The unexpected Linux IPO

Cobalt Networks, with file and Internet server applications, will be the next to offer Linux-oriented shares.

The smart money had been expecting VA Research to be the first Linux company to follow Red Hat into an IPO. The gambling money liked Caldera Systems. It turns out they were both wrong.

Cobalt Networks, a maker of file and Internet server applications, will be the next Linux IPO.

Cobalt, while not usually considered a Linux company, builds its popular storage server, the NASRaQ, and the Internet services servers, the Qube 2 and RaQ 2, around its own home-brewed Linux. Cobalt's adaptation of Linux is based on the Linux 2.0 kernel. For Cobalt, Linux is part of a hardware solution, not a product in and of itself.

Besides counting on Linux's popularity surge, Cobalt is trusting the validity of Dataquest's predictions that the server market will grow from 1999's $2.2bn (£1.36bn) to $15.8bn by 2003. Today, the company has 101 employees with net revenues of $7.7m during the first two quarters of this year.

Cobalt Networks hopes to raise about $86m in its IPO. These funds will be used to pay down operating losses, boost working capital and pay for increased capital spending. According to the company's S-1 filing with the Security and Exchange Commission, other details, such as the numbers of share and their pricing, haven't been determined yet.

Standing behind the IPO as underwriters are Goldman, Sachs & Co., Merrill Lynch & Co., and BancBoston Robertson Stephens.

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