Red Hat IPO on deck

Linux OS developer's IPO set for Aug. 11. Can it better Be Inc.'s flat opening?

The world keeps screaming for alternative operating systems and Wall Street will try to appease it Wednesday when Red Hat Inc. (Proposed ticker: RHAT) makes its debut.

Red Hat is hanging its hat on Red Hat Linux, an open source operating system that allows developers to make suggestions and amendments to the code.

By providing an alternative to the ubiquitous Windows operating system, Red Hat hopes to capture an audience that has long been disappointed with Microsoft's attention to detail and its systemic rigidity.

Wall Street heavyweight Goldman Sachs will serve as lead underwriter of the 6 million-share offering. Its price range is $10 to $12 a share, but could move up substantial before its Aug. 11 debut. Proceeds from the IPO will be used to provide working capital and for other general corporate purposes, including geographic expansion.

A safer bet, financially
From a financial perspective, Red Hat's a much safer IPO bet than some of the other Internet and retailing companies that have gone public in the past month.

In the year ended Feb. 28, Red Hat reported a loss of $91,000, or 1 cent a share, on sales of $10.8 million. That's up from sales of only $5.1 million in 1998.

In its latest quarter, the Durham, N.C.-based company checked in with a loss of $2 million, or 9 cents a share, on sales of $2.7 million.

Company officials are quick to point out that the best part about its open-source business model is also the most dangerous to its prospects for making money. If the OS fails to gain widespread commercial acceptance, all its best intentions won't mean much to investors.

On the bright side, it's received technological and financial support from the likes of Intel Corp. (Nasdaq:INTC) and America Online Inc. (NYSE:AOL), through Netscape, supporting its platform.

Linux is used more as a server software so Red Hat will be counting on large companies and Internet service providers for the bulk of its clientele.

Will it do a Be?
But before anyone gets too excite about the IPO, keep in mind that Be Inc. (Nasdaq:BEOS), which also offers an alternative operating system, was practically laughed off the Street on July 21 when it went public.

Be Inc. only managed to pick up 1/16 to 6 1/16 in its debut and that was after lowering its price range from $8 to $10 a share to $6. It's still sitting right at or below its opening price.

Clearly, there's a strong contingent of investors that doesn't believe in upstart operating systems while Microsoft (Nasdaq:MSFT) and Sun Microsystems (Nasdaq:SUNW) continue to dominate the playing field.