From Forbes.com:
forbes.com
March 15, 2000
Caldera Prepares For Strong Debut
By Nicole Koffey
NEW YORK. 4:30 PM EST-Orem, Utah-based Caldera Systems (proposed nasdaq symbol: CALD) is expected to turn out a stellar performance from its IPO this Friday, when shares of the latest Linux player debut. Although its tie-in to the free Linux operating system will secure a strong opening, Caldera's lack of fresh perspective and obscure branding leave little to inspire any ongoing enthusiasm.
Caldera was one of the first to market with Linux-based software. But as other Linux players like Red Hat (nasdaq: RHAT) and VA Linux (nasdaq: LNUX) continue to extend into the software services and hardware aspects of the business, Caldera has not kept up. As a result, the company offers little in the way of innovation to an industry that remains in question.
Demand for Linux companies stems from the need for support for an operating system that largely exists in a sort of repository on the Internet. Because the Linux operating system is free and exists as public property, programmers are constantly adding bits of code and software patches to make it more efficient and adaptable to business needs. The result is a rapidly evolving operating system in constant need of support and packaging.
Although Linux has yet to prove itself a viable alternative to Microsoft Windows and other operating systems, a host of companies are diving in to make that happen.
Players like Red Hat, VA Linux, and Cobalt (nasdaq: COBT) have attacked the problem head-on by offering packaging and special servers that run Linux, and make it easier to manage.
Despite these efforts, most users continue to view Linux as a headache. "There's not really anyone to call when a business has a problem with Linux," says Simon Yates of Forrester Research. "Often fixing the problem is more expensive than what the company would have paid to buy a different operating system--and that completely defeats the purpose of Linux."
In addition to striving after a dubious market, Caldera has failed to differentiate itself from the competition. The company has dabbled in both Linux software and hardware but has failed to make itself a market leader in any one area, says Dan Kusnetzky of IDC.
"Caldera does a great job of making a Linux server look like Novell's Netware server," says Kusnetzky. "But no one knows about it, and the company has done little else to differentiate itself in a crowded marketplace."
This speaks to Caldera's other problem: its lack of a brand name. As players like Red Hat have built strong brand equity and drawn huge attention to their product, Caldera has done little in the way of publicity and consequently has remained virtually unknown.
"Building a strong brand name is crucial in this market," says Kusnetzky. "The entire industry involves proving that you can add value to an otherwise free product. Brand name is key because it emphasizes what you do differently."
So far, Caldera is failing miserably in that area, but a strong performance on Friday could help. In addition to the public relations value, a strong performance could provide the proceeds and currency to make strategic acquisitions.
This, says Yates, is the company's only chance if it hopes to define itself in an increasingly crowded marketplace. But Caldera will need to act fast, given that stock prices of Linux companies tend to come spiraling back to earth a few months after the IPO. Both VA Linux and Cobalt, for example, have lost more than half their value since their stellar debuts.
Regardless, the company could make a strong comeback if it is able to buy its way into other markets and highlight its Linux servers, an area less crowded than software installation tools, says Kusnetzky. Hopefully, Friday will be a catalyst in that direction, provided the enthusiasm of Linux-loving investors is still alive. |
