August 24, 2001

Open Source stock report: Cisco bumps the markets

Author: JT Smith

- By Dan Berkes -
Good news from Cisco sent the markets into a frenzy today, as traders snapped up bargain stocks as quickly as they could. That's more than the Fed could do, when its latest rate cut sent Wall Street into a tailspin. In the Open Source markets this week: HP rolls its own Linux, VA Linux loses a nice chunk of change for its fourth quarter, and Borland sets up shop in China. Also: New hardware from Apple.The bigger picture
There's that old, sappy saying: When life makes you lemons, make lemonade. There must be a lemon orchard on Wall Street, because investors launched into a buying frenzy this week, ignoring the doom and gloom of lowered profits and revised estimates that we've seen in weeks past. They actually managed to send the Dow index and Nasdaq slightly up at the bell on Friday.

The buying frenzy was kicked off by news from networking giant Cisco Systems, who said late Thursday that its business may be stabilizing. It doesn't take much to encourage the herd to move in one or another direction, and that snippet of hopefulness from Cisco was just what was needed to give trading an upward momentum.

That the Federal Reserve would cut interest rates this week wasn't a surprise to many people, but the reaction of the markets to that news was quite a different story. Normally, Wall Street rallies when the Fed slashes rates, but when the latest quarter point reduction was announced, the market went in the opposite direction. At the close of business on August 21, the day of the announcement, the Dow index had dropped 1.4% to 10,174, and the Nasdaq lost 2.7% to close at 1,831.

The markets did better by the end of the week, with the Dow Jones Industrial Average gaining 181 points from the last week's close, ringing Friday's bell at 10,423.17. Over at the Nasdaq, the composite fared better to end the week at 1,916.80, or up 35 points from last Friday's close at 1,881.35.

Hewlett-Packard builds its own Linux
HP sees a need for increased security on Linux, and figured the best way to address that need was to offer its own distribution of the operating system. The company this week announced its HP Secure OS Software for Linux, targeted at telecommunications companies, e-commerce providers, and Internet service providers. The distribution is based on Red Hat Linux 7.1 and the 2.4 kernel, and will sell for $3,000 starting sometime next week.

VA Linux lands with a thud
VA Linux (parent company of OSDN and NewsForge) posted a breathtaking $290 million loss for its fourth quarter, which ended on July 28. That translates into a loss of $5.58 per share, and can be compared with the loss of $47.5 million, or just $1.15 per share in the same quarter for 2000. Revenues slid sharply as well, dropping from $50.7 million last year's quarter to $16 million for this quarter.

The company said the bulk of the loss was due to a non-cash restructuring charge of $267 million, most likely due to VA's June decision to quit selling hardware. The company is forecasting a loss of $10 million to $13 million for the first fiscal quarter on revenues of $3 million to $4 million.

Caldera opens up
Caldera Software International has made available the source code to two development tools, and granted open access to one of its operating system offerings. On Monday, the company released its AIM performance benchmarks and UNIX Regular Expression Parser under the GNU General Public License. Additionally, the company has made the Open UNIX 8 source code available, but its terms aren't quite as liberal -- it's only available to members of Caldera's developer program who ask to see it. The company says the GPL-ing and open access policies were implemented due to heavy customer demand, and it chose the GPL to support corresponding GNU products.

Borland goes to Beijing
Borland Software International told the world on Monday that it had opened a new office in Beijing. The company sees dollar signs (or should that be yuan signs?) in China, and figures that with the country's recent entry into the World Trade Organization that there will be a strong need for its enterprise software and services. That software will surely include Kylix, the rapid application development software that seems to be its flagship product these days. The manager of Borland's China office is Husen Tu, who previously worked in a number of IT and executive level positions with IBM and Siemens.

Fresh Apples
Apple Computer surprised a few people this week when it announced a new computer without the assistance of a trade show. The latest hardware from Cupertino is described as an "ultrafast" Power Mac running two 800MHz PowerPC G4 chips. According to Apple itself, this is the fastest computer the company has ever shipped. Along with those dual G4 processors, you'll get standard Apple features include 256MB RAM, 80GB hard drive, and NVIDIA GeForce2 MX with 64MB RAM to make everything look pretty. The suggested retail price for the base model is $3,499.

Here's how Open Source and related technology stocks ended the week:

Company Name Symbol 8/24 Close 8/17 Close
Apple AAPL 18.57 18.07
Borland Software Int'l BORL 12.70 11.98
Caldera International CALD 0.65 0.67
EBIZ Enterprises EBIZ.OB 0.09 0.14
Hewlett Packard HWP 25.13 24.05
IBM IBM 106.99 104.59
MandrakeSoft 4477.PA e6.19 e6.19
Merlin Software Tech. MLSW.OB 0.15 0.16
Red Hat RHAT 3.70 3.86
Sun Microsystems SUNW 14.97 14.03
TiVo TIVO 5.28 6.33
VA Linux Systems LNUX 1.60 1.83
Wind River Systems WIND 15.10 15.10


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