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Cobalt: Appliance Servers for the Rest of US

Not long ago, Linux was the path to riches. It was a guaranteed way to boost a company's market cap by multiples. Well, that is no longer the case as many Linux stocks have plunged or pulled their IPOs.

Yet, the Linux market is growing rapidly. If anything, the recent downturn represents great opportunities.

Linux has great promise for small and medium size businesses. These organizations need the benefits of an IT infrastructure, but of course do not have the technical talent nor the budget to implement complex systems.

A company called Cobalt Networks has a solution. It develops low-cost, easy-to-install network appliance servers. With Cobalt products, all software is pre-installed. A person need only connect the appliance to the network and enter a few commands (it takes about 15 minutes). A company will then have use of a variety of key services like email, commerce engine, hosting, file storage, firewalls, and so on. Because these components are seamlessly integrated, there is a high degree of reliability.

Whats more, the Cobalt applications are growing. The company has an extensive developer program. Over 500 programmers are working on applications.

Cobalt recently purchased Chili!Soft, which is a developer of Microsoft Active Server Pages (ASP) technology. With the acquisition, Cobalt will attempt to integrate Microsoft and Linux tools.

Cobalt's financials have been showing lots of strength. In the past quarter, revenues were $12 million, which was a 34 percent sequential increase and a 357 percent increase from the same period a year ago. Losses are moderate: $2.6 million in the past quarter.

The future for server appliances looks particularly bright. Dataquest pegs the market to grow from $2 billion in 1999 to $16 billion by 2003. This is good news for Cobalt; after all, the company has the highest market share globally for server appliances.