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.

Comments

For those trying to Confirm.

[chrisd]

Hi;

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

What are they going to do with the money?

[heroine]

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.

Re:What are they going to do with the money?

[MAXOMENOS]

If I were them, I'd put some serious cash into the following:

1. First and foremost, web browser development. Put some serious capital behind the Mozilla project, to make up for the lack of support from Netscape/AOL. As Dave Whitinger pointed out, losing the Browser battle could lose us the War. Mozilla has the potential to be a much better browser than Internet Explorer, especially once it becomes XML and SGML compliant. If you can build perl and python interpreters into Mozilla, you have an IE slayer.
2. Linux Laptop development. Linux is a pain in the rear when it comes to laptops; if VA could start selling them commercially, they would have a virtual lock on the market.
3. Start putting some major capital into open source office suites like KOffice or GNOME Office. This is much less necessary than (1) or (2) since there already exist excellent office suites for Linux (including StarOffice), but it may still be a very good idea just-in-case Sun decides to pull the plug on Linux support, in favor of (say) Solaris 8 for Intel.

The Kulturwehrmacht

Please read for details regarding DB and such...

[chrisd]

Everyone who was in the program and faxed in thier forms is by default confirmed for 100 at 30$. To change your share allotment to 50 or 140 , you must call and tell them.

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

Every company should add Linux to their name.

[hatless]

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.

Moderate this up....

[Rabbins]

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 :)

They should offer to buy Troll Tech

[SurfsUp]

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...