September 28, 2001

Open Source stock report: Markets, investor confidence higher this week

Author: JT Smith

- By Dan Berkes -
This was a better week to be a public company, as the markets came back to life, thanks in no small part to better than expected economic data. In the world of Open Source business: Sun opens up an online ID consortium, IBM wants $7 billion from Linux, and Apple releases a free -- if users can find it -- OS upgrade.
The Dow Jones Industrial Average closed Friday at 8,847.21, up 165 points from the previous day of trading, and up by 612 points from last Friday's close. The Nasdaq's composite index rang the closing bell at 1,498.90, gaining 38 points from Thursday's close, for a total gain of 78 points since the end of business last week.

The comeback rally, especially Friday's traffic, is the result of a combination of factors, the most powerful likely being that this week's end of business also marked the last day of the third quarter. Better than expected economic data in the form of the University of Michigan's consumer sentiment index also did wonders for improving investor outlook. While consumers felt less confident about the economy, analysts were expecting a drastically worse report. The Chicago Purchasing Management Association took care of the numbers on the manufacturing side of the economy, showing a rise in factory activity in September -- analysts had expected a sharp contraction. Last but not least, the second quarter gross domestic product did better than expected, too, indicating economic growth of 0.2 percent, out-pacing the 0.1 percent expectations held by economists.

Foundering tech and dot-com stocks traded on Nasdaq can breathe a little easier, if only temporarily. The market, which once billed itself as "the market for the next 100 years," announced on Thursday that it had suspended one of its key trading requirements. Until the announcement, stocks that traded under $1 for 40 consecutive days were de-listed and transferred to the over-the-counter market. The new rules permit stocks trading for less than that amount to remain on Nasdaq -- at least until January 2002.

The Globe and Mail business columnist Mathew Ingram wonders if the market was really reacting to the market downturns in the wake of the September 11 attacks, as it claimed when suspending this rule. As Ingram points out, about 15 percent of the stocks traded on the exchange can be purchased for less than a dollar these days, but those stocks were in the tank long before planes hit the Pentagon and World Trade Center. "If anything," writes Ingram, "the rule suspension makes Nasdaq look desperate, and will probably cause investors -- and companies -- to start looking to the New York exchange as the most important North American bourse."

While companies are still trying to figure out what the lasting impact recent sharp drops of the American stock markets will have on their businesses,
some of the nation's richest people already know. Many of the top-paid execs on
Forbes' list of 400 richest people have lost between 10 and 20 percent of their
net worth
since September 11, and the number one money-loser is Microsoft
chairman Bill Gates. Mr. Gates' net has dipped by 13 percent, or $7.2 billion,
since September 11, leaving him with a mere $46.8 billion. Care packages can be
sent to Microsoft's Redmond, Wash., headquarters.

Sun shines light on Passport alternative
Sun Microsystems on Wednesday raised the curtain on an industry alliance for handling the digital identify of computer users. Named Liberty Alliance, the group intends to provide a secure Internet identity service that, as Sun CEO Scott McNealy says, doesn't play favorites, possibly a reference to Microsoft's .NET and Passport authentication services. Founding members of the Liberty Alliance include Sun Microsystems, General Motors, Bank of America, RealNetworks, Nokia, and RSA Security. Microsoft has been invited to join the new group, but has yet to make a yes or no decision on the matter.

IBM: Linux a key growth area
IBM on Tuesday said it expects to generate at least $7 billion in sales revenue within three years, by focusing on seven key growth areas. One of those seven areas is Linux, along with life sciences, pervasive computing, network processing, data storage, appliance servers, and e-utilities. Linux will undoubtedly factor in Big Blue's goal to expand sales of existing and new supercomputers and database projects, not to mention data storage computers.

In other news from IBM, the company announced this week that it had sold its 1,000th zSeries mainframe computer. Quite an impressive resurgence of "big iron" computing, and analysts (not mention IBM) say that the revived popularity of mainframes is due in no small part to Linux.

Apple updates its operating system
On Saturday, Apple Computer will launch a new version of its Mac OS X operating system. Version 10.1 of the BSD-based operating system boasts easier DVD disk creation, additional interface customization features, and should fun faster than its initial release. The update is available at no cost, provided you can find it from a participating retailer, or can be ordered at Apple's store for a $19.95 handling and shipping fee.

Checking in with Corel
Software maker and former Linux distribution developer Corel Corp. made its fiscal third quarter announcement on Wednesday, reporting $500,000 or 1 cent per share net income from revenue of $34.2 million. Analysts were expecting earnings of 2 cents per share. In the third quarter of 2000, the company posted a net loss of $10.7 million or 15 cents per share. The company declined to provide any guidance for upcoming quarters, citing the post-attack economic climate.

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

Company Name Symbol 09/28 Close 09/21 Close
Apple AAPL 15.51 15.73
Borland Software Int'l BORL 8.10 7.58
Caldera International CALD 0.25 0.30
EBIZ Enterprises EBIZ.OB 0.03 0.03
Hewlett Packard HWP 16.05 14.96
IBM IBM 92.30 90.50
MandrakeSoft 4477.PA e6.18 e6.19
Merlin Software Tech. MLSW.OB 0.22 0.18
Red Hat RHAT 3.50 3.51
Sun Microsystems SUNW 8.27 7.96
TiVo TIVO 3.32 3.70
VA Linux Systems LNUX 1.05 0.78
Wind River Systems WIND 10.50 10.40


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