The road from emerging technology to consolidating market is a short one
these days.
Just six months ago, there were no public companies built around the
Linux operating system. Now there are several (with more in the
pipeline), and already they’re starting to merge.
VA Linux Systems (LNUX), which sells Linux-based computers and services, on Thursday said it has
purchased Linux news/information Web portal Andover.Net (ANDN) in a cash and stock deal valued at $1.04 billion.
The deal gives VA Linux something it lacks – an Internet component. And
that’s critical, for the future of the free operating software is inextricably dependent upon the Web as a development, delivery and information vehicle. After all, nobody is more “wired” into the ‘Net than the core Linux customer – programmers.
Shares of Andover.Net were up nearly 10 percent to 45 9/16 early Thursday
afternoon, and no wonder. Under terms of the merger, Andover.Net’s stock
price is set at $58.17 per share. At that price the company would have a
market capitalization of $870 million, and a valuation of 232x trailing
12 months’ revenues.
Not surprisingly, VA Linux shares dropped after the deal was announced
Thursday as many investors felt the company was paying too much for
Andover.Net. By mid-afternoon, LNUX was trading at 128-1/16, more than
8% below Wednesday’s close.
Expect to see more merger activity as Linux companies pumped up with IPO
money flex their muscles in the frenetic battle for market share. VA
Linux, even after Thurday’s stock dip, has a market cap in excess of $5
billion, while Red Hat (RHAT),
also down Thursday, is at $13.3 billion and Cobalt Networks (COBT) at $2.7 billion.
One likely candidate for a buyout is LinuxOne, a software vendor with no
revenue history that is planning a smallish IPO later this month. The
company hopes to raise $24.8 million in an offering of 3 million shares
under the ticker symbol LINX.
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