Has Internal Greed Damaged Desktop Linux?

Linux supporters were ecstatic when the financial markets responded extremely favorably to the IPOs (initial public offerings) of open-source companies. However after the unprecedented hype behind launches like VA Linux Systems Inc. and Red Hat Inc., share prices plummeted, leaving companies desperate to reorganize. Now, it seems that the shareholders were not the only victims, but that Linux's chances on the desktop also became something of a casualty of share dividends.

Red Hat's 52-week high on the Nasdaq stock exchange was just over US$151 per share, but currently the Linux distribution company's shares are trading at just below the $11 mark. VA Linux shares reached a high of $320, but today the stock is trading at $12. Sure, most dot-coms have taken a big hit recently in their market capitalizations, but Linux stocks were among those with the highest distance to fall, and fall they did. But what exactly happened?

One opinion is that people were waiting for a technology bandwagon to jump on, and when one came along, they nearly tipped it over. When Red Hat became the first large Linux company to launch on the market, people thought it was "the" Linux company, according to Jon "maddog" Hall of nonprofit group Linux International.

"The day traders saw the Linux name and bought into it, but they soon realized it was not 'the' Linux company. Then VA came along, with the (Nasdaq) symbol of 'LNUX', and people said, this one is 'the' Linux company," sending its stock price through the roof," Hall said.

But all was not well in Linuxland for long. "When day traders realized they had made a lot of money in the market, and had to pay income taxes, they sold their shares," Hall said. "What did those stocks drop down to? They dropped to what they were actually worth."

Suddenly, with market capitalizations lowered to only a small fraction of what they were previously worth, companies realized they needed new business models to keep their investors happy. The solid choice was the server market where open-source companies were already holding their weight against industry giant Microsoft Corp. The problems with migrating from Windows NT to Windows 2000 have also given Linux an even bigger push in the back-end market, according to Linux advocates. But what happened to the Linux on the desktop?

"You don't want to look to the Linux distributions for desktop news anymore, they're all focused on the server market," said Nat Friedman, president of Linux desktop application company Helix Code Inc. "The desktop is not in the core business model anymore."

However, Linux distributor SuSE GmbH, which is not publically traded, sees Linux continuing to pick up some of the desktop market. "I estimate that in two years, Linux will be on 30 percent of the desktops," said SuSE's Chief Technical Officer Dirk Hohndel estimating Linux's current market share on the desktop at between 5 and 8 percent.

Even though Linux on the desktop has somewhat faded from the mainstream press as presenting serious competition to Microsoft, the fight is far from over. There is still work going on behind the scenes with Hewlett-Packard Co., IBM Corp. and Compaq Computer Corp. throwing their might behind the two prevailing desktop Linux GUIs (graphical user interfaces) -- KDE and Gnome.

KDE is at http://www.kde.org/. The Gnome foundation can be found at http://www.gnome.org/. Helix Code, in Cambridge, Massachusetts, can be reached at +1-617-679-1984 or http://www.helixcode.com/. SuSE GmbH, in Nuremburg, Germany, can be reached at +49-911-740-5331 or at http://www.SuSE.de/.

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