inevitable aspect of the mediocrity of most dealers. Assuming that you don't know the market better than 90% of your fellows, the best way to keep your job is to be sure that you're doing what everyone else is doing even if it's against common sense. In other words, look out for trends and try to be one of the first to follow but don't get caught out there all by yourself. So they'll continue milking the cow for all it's worth until they begin to start feeling uncomfortable as the realisation slowly dawns that the cow they bought is little more than a mirage.
Surely many brokers must realise that time is almost upon them now. If so, many of them will be looking for a plausible excuse to switch strategy early next year. Of course they can't afford to just sell everything without good reason. But just about any bad news at all should provide a good enough excuse for the more cautious to ease themselves out of the game.
Fortunately for them, the media will be expecting a few Y2K glitches to hype up into front-page scare headlines. Now some minor Y2K cockups are inevitable even in those countries and corporations who dealt with the problem, and there are plenty of countries with significant economies who never really got it together. And our economies are all pretty tightly linked these days. So I believe those twitchy brokers will get their excuse.
When they do react, it won't go unnoticed. Trends are particularly easy to spot in electronic order driven markets, you just watch the online order book. So once people notice that the smart money is moving out, the trickle will rapidly become a flood.
I could be dead wrong about all of this but I feel it in my bones that a major market correction is on its way. I just hope the banks don't go down too like they did in 1929. If it's not just technology stocks but everything that's overvalued then we're in even bigger trouble. And that shortages stemming from interrupted supply lines (when producers and distribution companies find themselves paralysed by Y2K breakdowns) don't result in hyperinflation.
I'm certainly going to liquidate what stocks I have before the new year. The problem is, there's nowhere I can think of to put the proceeds that's immune to all of these risks
Consciousness is not what it thinks it is
Thought exists only as an abstraction
Well that depends upon how long it takes them to do the paperwork to split the stocks 3 or 4 ways. If they can get it done in a hurry, it will stabalize a bit and other people will be accually willing to buy it.
You don't need to be rich to get in on an IPO, of course it doesn't hurt.
Open an account at an online broker, I've got one at E*Trade, and every pay check put in a small percentage of your paycheck. When you put away money upfront its less painful then trying to come up with a wad of cash for the next big thing.
A money market account at E*Trade pays a pretty respectable interest rate. A lot better than my traditional bank and it has free checking. If I ever need to raid it I just write a check.
I did everything right, confirmed my bid for 200 at $30. And didn't get anything. I realize this is extremely common with an IPO.
Did ANYONE get stock with E-Trade today? Those that got in early the last few days? I would just feel better knowing that someone got something, cause i am starting to think that E-Trade kept them for themselves when they saw the asking prices.
Write more window managers? Write more device drivers? Red Hat broke $200 in November but how much have we seen result from that? I'm still using Netscape 4 to read this and the same software I was using before the IPOs for all the networking. Red Hat still employes only 7 engineers. I still wouldn't dream of finding a job coding in Linux and the number of people wishing they could code Linux software for a living hasn't changed.
... but the stock market will, eventually. Does anyone else think that this "irrational exuberance" (to quote a certain Mr. Greenspan) has gotten ridiculously out of hand? I'm no market expert, but none of this current boom seems to actually be based on actual company value, but rather what people think stock is worth to others. As soon as there is a crisis in confidence (for whatever reason) the bottom will fall out of the market like crazy. I dread to see what happens on that day...
IAAL,BIANLY
Andover.net tried to negate that as much as possible by offering a "Dutch Auction".
:) The idea is to better determine the price of the offering through an initial bidding process with individuals and institutions.
This method is unlike traditional underwriting methods in that it is set up to avoid these huge first day run-ups... insuring most of it goes to the company (those greedy bastards at Andover.net
Funny you mention the tulip bulb mania, because this is where "Dutch Auction" got its name from.
Needless to say, the method did not work very well as Abndover.net still ballooned up 252% at the opening.
Chris
--
Grant Chair, Linux Int.
VP, SVLUG
Co-Editor, Open Sources
Open Source Program Manager, Google, Inc.
As much as I like VA, I don't understand why their valuation should be higher (long-term) than other computer manufacturers. Let's face it: if, say, DELL wanted to become a bigger Linux company than VA, they could do it in a second.
Shares will officially in your the account on tuesday, the settlement date.
You can sell now if you like. Settlement date doesn't change that. To sell, you call the number in your packet, ask to talk to a broker, get the broker's name, tell them your sell order. They will probably hang up on you at this point and will call you back with a confirmation. This is how brokers are. This may seem rude, but it's how thier line of work works.
At the end of the day (After 5 pst probably) everyone will get an email confirming the deposit of the shares in the account. If you do not geta confirmation email by say 10pm pst, you have my permission to flip out and email me spaztically :-)
Please read your Q&A again, the bulk of the people calling are asking questions already asked in thier forms. Please RTM, you'll make this so much easier if you do.
Again, if you have questions , etc, email me chris@valinux.com. I will forward these on to the underwriter.
You are wasting peoples time if you send mail to me and the broker mulitple times. We are receiving the email, I assure you. Everyone that comes in must be checked against the lists we have and that takes a little while.
Happy holidays.
Chris DiBona
--
Grant Chair, Linux Int.
VP, SVLUG
Co-Editor, Open Sources
Open Source Program Manager, Google, Inc.
Bah!
US stock market nowadays is like some slimy scam! I'm happy that people are getting rich, but it's all insane. People like us aren't the ones that are driving the stock prices crazy, it's the fund managers that are trying to hold on to their jobs, it's everyone and their grandma who is daytrading.
Here's my main beef: there's no opportunity for anyone to profit from these stocks. They gap open to a price that is WAAAY overvalued, and then the corporate investors take their profits, and the stocks dip by the end of the second day. There is no opportunity for average not-well connected people to "get in" on anything anymore.
Stocks are priced, but never go on sale for that price. Why not just start pricing IPOs at $300/share???????
This is not a sustainable model.
I can see it now: Fund manager to fund manager: "we're getting out of Microsoft and getting into linux - Buy every company that does anything with linux and continue to accumulate all stock that you can get your hands on AT ANY PRICE"
I'm sorry I missed out on the VA IPO, but jeez... this is just insane!
Oh well, at least I'm glad that I'm not a not a financial consultant or work for a brick-and-mortar investment firm. Their days are numbered.
I guess this is good news for opensource... there'll be plenty of linux millionaires that can devote their life to creating 32-bit color icons or ultra-cool widgets, or whatever turns them on without having to worry about making a profit from it.... (or needing to prostiture themselves by writing windows code)
Seems you need a lesson in stocks. Just because the stock is at $200, doesn't mean Red Hat has free access to all those dollars. Shit, the brokers are the ones who make most of the money. All red Hat got was the initial selling price. The rest is pocketed (hopefully this will be changed by law) by those who got in on the IPO and then made them available at the inflated price. RHAT can start selling of a few million shares to get a lot of the $$$, but that's it. They can only do so much.
Very cool. To commemorate their very successful IPO, VA has announced that they will build a limited edition system on par with their StartX ZP workstation called the Dutch Tulip ZP. In the release, VA says that the main difference will be that the limited edition DT ZP will be priced about thirty times what it's worth.
Maybe I can get VA to send me a test machine for a while? Cool stuff.
So let's see. VA's an Intel-based hardware company. They sell the usual ATX-case Celeron PCs, some decent workstation models, and some good-but-not-terribly-innovative servers in the 1-4 CPU range.
So all the excitement is over the fact that they do a good job of testing and preinstalling Linux on them? That they have a modest services operation that builds turnkey Beowulf clusters? That they employ a few prominent programmers, and do some of their own hardware R+D?
And once the Dells, IBMs, HPs and Compaqs of the world ramp up support and services organizations for Linux, where does that put VA? VA makes good, speedy machines, but customers that care most about speedy machines want a hardware vendor with a broad product line and a comprehensive support solution. Supporting only one OS on Intel hardware is a bit archaic these days, and VA's 4-CPU top-of-the-line makes them no more a threat to Compaq in the Fortune 500 than Dell is.
By comparison, Cobalt is a more rational investment. They picked a couple of vertical applications and homed in on them hard.
They're not just a beige box builder that added Linux to their name, they actually do know the OS and what kind of hardware to put it on well. When we got a Linux workstation last spring, Gateway considered it a "special engineering" cost of ~$500, Dell charged as much as for NT, and both of them offered a selection of adequate but poorly-selected-for-Linux hardware, going with Adaptec over Buslogic, with some poor video card over Matrox... just basically taking their Windows workstation and slapping Red Hat on instead. I'm sure the big vendors are putting Linux prices in line with reality by now, but they're probably still shipping hardware with reverse-engineered drivers.
Let me give you an idea of how ridiculous it really is.
:)
Right now, VA Linux has approximately the same market cap of Amazon.com = $11 billion.
The reason I am going to talk about Amazon is because I recently ran a model on Amazon... but not on VA Linux.
Sales in 1998 for Amazon.com were $590 million.
VA Linux had $14 million.
For both companies, we can assume an operating margin (profit) of about 10% (Both are in highly competitive areas, with VA Linux having significantl higher barriers to entry). This will give us abou $40 million in net opertating income after taxes for Amazon.com (exluding startup costs). Assuming absolutely no growth out of Amazon.com, what would $40 million over the next 10 years be worth?
To get that number, we need a discount rate, or the cost of capital needed to generate those earnings. Because the stock is volatile, we assume a high cost... 15%.
Divide $40 million by 15% which gives us $270 million.
With no future growth, this is what Amazon.com would be worth ten years from now $270 million Which equals about $2.25 per share.
Obviously, investors are betting that Amazon *IS* going to be growing over the next ten years... but let's find out how much they are betting on ti growing:
Simply subtract $270 million from the current market market value ($11 billion), which gives us $10.7 billion roundly. How much do they need to grow? Well, by putting these numbers into our handy financial calculators we come up with an average annual return of 59.6% a year for ten years assuming margins of 10% and a 15% capital cost. Is this unrealistic? You bet.
Another way to look at it:
Barnes & Nobles and Borders together generate about $5.3 billion in sales with a scant 2% profit margin. People buying Amazon.com right now, are betting that they will completely run Brders and Barnes & Nobles out of business, as well as succesfully stealing a ton of market share from other business areas it is entering into.
Well, VA Linux generates even less revenue than Amazon.com... yet is valued just as high. Throw in increased pressure from IBM, Sun Microsystems, Compaq and Dell, and you are looking at a company with absolutely no room for error.
Good luck
And then put QT under GPL, removing once and for all what may be the biggest question mark in the open source world.
Like all the other linux IPOs, VA needs to beef up its assets by acquisition before the blush fades. Troll Tech would be a high profile, community-oriented acquisition that would have the immediate effect of boosting VA's market capitalization yet further. This would be a far more satisfactory arrangement that, for example, Troll tech winding up as a division of Red Hat, which already has a lot of influence over Gnome. We have to watch out for too much concentration of power on the commercial Linux side, and we have to let our desires be known.
Corel should also be thinking about making this move.
Looking into my crystal ball, I see flocks of bankers bearing bags of money camping out on a certain doorstep in Norway...
Life's a bitch but somebody's gotta do it.