The stunning success of Red Hat Inc. has generated much attention for the once obscure Linux operating system. However, some wonder if the color of money will spawn the kind of greed that could end up spoiling the entire party.
Since the Durham, North Carolina software vendor brought its shares to market, Red Hat has raised $5 billion (US$) — an amazing feat when you consider that the recent IPO market has been extremely flat. However, given the cult that has formed around Linux, no one should be too surprised.
Based on the Unix operating system, Linux was developed in 1991 by Linus Torvalds, a Finnish graduate student. The free system was made available on the Internet, and has since gained ground on Microsoft every year. According to International Data Corp., Linux shipments will grow 25 percent from 1999 through 2003 — more than twice the 10 to 12 percent growth of other workstation and server systems.
Linux Programmers Miss Out
Much of this market penetration is due to hours of volunteer work by about 3,500 Linux programmers. In an attempt to reward this group, Red Hat made about 800,000 shares of its stock available for them at its offering price of $14 through E*Trade. However, some of these programmers either didn’t have the $1,000 initial deposit necessary to open an account, or they didn’t meet E*Trade’s other requirements for account holders.
To add insult to injury, those 800,000 shares are now worth about $60 million, which seems to validate the adage that the rich get richer and that it takes cash to beget cash. Torvalds received shares of Red Hat’s IPO, but declined to disclose how many.
Fear Of Success
Meanwhile, some in the Linux community fear that this new-found success could spell trouble. They wonder if the profit motive could cause Red Hat — or some other Linux provider — to start selling it. While some would argue that Linux is covered by an informal license that prevents that, the GPL, as the license is called, has never been tested in court.
Some analysts say that all this talk about Linux becoming corrupted by “too much, too soon” is nothing more than a fear of success. Still, if I were one of those programmers who lost the opportunity to share in the windfall, I might disagree. If Red Hat really wants to show the world that it is not just another money-grubbing corporation, it should find some other way to pay back those programmers whose hard work made its IPO such a hit on Wall Street.
What do you think? Let’s talk about it.