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To: allen menglin chen who wrote (88982)	12/29/1999 6:49:00 PM
From: Eric Wells	Read Replies (1) \| Respond to of 164684

>>Why short RHAT Allen - you ask a good question. As someone who has shorted RHAT, I'll give you a few reasons why: 1. It's over-valued. Okay, okay - I know to say something is over-valued means nothing these days. But geez, the company has a $15 billion market cap on $15 million in revenue and nearly $10 million in losses ($5 million in losses after those infamous one-time extraordinary expenses). 2. In my view, Red Hat doesn't stand a chance of making nearly enough revenue and profit to justify a $15 billion market cap at any time in the near future. Think about how they make money - they don't make much by selling Linux, and they're counting on most of their revenue coming through service and support. I can think of no company that has specialized in operating system service and support that has ever come close to a $15 billion market cap. 3. In my view, Red Hat has no real technical competitive advantage. They may have advantage of brand (through the notoriety they've gained from their IPO), but the Linux they sell - well, it's going to be the same Linux that everyone else is selling. This market is wide open for massive competition. 4. I see the Linux product development model as being fundamentally flawed - many cannot say enough good things about the open source movement. However, I think IT managers (decision makers for the biggest market for Linux) see it as risky. 5. If LinuxOne does hold it's IPO (the latest news releases are now predicting next month), I think it will have a negative impact on all Linux stocks. Why? LinuxOne has no business history, no revenue, and about $150,000 in losses - and from all outward appearances, it appears that the company is going IPO only in an effort to capitalize on the current Linux craze. While the market has seen some junk companies go public this year, LinuxOne has got to be one of the worst - and well, I think that investors are smart enough that if LinuxOne goes public that they might start to think that the whole Linux euphoria has gotten a bit out of hand. 6. Windows 2000 is coming out in February. I can't help but feel that the release is going to dampen some of the current infatuation with Linux. 7. I've been successfully shorting RHAT off and on from 297 down to 224 today. And I think it will go much lower. In fact, I'm hoping it goes below 50. You know RHAT was under 100 a month ago - and it tripled in December because... because, well, you know I don't think there was a reason. -Eric