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On to question two -- in the current depressed stock market climate for Linux companies, isn't the turmoil at Linuxcare just another sign that investors have no business being in the Linux business?

Fickle, fickle, fickle. Just a few months ago, critics of the various Linux-related IPOs were howling at what they called the absurdly high valuations of Linux companies. Now that the stock prices of companies like Red Hat and VA Linux are sinking down to more reasonable levels (VA Linux, for example, was down Monday morning to $55 from an opening day high in December of $320), the decline is suddenly taken as evidence that there is no money to be made in free software at all. Case in point: the not-so-spectacular debut of Caldera was widely reported as proof that Wall Street had soured on Linux. Time to bail out, and pity the poor individual investor who got caught buying in too late. Wall Street's honeymoon with Linux is over, and divorce papers are in the mail.

Of course, anyone who had been paying attention to the companies involved in the commercialization of Linux might have noticed that it was perfectly natural for Caldera to elicit less excitement than Red Hat or VA Linux. The latter two companies command more mind share from the public at large, employ more prominent open-source programmers, and enjoy more respect from the open-source community than most their competitors. Viewed in this light, Caldera, which had a smaller market share than Red Hat to begin with, got exactly the IPO it deserved.

But more importantly, both the hype that launched the initial Wall Street love affair with Linux and the disavowals that are currently raging through the investment community have far more to do with the disfunctionality of the current market economy than any rational appraisal of Linux's future. For years, buzz has driven the market -- remember push? Remember portals? For a few months Linux enjoyed the ride. Now that the whole dot-com economy is looking weak to Wall Street and the day-traders are beginning to run scared, the open-source companies that delighted in taking advantage of investor passions are paying the price. Live by the hype, die by the hype.

But we still don't know whether there is real money to be made from Linux. Neither the swing in stock prices nor Linuxcare's CEO shuffling offer any real evidence one way or another. The only thing that these data points prove is that when money is spent on a grand Kleiner Perkins scale and stock prices are the stuff of daily headlines we enter a realm that is very, very distracting.

Because guess what? The market share of Linux-based operating systems continues to rise. Worldwide, people and companies involved in setting up computers systems are increasingly turning to open-source solutions. The Apache Web server continues to gain market share at the expense of Microsoft. Programming and scripting languages like Perl, Python and PHP continue to surge in popularity. Even the creators of the much-beloved Macintosh desktop interface are now working on Linux.

Someone, somewhere, will figure out how to make money out of these realities. Whether or not the stock market approves.
salon.com | April 11, 2000

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