Red Hat’s Wall Street Success Continues

Amid a downturn in the stock market that hit technology stocks—particularly Internet offerings—hard, Red Hat Software hit a home run with its initial public offering (IPO) on August 11, 1999. Red Hat ( is one of three leading companies selling and supporting the Linux OS, which is built on the free software and open source code model. Offered at $14, the stock rose to the $50 range by day’s end and traded higher than $60 within a week. Red Hat shares closed at nearly $80 on August 27. In the past year, Red Hat CEO Robert Young convinced industry giants IBM, Dell, Compaq, Novell, Intel, SAP, and Oracle to invest in Red Hat. The company, which has sold 400,000 copies of Linux software and has earned a reputation for solid support, decided to capitalize on its momentum and expand its operations. Red Hat sent letters to the many programmers and hackers who contributed code to the Linux OS, offering them the chance to get in on the ground floor of the IPO. Unfortunately, Red Hat chose E-Trade to handle the deal, and the online brokerage’s eligibility tests threatened to exclude many of the nontraditional investors. LinuxWorld opened on August 12, 1999, in San Jose, California, and featured several significant announcements. Linus Torvalds, who at 22 developed Linux, presented the feature set for Linux 2.4, which we should see by the end of the year. Linux 2.4 will support laptops and will include USB support, better driver support, and more device support. Version 3.0 is reportedly more than a year away. SGI’s decision to abandon Windows NT for Linux was just one of several announcements by major vendors that intend to develop software for the Linux OS; expect Linux versions of DB2, Oracle, and Domino/Notes in the near future. Andy Grove, CEO of Intel, made a surprise appearance on stage at LinuxWorld to demonstrate Linux running on a 64-bit Merced emulator, even though Linux 2.4 will not support 64-bit computing. Dan Kusnetzky, an analyst at IDC who follows the server marketplace, predicts that Linux will be the fastest-growing OS for network servers for the next 4 years. He pegs Linux's share of the marketplace at 17 percent for new OS sales. One report by the head of a Linux advocacy group estimates Linux adoption at between 12 million and 15 million installed systems, or 5 percent to 7 percent of the estimated 215 million computer systems worldwide. Computer Business News reports that TurboLinux Workstation J 4.0 outsold Windows 98 SE in Japan last month in over 200 major computer stores. Recent developments, including infighting in the Linux community, the commercialization of Linux by companies such as Red Hat, IBM, and HP, and the release of significant hardware and software for the platform by major vendors, could threaten Linux’s model, especially if different versions emerge. If Linux survives such threats, the OS’s considerable momentum will make it a serious competitor in the server marketplace.

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