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The Long Run

Well, here we are -- January 2001. Arthur C. Clark and Stanley Kubrick would be proud. Last year, everyone was waiting to see if the turn of the millennium would cause the world to explode, and if you had a publicly traded company (or wanted to have a publicly traded company), all you did was add the words "Linux" or "dot-com" to your name and then watch your stock run skyward.

Well, here we are — January 2001. Arthur C. Clark and Stanley Kubrick would be proud. Last year, everyone was waiting to see if the turn of the millennium would cause the world to explode, and if you had a publicly traded company (or wanted to have a publicly traded company), all you did was add the words “Linux” or “dot-com” to your name and then watch your stock run skyward.

Needless to say, what a difference a year makes. The past few weeks have been less than kind to both Linux and dot-com companies alike. In fact, looking at the shared plight of these companies has led me to wonder how strong a connection there is between the two groups. Is the future of Linux to some extent tied to the future of the dot-coms? I believe that while there is a short-term connection between the stock prices of the two groups, the long-term success of Linux should not be affected much by what happens to the dot-coms.

The reasons for the short-term connection are pretty straightforward. Last year’s market for dot-coms led to a phenomenal amount of new Internet-based companies getting tons of money from venture capitalists and public markets. If there was one thing those companies needed (other than help with their business plans) it was information infrastructure. Since these companies all sprang up from nothing, they had no legacy systems to hassle with. So what better way to get up and running quickly than by using Linux? This led to a dramatic surge in new business for companies selling Linux services.

Fast forward to today. If you’ve got a dot-com after your name, you’re probably too busy planning Chapter 11 to take time to build up your network infrastructure. This leads us to the short-term connection between dot-com and Linux stocks. If you had a lot of sales to dot-coms, of course you are going to see a short-term blip in your sales, as VA Linux reported in the first week of November.

In the long run however, the dot-com craze may well come to be seen as little more than a launch pad for Linux. Why? Because it provided the fuel necessary to capture the attention of the major players in information technology, as well as the eyes and ears of corporate IT buyers everywhere. Linux is becoming just as much an enterprise system as it is a hacker’s system. The 2.4 kernel (which should be available by the time you read this) is loaded with features that would make any enterprise IT manager or system administrator smile (see our article, pg. 62).

However, just as exciting as the fact that so many of the major traditional IT players have embraced Linux, a number of solid Linux companies have made names for themselves in the past several years. Many of these companies have been able to use the surge of interest surrounding Linux to brand themselves in the mainstream IT community, and they now have the opportunity to leverage that brand equity.

Linux is no one-trick pony. True, the dot-coms represented the low-hanging fruit for many Linux companies, but there’s a curious trend developing here — as the dot-coms are going out of business, Linux is continuing to gain market share.

The bottom line is that the future of Linux, and the companies supporting Linux, is a lot more solid than the day-to-day fluctuations of the stock market would lead you to believe. Count on it.

See you next month,

Adam Signature

Adam M. Goodman

President & Publisher

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