More Linux Lunacy
Investors may or may not know Linus Torvalds from a penguin, but they
can't wait to snap up Linux-related stock. After VA Linux made stock
market history yesterday with the biggest first-day gain ever - giving
the company a market value of nearly $10 billion - the media rushed in
to explain What
It All Means. Depending on what you read, it portends either that Linux
is the future of computing or that investors have abandoned good sense
to jump on the overcrowded open-source bandwagon.
Many reporters did agree that it's been a good week for several
Linux-related companies, noting the stock success of Linux-related
companies Andover.Net and Corel. There was some slight disagreement
about the numbers, however. VA Linux priced at $30 and opened at $299
(or $320, according to CBS MarketWatch, or $300, said the New York
Times). Then it closed at $239.25, rising 698 percent, wrote CBS
MarketWatch, the L.A. Times, ZDNet, and TheStreet.com. Or it closed at
$250, for a run-up of 733 percent, according to the Wall Street Journal,
Wired News and a Bloomberg report in USA Today. Finally, the San Jose
Mercury News and New York Times reported a closing of $242.38. Let's
make it simple: The stock went up, a lot.
The most scathing headline came from the New York Times: "A Tiny Company
With Dim Prospects Goes Public With a Bang." Writer Lawrence Fisher
might not have written his article's headline, but he's most likely
responsible for the biting lead paragraph: "Internet mania reached new
levels of frenzy Thursday as investors paid huge multiples on an initial
public offering, giving a market value of almost $10 billion to a tiny
company with powerful competitors, little revenue and no expectation of
earnings in the foreseeable future." Ouch. The Merc's Cecilia Kang
seemed almost as befuddled by VA Linux's success. "Linux is used on a
mere 2.1 percent of PCs," Kang wrote. "[S]keptics see [Linux] as too
difficult to use and too limited in its capabilities" to go head-to-head
with Microsoft. Joanna Glasner, reporting for the open-source-happy
Wired News, posted an article surprisingly hard on VA Linux, calling it
a "money-losing seller of servers and workstations equipped with the
Linux operating system." She wrote, "Analysts said VA Linux's astounding
IPO had less to do with the fundamentals of the company than with the
general hoopla among investors about anything remotely tied to the Linux
operating system."
Steve Gelsi at CBS MarketWatch reported good Linux PR. "It's seen as
faster and cheaper than Microsoft's Windows NT," said Gelsi. "VA Linux
is certainly capitalizing on the belief that Linux can compete
effectively against Microsoft's widely adopted offerings." Gelsi quoted
obviously optimistic Red Hat Chairman Bob Young rather than the grumpy
analysts other reporters chose. Bloomberg also went with the David and
Goliath angle, calling VA Linux "the company that's challenging
Microsoft Corp. with software and computers for the free Linux operating
system." Well, not "the" company, but okay.
ZDNet turned in one of the more balanced pieces. Larry Dignan pointed
out VA Linux's lack of profitability without snickering, explained the
company's business approach (mostly hardware), and - just to even out
the generally Linux-positive spin - gave some ink to analysts who called
the Linux stock craze "absurd" and "goofball."
We hope Theglobe.com, the previous record-holder for the biggest IPO
ever, enjoyed its time in the sun. But even the analysts opining -
probably correctly - that Linux stocks are wildly overvalued must admit
that VA Linux deserves the record more than Theglobe.com's amateur
homepage factory. - J.M., M.G. |
