Earthweb: Entering the Linux Valuation World?

So far, Red Hat is the leader of the Linux movement, with over 50 percent of Linux
servers shipped worldwide. For this leadership, Wall Street has placed a
hefty $13 billion market capitalization on the company.

Other Linux companies are scrambling for leadership and more market
capitalization. Last week, VA Linux paid a whopping $1 billion for
Andover.Net (ANDN). Apparently, it took a mere couple weeks to complete the
deal.

It was definitely a rich price. Andover.Net, in its latest quarter, had
revenues of $2.1 million and losses of $15.7 million. The company went
public in early December, raising about $72 million.

Then, this week there was another mega buyout. Corel (CORL) purchased
Inprise (INPR) for $2.44 billion. Inprise is a computer language developer
and Corel has a suite of Linux products.

Okay, the big question is: Who are the other potential targets? One that
looks compelling is Earthweb (EWBX).

EarthWeb is an early leader in high-tech destination content sites. The
company went public on November 11, 1998. Since then, it has been showing
strong growth. In the latest quarter, revenues were $11.5 million, which was
up substantially from $1.4 million in the same quarter a year ago. The
sequential growth rate was 33 percent. The company had a loss of $9.8 million.

Because of the high-tech demographic, EarthWeb can charge a high CPM rate of
$60. Examples of advertisers include MCI, Microsoft, Office Max, Sprint and
even Red Hat.

In terms of page views, the company had 230 million in the latest quarter,
up from 210 million in the prior quarter. There are 702,000 registered
users, up from 565,000 from the prior quarter. There are 160,000 job
listings.

The company has purchased several companies — such as MeasureUp, CCPrep.com
and NetCerts — so as to offer IT certification and testing. Such
transaction-oriented services can greatly monetize the traffic of the site.

Such assets and experience should be valuable in the Linux race. Sitting at
a $341 million market capitalization, the price also seems right as well.