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[P]
Linux investors hosed?

By Paul Dunne in News
Sat Feb 19, 2000 at 05:00:53 AM EST
Tags: etc (all tags)
/etc

An article in the New York Observer is extremely critical of the recent wave of Internet and Open Source IPOs. It pours particular ire on a recent transaction familiar to all of us, the acquisition of Andover by VA Linux Systems. Anyone knowledgeable about matters financial here? Is this piece a breath of fresh air, or just petty sniping? Is it true that the recipients of VA's "letter" now find themselves, to use to the Observer's succinct phrase, "hosed"?


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Linux investors hosed? | 21 comments (21 topical, editorial, 0 hidden)
Good questions.. lets see what kind... (none / 0) (#8)
by driph on Sat Feb 19, 2000 at 05:15:00 AM EST

Driph voted 1 on this story.

Good questions.. lets see what kind of comments we get from this..

--
Vegas isn't a liberal stronghold. It's the place where the rich and powerful gamble away their company's pension fund and strangle call girls in their hotel rooms. - Psycho Dave

It's plain sour grapes. Next!... (none / 0) (#3)
by bmetzler on Sat Feb 19, 2000 at 08:59:31 AM EST

bmetzler voted -1 on this story.

It's plain sour grapes. Next!
www.bmetzler.org - it's not just a personal weblog, it's so much more.

Just can't get too excited about it... (none / 0) (#4)
by Demona on Sat Feb 19, 2000 at 12:54:18 PM EST

Demona voted 0 on this story.

Just can't get too excited about it. Open source is exciting enough on its own, without all the false assumptions people bring to the table.

I've been pessimistic about stock a... (none / 0) (#2)
by ramses0 on Sat Feb 19, 2000 at 01:24:12 PM EST

ramses0 voted 1 on this story.

I've been pessimistic about stock and stock markets for a long time. I'm very glad to have found this article.
[ rate all comments , for great justice | sell.com ]

Interesting. I'd like to know.... (none / 0) (#7)
by Dast on Sat Feb 19, 2000 at 01:37:21 PM EST

Dast voted 1 on this story.

Interesting. I'd like to know.

std_dsclaimer: I do not own stock i... (none / 0) (#1)
by joeyo on Sat Feb 19, 2000 at 01:42:04 PM EST

joeyo voted 1 on this story.

std_dsclaimer: I do not own stock in the above companies nor am I a stock expert.

I think it is true that the .coms are being over-hyped and over-valuated. But I'm not sure if many investors in LNUX are considering themselves "hosed": The stock is still trading much, much higher than the IPO price!

As for whether or not the merger was a good deal.... Personally, I think that Andover offers some real value because of all the ad revenue from the open source sites (traffic to which will only increase). Sure it may pull down VA's stock in the short term but someone is always on the short end of the stick. And the author is being short sighted himself if he is basing the worth of the merger on the short term stock flucuations..

my $0.02
/joeyo

--
"Give me enough variables to work with, and I can probably do away with the notion of human free will." -- demi

Bug or Mea Culpa ? (none / 0) (#18)
by joeyo on Sat Feb 19, 2000 at 04:18:18 PM EST

Sorry for the double post, but I don't remember posting twice... Even if I did, it shouldn't have let me vote twice...

--
"Give me enough variables to work with, and I can probably do away with the notion of human free will." -- demi
[ Parent ]

Re: Bug or Mea Culpa ? (none / 0) (#21)
by Emacs on Sat Feb 19, 2000 at 08:22:50 PM EST

It would apear that there is a *bug* somewhere that is posting all of the submission comments twice.

I'm not sure I like the submission comments being posted anyways. They seem sort of out of place.

[ Parent ]
Re: Bug or Mea Culpa ? (none / 0) (#24)
by joeyo on Sun Feb 20, 2000 at 02:27:53 PM EST

yeah i agree. I'd rather see comments about the the article not the *worth* of the article when/if an aricle gets posted.

--
"Give me enough variables to work with, and I can probably do away with the notion of human free will." -- demi
[ Parent ]

Re: Bug or Mea Culpa ? (none / 0) (#29)
by rusty on Wed Feb 23, 2000 at 04:47:40 AM EST

It was a bug, indeed. Basically a race condition involving story moderation, I believe. If that's what it was, then it's fixed now :-).

About the mod comments-- I added some instructions that will hopefully alleviate this somewhat, and I plan to add the option of not having your moderation comment carry over. I think that should take care of the problem.

____
Not the real rusty
[ Parent ]

argh (none / 0) (#19)
by Anonymous Hero on Sat Feb 19, 2000 at 04:40:24 PM EST

test

[ Parent ]
interesting news... (none / 0) (#5)
by rajivvarma on Sat Feb 19, 2000 at 02:59:22 PM EST

rajivvarma voted 1 on this story.

interesting news

Rajiv Varma
Mirror of DeCSS.

Very topical... (none / 0) (#6)
by Emacs on Sat Feb 19, 2000 at 04:02:05 PM EST

Emacs voted 1 on this story.

Very topical

yeah, hosed (none / 0) (#17)
by Anonymous Hero on Sat Feb 19, 2000 at 04:13:25 PM EST

If you want, take a look at the share price of VA Linux (ticker symbol "lnux"). I like
The poeple who actually brought in the money got h (none / 0) (#20)
by Anonymous Hero on Sat Feb 19, 2000 at 07:18:33 PM EST

First of all I just discovered this site off a Slashdot link, I am amazed! This might become something really cool.

By coincedence, I submitted this same articel two days ago in Slashdot, but it was rejected (no bad feelings), so I went ahead and posted it as a off-topic comment. Quite a moderation war started. I got up to "+3", but finnally it ended up with "+1 off topic". Here is the link.

Some facts on this topic:

I was curious about this, so check some numbers last night from the official filings of Andover. Our good old friend CmdrTaco currently owns 111,111 Andover shares, and made a cool half a million from the Andover sale in cash payments alone. His profit from the Slashdot sale in total is probably around $10 million. Did he deserve that? Compared to the workers in Asia that assemble the machines on which this wonderful revolution is running on and get a buck per hour probably not. But compared to what he could have made, if he would have been really only after the money, it's probably meager.

The biggest shareholder of Andover is Bruce A. Twickler, the CEO who owns close to 2 million shares. He made $15 million from the cash payment of the sale alone. He must be a happy man.

And then there is the random invester who bought shares in Andover because it is such a cool Linux company. Well, the stock went downhill and he is the one who brought in the actual money that is passed out around here. The random VA Linux invester is in the same boat, that stock price is currently $118 from a $320 high.

The open source members who had a chance of getting in on the IPO are still in the plus, let's see how long, though. But are they conspirators in the "crime"?

Re: The poeple who actually brought in the money g (none / 0) (#23)
by Anonymous Hero on Sun Feb 20, 2000 at 08:08:27 AM EST

You underestimate investor. I own shares of
both Andover and VA, some of it bought at a
hihg price, some of it around the current
valuation. Am I unhappy that it's currently
trading below my highest buys? Of course.
An I unhappy that I bought at all? No a chance.
I'll keep my VA/Andover shares, and I'll buy
more (actually, I'm selling around 80.000 USD
worth of shares I got in the company I'm currently employed in to buy more Linux related
shares). The reason? I don't buy stocks for short term gains - if you do that, then you're
basically gambling. I buy stock because I believe that companies like VA, Andover, Corel
and Redhat will become important players in the Linux market long term, and I also believe that
the Linux market will keep growing and overtake
Windows. With those assumptions, the current price is low.

[ Parent ]
My 2 cents (none / 0) (#22)
by Emacs on Sat Feb 19, 2000 at 09:02:15 PM EST

<disclaimer>
I don't own stock in any of the companies mentioned.
</disclaimer>

This is truely a brave new world we are living in. The emergence of on-line trading has opened a new door for the stock market which... well....changes things quite a bit IMHO. When they write the history books 20 years from now they will point to this *emerging internet era* and say "That was when the rules changed" My take on it boils down to one word ---insanity---

I might be 100% totaly rock-stupid wrong here, but I wouldn't put one hard earned dollar in any .com company. Not yet anyways. The scary thing that the article touches on is that we see all of these outrageous stock prices but it's the VC (venture capital) people who are making the money. These guys are sharks, and when you swim with sharks you get swallowed up. Meanwhile there are tons of "speculators" looking to cash in on the .com frenzy, putting big bucks into start-up companies with very little to go on other than the Linux or .com feeding frenzy. For every Microsoft (I wish I had bought that stock when they went public) there are thousands who burn out bright and go belly up in a few years. Scary stuff. I just can't see putting long term investment dollars into any internet companies. Again, I could be missing the bus big time. OTOH I guess if you are doing short term speculating the .coms are probably the way to go.

The best advice I got was from someone who told me to invest into the "behind the .com" companies. The guys making the hardware, the chips, etc. The .coms will come and go, but the Intels, Sun, Nortels, etc will be around for a while. (I don't own any of those either :)

Either way this is an exciting time to be alive.

Re: My 2 cents (none / 0) (#25)
by joeyo on Sun Feb 20, 2000 at 02:56:36 PM EST

I have invested in some .com-type companies (not saying any names *grin*) for the short term and I have done pretty well. If you can get in early enough, with enough capital, and aren't worried about loosing sometimes, you can do quite well. But mainly because the market is doing very, very well right now. Don't confuse brains with the bull market!

On the other hand, I have invested in some high-tech firms that I think are going to be around for a long time and I haven't yet been dissapointed with that strategy either. So I guess it depends on your stomach and your goals. In some ways it's no different than its always been- there is always some ultra-risky industry.

What I think is different this time around is that there are a lot of young, independent investors like me pumping money into the stock market and making trades all the time. Not all of the power is in the hands of the big companies and the mutal funds. In theory, this should be a good thing- power to the people and all that stuff... :)

/joeyo

--
"Give me enough variables to work with, and I can probably do away with the notion of human free will." -- demi
[ Parent ]

Re: My 2 cents (none / 0) (#26)
by Emacs on Sun Feb 20, 2000 at 05:04:45 PM EST

***I have invested in some .com-type companies (not saying any names *grin*) for the short term and I have done pretty well. If you can get in early enough, with enough capital, and aren't worried about loosing sometimes, you can do quite well. But mainly because the market is doing very, very well right now. Don't confuse brains with the bull market! ***

Excellent point. I guess I was making the distinction between investing and speculating. If I'm looking to turn a quick profit in a couple months that's more speculating than investing. I really don't have the proper constitution for that :)

My biggest fear is if things get rocky for a while you might see some inexperienced investors panic and really send things into a tailspin. Meanwhile the Fed and my pal Greenpsan seem pretty intent on slowing things down in the near future.

[ Parent ]
Re: Linux investors hosed? (none / 0) (#27)
by Paul Dunne on Mon Feb 21, 2000 at 04:43:29 AM EST

I found this an interesting article. My motivation for posting it here was two-fold: firstly, because it raised issues that should concern us; secondly, because of the source: it is from the business section of the New York Observer. Most of the commentary I've seen before on Linux-related IPOs has been from free software people. This is the first look at it I've read from a financial journalist, if not an expert.

Disclaimer: I know little about business, I don't even own any shares or stocks or equities or whatever they're called; this is just my personal take based on the article I pointed to, plus some common sense. That said, I think it makes several pertinent comments.

  1. There is something wrong-sounding about investors paying in $15 million, and getting $60 million back, without essentially *doing anything*.
  2. Andover was clearly never designed to be anything other than a "buy 'em cheap, sell 'em dear" outfit.
  3. The dilution, and consequent devaluation, of VA stock does hit the ordinary shareholder, who bought at what we can now see was an inflated price.

So, any conclusions to be drawn? Firstly, /. was not an asset; just "icing on the cake" to attract a buy-out. In other words, this didn't "just happen"; it was Andover's plan. Acquire "big-name" sites, and thus attract buyers; then sell for the best offer. This has been happening a lot with web publications, as they search desperately for a business model that allows for some profit.

On the other hand, /. isn't worthless trash per se, and VA Linux knows this. VA gains at least some kudos from owning the site -- though not as much as from having ESR on the board. Now *there's* an asset. He is *the* face of free software nowadays, and having him a part of the company is worth many Superbowl ads. So, while /. won't bring in much revenue, acquiring it was good PR in the short-term, and will serve as effective advertising ("we're the good guys of Linux companies, because we give more back" etc etc).

But, is /. actually an asset in raw accounting terms? The guy at the New York Observer doesn't thing so, and I doubt it myself. My guess is that the operation considered in isolation probably breaks even, or turns a small profit. But if you're in this for real money, the only way you can make it from such sites as /. is the Andover way; acquire, then divest.
http://dunne.home.dhs.org/

Re: Linux investors hosed? (none / 0) (#28)
by Emacs on Mon Feb 21, 2000 at 11:42:32 AM EST

***1) There is something wrong-sounding about investors paying in $15 million, and getting $60 million back, without essentially *doing anything*. ****

I can't really agree with this. It's the "buy low - sell high" principle that all investors live buy. Yeah... it *seems* wrong... but if you have big dollars to play with you get to reap big rewards.

***2) Andover was clearly never designed to be anything other than a "buy 'em cheap, sell 'em dear" outfit. ****

Linux has hit it big and now we have to deal with all of the side dishes that go along with it.

****3) The dilution, and consequent devaluation, of VA stock does hit the ordinary shareholder, who bought at what we can now see was an inflated price. ****

Yep, that's the risk you take when you invest. One of the companies I own stock in just released 15 million new shares... the stock dropped about 20% over a week after they made the anouncment, (it's has since made it back up, plus some :)

When you buy stock you really don't have any guarantees that this stuff won't happen.

I would consider an investment in VA Linux a *high risk.* I'm a big fan of Linux and I hope to see it grow in the future, but I'm not going to base any investments on my humble opinion. People who buy stocks on emotions tend to end up in the negative. I'm not saying that VA Linux won't be a great company in the future, but they will have to prove to me that the *plan* they have works before I would invest anything. Heck, based upon the fundamentals of the company, even $100 is overpriced.

With regards to /. only time will tell. If they can figure out how to generate enough revenue from ads, then the model works just like radio/TV in which case /. does make $$$.

[ Parent ]
Linux investors hosed? | 21 comments (21 topical, 0 editorial, 0 hidden)
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