Originally Published: Sunday, 12 March 2000 Author: Daniel Hemmerich
Published to: featured_articles/Featured Articles Page: 1/1 - [Printable]

Free Operating System Bringing in the Cash?

Linux is the product of "a loosely knit team of talented programmers working from all over the world." It is provided free and used by an estimated twelve million users. A handful of companies, which have spent large amounts of time customizing Linux into their own distribution package, are now cashing in the Linux craze. Is this a good thing for the Linux "revolution" and is it fair that a few profit from the work of so many?

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Linux is the product of "a loosely knit team of talented programmers working from all over the world." It is provided free and used by an estimated twelve million users. A handful of companies, which have spent large amounts of time customizing Linux into their own distribution package, are now cashing in the Linux craze. Is this a good thing for the Linux "revolution" and is it fair that a few profit from the work of so many?

The most recent of the Linux companies to pursue financing through the NASDAQ Stock Exchange is Caldera Systems, located in Orem, Utah (though incorporated in Delaware) and employing just over 100 people. The company lost approximately nine million dollars at the end of 1998, which is very similar to Red Hat's current financial status. Caldera is expected to generate forty five million dollars from the sale of the company's stock this week (as reported on IPO.com).

The current influx of money into the Linux community is a boon for the community. However, most of these companies are profiting from the hard work of many people who have dedicated themselves to the betterment of Linux. Most of these companies are capitalizing on selling the operating system to businesses and consumers. These sales are bringing more and more people into the Linux community; hopefully this will prove well for the community in the long run.

However, there is a downside to all of this: the inability of the Linux companies to produce profits. An example is VA Linux Systems, which generated 20 million dollars of revenue for the three months ending January 28. However, their losses were roughly 11.5 million, which gives a ratio that for every dollar they make, they spend $1.50. This proves that Linux is a tough sell to end users. Hopefully, companies such as VA will start showing profits and the Linux community will be able to benefit from the influx of development revenues into the community.

Currently VA Linux Systems is planning on buying Andover.Net (as reported by Yahoo). Now in my own mind I have determined that businesses selling Linux and bringing in huge investment is going to do good things for the Linux community. But will consolidation of these businesses damage the current good they might possibly be doing? Because Linux is under GPL, no business will ever start controlling it. They will only be able to advance the operating system with possibly a few minor profits.

These companies will continue to be around for years to come, but I fail to see any one of them as good investments. What they produce is something that is also offered for free. What they provide as a service is something that, again, is also offered for through either through the Web or on IRC.

While I hope this initial public offering for Caldera Systems is a massive one, and couldn't see putting a penny of my hard-earned money in a business that everything they provide is also offered for free. Please let me know if my thinking has any shortcomings or gaps.

Daniel B. Hemmerich (daniel@Linux.com) is an undergraduate student at Pennsylvania State University majoring in computer science. On the side he writes weekly as a contributing editor for Linux.com. He also enjoys coding mostly in C in his spare time. He also has a beautiful girlfriend of two years.

Chris Maloney (trader@willinet.net) is a programmer of Web-based production line management software in South Dakota, and contributed to this article. Unlike Daniel, Chris is (unfortunately) currently single.





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