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; Thursday December 9, 7:36 pm Eastern Time
Linux, the Net's own operating system, grows up
By Dick Satran
SAN FRANCISCO, Dec 9 (Reuters) - Free software is worth more than anyone ever imagined.
The cult-like Linux open source software movement that began as a blow against big business has become pretty huge itself. VA Linux Systems (NasdaqSC:LNUX - news) Thursday shattered the record as the most successful initial public stock offering in history and became a $9 billion company overnight.
The Sunnyvale, Calif.-based software service company, whose stock soared 700 percent on its first day of trading, up $209.25 to $239.25, topped the record first-day gain of 606 percent set by The Globe.com (NasdaqNM:TGLO - news) last year.
Linux has been around for more than five years, but it's mostly been of interest to computer professionals and techies until now. A product of the Internet, it's been built as a collaborative effort by thousands of computer programmers around the world who update and swap computer code over the network.
''Most people couldn't really understand it or get excited about it before,'' said Daniel Kusnetzky, an analyst with International Data Corp. ''But now it's become a story that's very attractive to a lot of people -- it's got a real mythology to it.''
Linux began with a graduate student at the University of Helsinki, Linus Torvalds, who wrote his own software, based on widely available Unix software. He put his work on the Internet, and other programmers began to de-bug and update it.
Soon, hundreds of people were getting involved in a movement that was largely a reaction to Microsoft Corp.'s dominance, and the feeling that creativity was being squelched by a lack of alternatives, Kusnetzky said.
''There was a religious fervor to it when it began -- a holy war against Microsoft,'' said Jon Katz, a culture writer for Slashdot.org, which acts as a kind of bulletin board for the open source community operated by Linux service provider Andover. Open source has evolved into a full-blown movement that is ''trying to knock down the walls of corporatism,'' Katz said.
In the narrower, technical view, the theory of open source is that the more eyes on a piece of software, the better it will be, free of bugs and improved by new ideas. Moreover, companies that closely protect their software code don't get proper peer review, like open source gives. ''The argument is: You wouldn't build a bridge or a highway without having it put to independent review,'' Kusnetsky said.
Few personal computer users have ever used Linux, and it lacks the graphical user interface that makes Microsoft Windows relatively easy to use.
But the Internet has given users a chance to create such enhancements, and commericial product offerings are appearing. Apart from providing a platform to work on, the Internet has also provided Linux with a model for converting communities into hard cash.
Companies thought to be pure bastions of ideas, almost in the academic mold, have become bankable. The Well online community and Pretty Good Privacy, a one-time computer privacy advocacy group, are two well known examples of open communities that sold themselves for stock of publicly traded companies.
Indeed, the Internet itself has been commercialized without much fuss, moving from an era when ''dot-com'' addresses were gauche to one in which anything else is uncool. Network Solutions, which registers names on the Internet, evolved from a public interest consortium into a commercial company worth billions of dollars.
The evolution, in the case of Linux, isn't complete, but it's well on its way. ''There is some angst and fear about where this is going. Linux people are thrilled that they won the battle, but worried that the freewheeling era is cooling down.''
Linux software services company Red Hat Inc (NasdaqNM:RHAT - news) chairman George Young, one of the first to get rich on Linux, calls the commercialization a good thing. ''It's an expansion of an ecosystem that is being created with Linux and open source.''
Evidence is everywhere that Linux has become a hit in corporate America. Red Hat, which went public earlier this year, is now worth nearly $20 billion, and Andover.Net Inc (NasdaqNM:ANDN - news), another Linux service provider that went public Wednesday, has also topped $1 billion.
The huge valuations come despite a lack of any profit for most of the companies, and warnings from the companies themselves of considerable financial risks in a business whose main software product is free. The companies charge only for servicing the software.
Still, the movement is getting help from a string of major corporations, from IBM Corp to Hewlett-Packard Co to Dell Computer Corp, which have started bundling the software into their computers. Software stores as well are increasingly selling packaged versions at cut-rate prices.
The burst of energy in the stocks was triggered when Microsoft lost its court ruling and was labeled a monopoly. That has caused some corporate computer purchasers to ''hedge their bets'' by exploring alternatives, Kusnetzky said.
Traditional Microsoft rivals like Sun Microsystems Inc (NasdaqNM:SUNW - news), meanwhile, have been quick to get into the act. Sun bought a company, Star Office Division, that makes a free Office Suite running on Linux.
The software may well pose a threat to Microsoft, as a very low priced alternative with the potential to become a bigger factor in the computer server market, where it already owns a significant market share, and on the desktop, where it will grow as software applications, like Sun's Star, become available. Already, IDC says, 15.8 percent of new server operating systems last year were Linux.
''The grassroots revolutionary technological movement is suddenly is becoming part of the corporate mainstream,'' said Katz. |
