Red Hat stock is red hot

The recent slump in confidence in technology stocks seems not to have had an adverse effect on Red Hat Software's initial public offering (IPO) in the US.

The open-source software vendor launched its IPO of 6 million shares of common stock yesterday, and watched the share price triple over its offering price in early trading.

Shares opened at $US46 and climbed to $52.06 by late afternoon -- much higher than the offering price of $14 per share. Dow Jones estimated Red Hat's market value at $US2.96 billion.

Red Hat is the leading vendor of the Linux open-source operating system, which is becoming an increasingly popular alternative to Microsoft's Windows software on corporate network and Web servers. Open-source software such as Linux is built by unpaid developers over the Internet, freely distributing and modifying the code. Red Hat has a 49 per cent share of the Linux market, according to research firm IDC.

One analyst said Red Hat's IPO should not necessarily be compared to recent ones from other high-profile technology companies, which have been largely Internet-centric.

"I think the reason Red Hat is making a little more success is that it's not an Internet IPO," said Jonathan Eunice, an industry analyst.

"The success of their business could be greatly affected by success on the Internet -- because its most interesting commercial use is by ISPs and ASPs (application service providers), the people who run the Internet and Internet applications -- but it is a product company," Eunice said. "They sell something that is not just a diffuse hope that the Internet changes everything."

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Jeff Partyka

PC World
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