Linux in spotlight again in two IPOs this week
By Therese Poletti
SAN FRANCISCO, Dec 5 (Reuters) - The renegade Linux operating system will be in the spotlight again this week when two related companies, the much-anticipated VA Linux Systems Inc. and Andover.Net. , go public.
Both companies are well-known in the quirky Linux community and among software developers. But they are also expected to get a warm reception on Wall Street, especially after hot IPOs by Red Hat Inc. , the biggest Linux distributor, and Cobalt Networks Inc. , which makes server appliances that run Linux for small to medium-sized businesses.
"The big headline next week is VA Linux," said Irv DeGraw, research director of WorldfinanceNet.com, an investment Web site based in Sarasota, Fla.
"It's in a class by itself. Anything that is Linux-related and reasonably substantial is going to be extremely well-valued at this point."
VA Linux Systems, based in Sunnyvale, Calif., develops computer systems and servers that run the Linux operating system. VA also provides customized versions of Linux for its services and customers, who include Akamai Technologies Inc. , eToys Inc. and others.
It seeks to raise over $48 million when it goes public.
Linux is a free version of the Unix operating system, and was developed by Finnish programmer Linus Torvalds and a group of far-flung co-religionaries around the world. It has taken the computer world by storm in the past year, as many companies start to adopt it for specific purposes, such as Web servers or hosting e-mail, as an alternative to Microsoft Corp.'s Windows NT.
VA Linux Systems was founded in 1993 by its chief executive Larry Augustin, while he was a Stanford University graduate student. Augustin has joked that his biggest claim to fame was that he started a Linux company, building Linux workstations in his living room, instead of joining fellow students David Filo and Jerry Yang as they started up Yahoo! Inc. .
Now Augustin and other VA Linux executives are likely to see a financial windfall for themselves, as well for members of the Linux software developer community. Like Red Hat, VA Linux Systems offers Linux developers an opportunity to buy its shares through its friends and family program before the initial offering. Credit Suisse First Boston is the lead underwriter.
"VA Linux could see a gain of 300 percent," said Jeffrey Hirschkorn, a senior market analyst at IPO.com in New York.
For the year ended July 1999, VA Linux had revenues of $17.7 million with a net loss of $14.5 million and among its investors are Intel Corp. , Sequoia Capital, SGI and others.
The second Linux-related IPO of the week, Andover.Net, is a network of Web sites with content, community and e-commerce, targeted to the Linux and open source community. Andover.Net's most well-known site is Slashdot.org, a must-read in the open source community, that bills itself as "News for Nerds."
Andover.Net, based in Acton, Mass., was founded in 1992, initially as a software publisher, but then moved to Web-based publishing in 1996. The company's recent acquisitions of sites like Slashdot.org and Freshmeat.Net, have boosted its traffic.
Analysts said that Andover.Net is next week's wild card, because it is offering its shares through a Dutch auction, or an open IPO. In a Dutch auction, the opening price of the IPO is based on bids received from investors, ahead of the IPO date, so investors set the price of the stock.
Friday lead manager W.R. Hambrecht raised the projected range of the share price to $15-18 for four million shares, up from $12-15 a share previously. But the IPO price depends on the auction's results.
"We will now see how the open IPO will work in a real hot sector," said DeGraw. Past open IPOs, Salon.com and Ravenswood Winery Inc., did not fare well and Salon.com even closed 50 cents below its offering price of $10.50 on its first trading day.
Andover.Net's revenues were $1.3 million in 1998, with a loss of $474,000. It has over two million users and over 40 million page impressions a month. Its IPO is expected early in the week.
"I love Andover.Net," said IPO.com's Hirschkorn. "You don't know what to expect and it has a lot going for it. They are an Internet portal that generates most of their money from advertising. From what I hear on the Street, this is going to be a rocketing change from the past open IPOs." |
