Will Red Hat’s IPO Help Push Linux?

When Red Hat Software, Inc.announced last week it was going public to raise $96.6 million (US$) in a stock offering — it caught the attention of Linux watchers all over the world.

In its short statement, the Durham, North Carolina company said it had filed with the Securities and Exchange Commission, but it left out details such as the number of shares and how the money would be used.

“In accordance with the SEC regulations, no further information is available at this time and we are not able to comment further,” said Bob Young, Red Hat’s chief executive officer, in written statement.

While Young may not be saying anymore, Wall Street is buzzing with the meaning and the long-term possibilities of Red Hat’s move. Red Hat packages and sells its version of the free operating system developed by Linus Torvalds in 1991 — embraced by some as an alternative to Microsoft Windows.

The privately held software company has successfully built a business by selling its CD-ROM version of Linux, which includes a manual and technical support.

Some analysts see Red Hat’s IPO as concrete evidence that there’s more behind Linux than just the thrust of Microsoft haters. They say $96.6 million pumped into Red Hat would go far to push the Linux operating system past its already 10 million users. It also gives more credence to an answer Bill Gates gave Business Week, May 17, when it asked what companies he considered his biggest competitors?

“New competitors such as Linux are constantly emerging and growing amazingly fast,” Gates answered.

At the time, many analysts said this was part of Gate’s strategy to show the government that Microsoft was in real danger from its competitors. But now some industry experts say Gates may have been telling it like it is — especially in light of IBM recent announcement that it was modifying its operating system to run Linux applications.

Add to the scenario the fact that other major technology companies such as Netscape and Oracle also own a stake in Red Hat and you have the makings of a multi-company salvo aimed at the very heart of Microsoft.

Nevertheless, detractors of Linux point out that Microsoft still corners 85 percent of the personal computer market and that there’s a dearth of Linux word processing and spreadsheet programs. They also say Microsoft’s war chest could easily neutralize any money raised by Red Hat’s IPO.

Yet, industry experts counter that it’s time to stop looking at the small picture and realize the true significance of Red Hat’s decision to go public. It will be the first time Wall Street has had a change to vote yea or nay on whether Linux is truly the challenger to Microsoft some say it is. If Red Hat’s IPO skyrockets its first day out, they say, Bill Gates words may come back to haunt him.