In its third day of trading, the stock of Linux distributor Red Hat (Nasdaq: RHAT) kept rising dramatically. Shares of Red Hat, which went public at $14 on Wednesday, climbed 12-5/8 to 85-1/4 on Friday.
Red Hat’s future seems rather bright, and there’s a lot of smart money behind it. However, after Friday’s gain, the company is worth nearly $5.7 billion. That seems like a pretty favorable valuation for a company that had revenues of just $2.8 million, and a loss of $2.1 million, in the second quarter of 1999.
A lot of people are saying that Linux is a serious threat to Microsoft (Nasdaq: MSFT). This may be somewhat true, but investors shouldn’t get carried away. Red Hat itself isn’t going to topple Microsoft, which had a market value of more than $432 billion when the markets closed on Friday. Despite the gigantic difference in market values, Microsoft actually looks like a better value than Red Hat.