Interview: Larry Augustin Finally Answers 203
1) THE question
by Nicolas MONNET
Much like most net-related IPOs, VA's valuation is impressively high. Much higher than bigger and older companies which have proven to be able to actually MAKE money. So let's assume that this valuation actually means something. How do you see VA Linux fulfilling this promise, IOW, what will it be like when it will sell as much as its stock price mean? Will it compete directly with Compaq and the likes on the server market?
Larry:
We're building a serious company here and we plan to grow significantly, and I think our valuation reflects that. I think we are undervalued compared to some of the other companies out there based on the potential of Open Source and our target markets. The market opportunity is huge.
We sell systems based on Open Source software and provide significant amounts of consulting services to companies building major sites on the Internet like eToys, Akamai, DoubleClick, and Starmedia.
As those customers grow, we grow with them. Intel estimates that only 5% of the servers needed to run the Internet by the year 2003 are deployed today. That's a huge market for VA Linux. That's where investors see the big potential.
But you have to understand more about what we offer those customers. On the surface, people think we're a hardware company. We're not - we're an Open Source company. We work directly with those customers to solve their problems using Linux and Open Source. We offer some of the most powerful high-density rackmount servers for the Internet server market as part of that solution. Since you mention Compaq, in at least two instances I know of VA engineers have rescued large installations using Compaq hardware. Although we offer the best hardware for Internet servers and will continue to do that, that's only a fraction of what we do. We have a tremendous amount of expertise in Open Source, and it's really that expertise that we offer to our customers, and you can see some of this in our announcement this week with HP. The systems side of the business really just gives us a solid platform on which to build a known, stable, and supportable solution for our customers.
So the one thing underlying all of our business is our commitment to Open Source. The computer industry is changing; Open Source is emerging as *the* way to develop software in the next decade. The companies that figure out business models that work around Open Source will succeed. At VA we will be the leader in Open Source. I've built a company with a commitment to Open Source at its core. I don't want us as a company to have any incentive to develop proprietary software. I'm building a company that succeeds if Open Source succeeds. That creates a business model where supporting Open Source development (through initiatives like SourceForge.net) are absolutely critical to us. We will be Open Source pure.
2) IPO Question
by jezzball
I know how you choose the people you picked as friends and family (being one of them), but were there any specific HOW-TOS you looked through? Did you weight projects? Is there a place where you've amassed this information for people to look at?
I was quite surprised myself at being picked, as several other people who I felt have contributed more than me weren't.
Larry:
Sometimes going second has its advantages. One of the pieces of feedback we had from the Red Hat program was that people in the developer community wanted to understand how their names were picked.
From the beginning we decided to create a process that was as mechanical as possible in extracting names of contributors Open Source projects in general and Linux specifically. Chris DiBona and Chip Salzenberg assembled a set of custom scripts that scanned for developer names. It's best if I just leave the description of that process to Chris.
Chris:
There is a lot more to this question, so this is a long one...
When it was clear that we were going to go public and we wanted to do a community program, Larry and Todd (Our CFO) asked me to start working on putting together a list of folks to target.
Since I got word pretty early (before the initial S1 filing). I wanted to plan for as much flexibility as possible, as I knew that while I would probably be in charge of administering the program that final say on who we wanted to help would be not just mine, but on the shoulders of Larry and others (like ESR, who is on our Board).
So I first got mirrors of Sunsite, gnome.org, kde.org and many other software repositories. I wrote a perl script to rifle through them and un tar.gz the source code therein. It worked out to about 11 GBs of files. I then ran an e-mail scanning script that Chip Salzenberg cranked out for me against the archives to pull e-mail addresses.
This netted about 17,000 e-mail addresses. Each e-mail address was stored with a reference to all files it existed in.
I then went through the list by hand and got rid of bad addresses. This included things like lug addresses, root@ addresses and corporate info addresses. I also removed known silly addresses (foo@bozo, billg@microsoft.com) and straight errors that got through (1024x768@75mhz and such). This brought the list down to 12,000 e-mail addreseses.
I set these addresses aside and began accumulating contributor lists for various projects including gnome, kde, cpan, debian and others. These when concatenated with the top 1000 addreses from the scanned addresses amounted to about 3500 e-mail addresses. Since our orignal target was to provide 2700 people with an opportunity to participate, we felt 3500 was an appropriate target.
We were wrong. About three days into the program, we realized that our returns were much less than anticipated. At this time I scambled to include more people, I took the next 1000 from the scanned addresses, the beta developers from SourceForge (another 950) and a bunch of people were added anyhow because we simply missed them (about 200 or so) We also realized that due to a glitch in the scanning process a chunk of the kernel credits list was missed and I added those folks and made sure they were notified. For the most part if somone had been in the kernel list, they had already e-mailed me personally and I had already added them.
Our selection process (including Sourceforge) meant that Open Source developers on other platforms were allowed in as well, which was cool by us as we feel open source benefits all platforms.
In the end we got to include about 1500 people from the community, when we realized that we were going to have more shares available in the community pool, we reallocated to allow people to recieve 140 shares. At this time our price had gone up to $30, so we allowed people to take part at the 50 share level if they still wanted to participate and didn't have the money for the full 140 or 100 shares. Someone on Slashdot suggested this, BTW.
Everything went very smoothly, and I'd actually like to thank everyone in the free software community. Why? Well, as many of us now know, the VA IPO was very hot, we had an astonishing number of people calling, e-mailing and visiting asserting that they were a community member, and we took all of them seriously as that's the right thing to do.
The reason I want to thank everyone is that, 99.9% of the time, we were able to tell right off if someone was legit if they were nice. For the most part, everyone we included in the program was nice, and everyone who was trying to get into it fraudulently was a jerk. It made it really easy, so thanks, I appreciate it and the folks at the Underwriters said that the folks in the community program were just about the nicest people they've had to deal with in any designated share program they can remember.
Also, to those who have done things in the free software world and were not given an opportunity to participate, I just want to say thanks for your hard work. We do appreciate it, but we were working with a limited number of shares and we had to stop somewhere, but this doesn't mean that we don't appreciate you or what you've done.
As a last note, we are -very- sorry we had to send such a huge e-mail out to everyone. A megabyte is a really big e-mail to get unexpected. The SEC was very clear on this, we were given the choice to send it out with prospectus and forms in a PDF format or not offer it at all. And since for 90% of the list all we had was e-mail address, this meant spamming a lot of people. In the end, I personally decided to do this, as I felt it would have been a greater error to not include free software developers in our IPO. So in essence I had to decide what was worse, spamming or exploiting the community. I chose to spam rather then exploit. I still feel bad for it, but I do feel it was the appropriate thing to do.
3) Prices
by FascDot
Every time I need to buy a computer (for self or business) I check out VA Linux Systems. But your prices are always $500-$1000 higher than even the Microsof-tax laden goods from someone like Gateway or Dell. Is this all due to volume discounts or is there something else at work?
Larry:
First of all it is not our intention to be the lowest cost source of a box. We're not just selling a box. Typically we're selling a great deal of service and support around the box, and in the end the customer gets a better value as a result.
But if you're just comparing box prices, it also depends on what you are looking for. We do competitive pricing comparisons weekly versus Dell, Gateway, and many others. We work very hard to make sure we are comparing similar configurations. We have some configurations in the server space where we consistently come in lower because we have products that are better suited to the customer. In other cases, we have configurations that are consistently higher. For example, our StartX MP dual processor desktop system has easily a lot more cooling and power than anything else in its space in the market. Frankly, the chassis and power supply are over-engineered for a dual Pentium III desktop. As a result, we look a lot more expensive when comparing products in that space; the quality is apparent until you open the system up and do things like thermal profiles inside the chassis.
Also, I don't think people realize that we do a tremendous amount of engineering on our products. Every disk drive is flashed to a known, qualified firmware level. We regularly work with disk drive manufacturers to fix firmware problems. We need to do a lot of qualification that a Windows supplier has already done for them. For example, we had an incident in November where we attempted to qualify a major name-brand memory supplier under Linux on one of the Intel server motherboards. We expected it to be easy because Intel and the memory manufacturer had already qualified the hardware under NT. Well, Linux is not NT. We could make the memory fail under Linux. In normal operation the error might show up as a system hang once every few weeks. That's unacceptable to us and our customers. We log thousands of hours of testing of every component and configuration before we qualify it under Linux. No one else does that.
4) The next step
by DarkRyder
Now that the IPO period is over, what directions do you see VA Linux moving in? Are there projects that have been placed on the back burner until the IPO could 'make it possible'? If not, have projects been undertaken, or put into the planning stages, that wouldn't have been if the IPO hadn't taken place? Or is this just a calculated business move, with no plans beyond simple, steady growth as a company behind it?
Larry:
As we said in our prospectus, we'll be using the net proceeds from our IPO to fund operating expenses including broadening our professional services division, hiring more R&D personnel, and expanding our sales operation worldwide (starting in Europe). Another important benefit from the IPO is the credibility it's given us as a company. A lot of prospective customers who might not have considered us before the IPO now look at VA Linux Systems as a company they know will be here over the long term. We're publicly accountable now, and we're focused on execution. It's a responsibility all of us take seriously.
5) Plans for other platforms?
by imac.usr
Specifically, the new PowerPC motherboards that some companies are planning to build...is VA planning any systems around these boards, or do you see a market for platforms other than i386 in your company's future?
Larry:
We're always looking.
6) Your view of Linux and the open source movement
by God I hate mornings
I've been watching with keen interest both Linux and the open source movement with great interest for the past few years. Now with anything Linux being the darling of Wall Street, it would seem all one has to do is mention Linux and watch the rush of money.
My question is this: How do you, personally, view your fellow Linux distributors? Do you see them as competition to be toppled? Or do you view them as competitors in a worthwhile cause?
Larry:
We are distribution neutral. I believe there is one Linux. We have pre-installed various distributions over time, and we're committed to supporting standards and customer preferences on this issue. Most of our customers don't really care too much; in internet infrastructure implementations, most people have very specific loads customized to their needs. We help them with that customization as part of our added value, and we pre-install the results. We often start from Red Hat, but based on customer demand we have also started making plans to offer standard Debian and SuSE based loads this year.
I can't remember actually competing with a distribution company for customer business. We typically partner with them. We put our competitive focus on counter- or quasi-Linux companies such as Microsoft, Sun and Dell.
7) Joint marketing effort?
by Floris
Watching all the little companies (and the not-so-little companies) that build and support Linux as an OS, I have been wondering about when we will see Linux commercials on commercial TV?
Some CEOs of Linux-related companies have said that their goal right now is to "grow the Linux market" rather than competition with the other vendors. The main competition would be Microsoft rather than each other.
However, Microsoft has a massive marketing machine at its disposal. The Linux vendors dont have nearly its marketing muscle. Are there any plans for a joint marketing effort to counter that?
Larry:
For practical reasons, we're not planning any TV ads. Most of our sales are to folks that buy based on information from other sources.
8) VA Linux Software Patent Intentions
by Aaron M. Renn
In your S-1, you mention that you have applied for a patent. Here is the relevant paragraph:
"Our systems consist primarily of commodity hardware components in combination with the Linux operating system. While we have developed some proprietary techniques and expertise, most of our activities and systems are not protectable as proprietary intellectual property and may be used by competitors, harming our market share and property, we generally enter into confidentiality or license agreements with our employees, consultants and corporate partners. We have also recently commenced a patent program and to date have filed one patent application. In general, however, we have taken only limited steps to protect our intellectual property. Accordingly, we may be unable to use intellectual property to prevent other companies from competing with us. In addition, we may be unable to prevent third parties from developing techniques that are similar or superior to our technology, or from designing around our copyrights, patents and trade secrets."
I realize you will not want to disclose the details of your pending patent application, but I am interested in knowing whether or not it is a software patent. And, what VA's policy towards software patents is, in general. Will VA apply for software patents? If so, how will they be licensed? Will they be made available on free software terms to free software developers?
Larry:
We have applied for a patent on the techniques we used in the design of our FullOn 2x2 high density rackmount server. We have some unique packaging technology there.
I personally believe the patent process with respect to software is broken. However, it has not been a priority because we have not applied for any software patents.
9) Intel influence behind the scenes?
by RelliK
A while ago VA Linux Systems (then called VA Research) used to offer Alpha systems. But soon after Intel's investment in VA, the Alpha systems disappeared. Last I checked AMD systems were not offered either (and don't tell me there is no demand for either Alpha or AMD). Intel is the *only* choice.
My question is: being a Linux company, will you continue to offer people a choice or will you, like Dell, become a slave to Intel?
Larry:
We dropped Alpha well before the Intel investment because we didn't have the resources to support Alpha and Intel on Linux. However, we're always exploring all of our options.
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Patents and IPOs (Score:2)
So many times I read "So and So has the legal obligation to share holders to patent software...blah blah blah..."
As far as sour grapes about not making the list...well, hey no matter what they do they will never make everyone happy. It's just not possible. At least they are making a try at it. Most IPO's only go to large valued customers at big brokerage houses. I.e. Not John Smith with the e-trade account.
It's called speculation (Score:2)
1. They expect future growth in the market sector (Linux Servers in this case), and expect companies with large market share today to retain that share in the future.
2. Everyone else is doing it.
Without the Tech sector, Wall Street is showing lackluster performance. We're to the point where the only way big, established companies can grow and increase profits is through mergers.
People looking for money grabs in today's market are jumping on board a massive roller coaster on its way up...and after it crests, it'll go down really, really fast, taking every stock owner along.
I own stocks through my employer's deferred compensation plan. I am nervous.
Re:What?!? (Score:1)
The whole tech industry is suffering from over inflated stock prices. Yes. Suffering. Becuase once the bubble bursts, lot's of former millionaires will once again be mortal again. It's only a matter of time before the gov't puts the breaks on the growth trend we've been having for the past decade. And then what?
I'm not saying I'm smart. I'm just saying that Wall Streets insane. They're all hunting for the next Yahoo's, Amazons, or Microsofts... WHen they pump up a companies value, most companies don't realize it's because of traders and not themselves.
Let's see LNUX is 131 a share today.... Would you buy it at $90/share in 6 months? But you need to pay today. That's how shorts work.
No... I don't have the money to gamble on something like that. Sorry, but though the street seems to be sanening up, it's still much too insane for me to get into anything like.
Re:Why (Score:1)
Re:AMD Dodge... (Score:2)
http://www1.amd.com/products/cpg/result/1,1265,
Re:No way... Amazon has already won (Score:2)
Books are a commodity, most people will buy on price if they consider all other things equal. I think that if soemone can find a way to get next day shipping at no additional cost and be *very reliable* then they will win.
I agree with your point about the Amazon branding, I think that there are a lot of newbies who don't even know enough to look anywhere else but Amazon when they want to buy a book online.
This whole thing kinda ties into the problem that VA Linux will have unless they can really prove that they give you better service and better boxes than Dell... Computers are a commodity and many people will buy on price...
Re:No way... Amazon has already won (Score:3)
Well, remember that fundamental business rules haven't really changed. You still have to connect products to customers. It's the communication with the customer that's changed. It's never been more direct, or less expensive to present your wares to an individual.
However, that doesn't mean you don't have to market anymore, maintain warehouses/inventory, service the customers, or whatever. Once you've decided to launch a new product line, you have to hire experts for that domain, line up suppliers, reserve inventory space, buy inventory, on and on. And when you're amazon, you can't just slap up a web page and see what happens. What will happen is that you will get a flood of orders, and Amazon has to be ready to receieve those orders. That means more servers, more customer support reps (who have to be trained on the new product, which means you have to write training manuals, etc).
Let's face it... e-commerce is just catalog mail-order, going all the way back to the original Sears catalog. The web just makes it easier to automate the ordering systems. In essence, rather than a clerk entering your order into a fulfillment system, you are entering the order directly into the fulfillment system. And instead of having to print catalogs, you can instantly see what's available.
But it still boils down to ordering from a catalog.
Eventually a lot of these companies will have to justify their valuations. Some of them are going to grow into being justified, and others aren't. If anyone is going to grow into justification, it will be Amazon because they have the branding. Some people think branding is dead, that people will just hop from site to site looking for the best deal. Some will, but I bet most won't. Never bet against the laziness of the average individual. Most won't worry about saving a few bucks when they can go to a place that's comfortable, hit one button, and the order appears on their doorstep without any fuss or trouble.
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Re:The shareholders will not win (Score:3)
Amazon needs to completely run Borders and Barnes & Nobles out of business to realize the price of its "future growth".
Not at all, for two reasons.
1) Amazon doesn't have to be a monopoly to be the dominant player in a space. One of the rules of branding is that it rare to have more than a 50-60% marketshare. Above that, people distrust you because they feel their choices are limited. For Amazon to be considered a winner, they only need to have the dominant marketshare.
2) But, as you point out, to justify their valuation they probably would need the entire book market. That's why Amazon doesn't care about domanating the book market, they want to dominate the web retail market. In essence, they want to be the department store (or Wal Mart) of the web. It's no coincidence that Amazon hired a lot of high-level executives from Wal-Mart. WM is incredibly efficient in their distribution systems, and it's that experience that Amazon wanted.
Bottom lines, it's not about the books. It's about product diversification.
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Re:Prices (Score:1)
Since it's only partially related, I've put it here [greenspun.com].
The magic word is TANSTAAFL.
Cheers,
-- jra
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Re:consult what?! (Score:1)
The guy didn't think Starmedia staff
reads (and apparently posts to) Slashdot ???
I'm wondering how is the rest of his
consulting services...
And what's so special about his hardware except
bigger fans and thicker cables ??
Re:Why (Score:1)
Valid Comment ? (Score:1)
Just 5% ?
But I thought the world was running out of IPv4 address space really fast; and as IPv6 is still a long way from roll-out, surely this statement is either false or IANA [iana.org] is gonna have to get their skates on to get more sites ready for the move to IPv6!
No way... Amazon has already won (Score:5)
Amazon can turn a profit any time they want... all they have to do is turn off the marketing machine and stop spending so much on infrastructure.
But the reason they have won is that they won the branding war (which is the only war worth winning). They knew that they had to spend giant dollars to rise above the noise of every clown598.com.
Say what you want about Amazon, but they have succeeded brilliantly in diversifying from books. In five years Amazon will be the Wal-Mart of the web.
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no AMD at VA - sigh... (Score:4)
but that as may be, I was never in love with VA in terms of their customer-defined configurations. I tried several times to buy systems from them, but I did need to specify the motherboard I wanted used (I'm a system builder as well but I needed a totally built and warranteed system so that I could expense it at a previous job). they refused to even try to obtain that board (an asus mboard - which is hardly a step down!). and when I wanted to buy just a RAID subsystem (disks + controller + case) they would only sell complete turnkey systems (ie, it had to be a full cpu/ram/video/keyboard/etc system). and like I said, it was years ago before they went "big time" - I can only imagine there's less flexibility now than back then.
so my business always went with local system builders due to VA's inflexibility to work with me as a customer.
on the positive side, my current company does have a few VA systems and I must admit that their cases and fans were well selected. there is so much cooling in that system, that apart from a very expensive supermicro case or server cube, their system is the most ventillated one I've ever seen. but that was before they went all-intel - so I'm not sure what their current systems are like. nor will I spend the time to find out - there are many other system builders out there; ones that are willing to build to my spec.
at any rate, as a loyal linux advocate, I do wish VA well. for many customers, the level of service and customization is just fine for them.
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Re:Why no AMD (Score:4)
What kind of consulting services? (Score:1)
Re:Put your e-mail address everywhere in your code (Score:3)
I don't know about the other ipos coming down the pike, but with ours those email addresses were scored and hand checked before being added as backfill on the contributor lists.
As far as spam traps went, for those that bounced back with instructions, we followed them, but it was our experience that a small number of people actually missed out. Most people who felt they deserved being included and had super spam traps emailed me and we went from there.
Chris DiBona
--
Grant Chair, Linux Int.
Pres, SVLUG
Re:Put your e-mail address everywhere in your code (Score:2)
Jezzball
ls:
DoubleClick and Etoys (Score:1)
Re:DB Alex Brown (Score:2)
Having been through both RHAT's and LNUX's IPO invitations, I certainly agree.
I'm sure RHAT, and those (LNUX et al) who would follow, learned a lot from that RHAT IPO. I hope E*Trade learned how to better, and more consistently, do things like manage their web site, answer questions, etc.
Dealing with Deutsche Bank (during the LNUX IPO) was delightful, and, IIRC, we always got consistent and correct information.
Re:Why (Score:1)
In my opinion, the reason FreeBSD hasn't caught on to the extent that Linux has is that they really don't care much about user-friendly type issues. It's no surprise that GNOME and KDE are coming from the Linux camps, for example.
Now, FreeBSD can be made just as friendly. For example, you can build the Linux software (or just run the binaries using FreeBSD's amazing binary compatibility). But the point is, user-friendliness is an extra, not the default.
FreeBSD is great, but their focus has been primarily on servers and hardcore UNIX geeks, not on non-technical users, and it's cost them the fame that Linux now has.
Prices (Score:3)
Memory testing software? (Score:2)
Do you have any special software you use to test the memory in this way? What is the exact method of memory testing? Anything open source?
This would be of great interest to me, and certainly to others too. I've bought duff memory several times in the past and proving (to oneself and the retailer) that it's broken is often very difficult.
Re:No PIIIs in February (Score:2)
Open Source mentioned (Score:4)
DB Alex Brown (Score:4)
Now if only my govt didn't want to take 40% back off me
Re:Why (Score:1)
I believe FreeBSD runs GNOME and KDE just fine, though. So there isn't any technical impediment to using it on the desktop -- just less development momentum.
Whoops (Score:2)
Here is the actual link [slashdot.org]
I defend Roblimo! (Score:2)
Roblimo, (seemingly) alone among the
Well done, Roblimo!
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Re:AMD Dodge... (Score:1)
Not true. I saw a dual processor Athlon board at the Fremont Fry's last november or so. It sold out rather quickly and they haven't got more in yet, but it shows that the AMD SMP stuff is out there, you just need to find it. I think it was FIC that made the board, and the board was ~ $230. We drooled over that for darkstar.frop.org [frop.org], but at the time we didn't have the cash to get it. Soon, though.
-skullY
Re:Stock price should also be discounted for risk. (Score:1)
I'd like to point out the difficulty in knowing just exactly what Amazon's assets are, though. A quick look at Yahoo gives a "book value" of $1.24, but what does that really represent? You can assign hard values to things like cash, office buildings, and inventory, but it is difficult to calculate the value of intangibles like patents and trademarks--which is what Amazon mostly is.
PS: Are you the guppy I know?
Maybe, but your nickname doesn't ring a bell. I am 23 years old, Chinese-American, currently live in Pennsylvania, and graduated from Penn State. Need more personal info to ID?
return of the regime . . . (Score:3)
I'm not going to praise Christianity as a countermeasure to the Holy Roman Empire. After all, where is the Vatican, the "holy" capital of Catholosism? ROME FOLKS!!! It's not an alternative, it's a PART OF THE PROBLEM!!!!
This of course is not without precident. The Romans, as you know, practiced a rather stylized form of paganism. But even THAT wasn't theirs. They stole it from the Greeks, and just changed the names!!! A PR manouver copied time and time again.
The world has changed alot in the past 2000 years, but it is no less ruled by religion than it was. Only now it's not paganism or christianity that rule all business dealings and politics. It is of course scientology. The Roman threat does not represent an END to scientology mind you, it represents the ASSIMILATION of the religion we all love and hold dear!!! You will no longer be Ready to Receive the Knowledge after arduous training, all you'll have to do is PAY OFF THE RIGHT MAFIOSO. It happened to Medeterranian Pagans, it happened to the Catholics and it can happen to us too!!!
I'm not surprised that the next rise of the empire would take place from a linux company. After all, linux is driven by WORLD DOMINATION. Something wrong with this picture folks?!?!?! Look at this smarmy neo-roman; he doesn't even ANSWER SLASHDOT INTERVIEW questions in a timely fashion!!!
We must unite and assure the Church of Scientology does not not bow to Mr. Augustin and VA (Vatican Assassin) Linux. BOYCOTT VA!!! BOYCOTT THIS ARTICLE!!!! BOYCOTT THE WEST COAST OF THE UNITED STATES!!!! THEY'RE ALL PART OF HIS PLAN!!!!!
Why no AMD (Score:5)
I can understand the difficulty of supporting both x86 and Alpha, but support for the AMD (being x86) is much simpler.
The lack of AMD support would seem to be purely due to intel's influence.
Small Chance (Score:2)
We should EXPECT to see new McDonalds and so forth. Small companies whose net worth climes drasticlly. This time Wall Street isn't stupid and everyone wants a piece of that company when/if it does grow huge. So in fact the companies may not be overvalued but they are EXTREMLY risky b/c they veyr well might not corner most of the market
Stock price should also be discounted for risk... (Score:4)
The stock price should also be discounted based on the uncertainty concerning the "expected price of the stock when you sell it". In the case of Amazon and similar stocks, this uncertainty is substantial. Add to this the fact that Amazon has no dividend (No +1 on your die roll), so that the current valuation is now based entirely on future expectations. The question is -- are these high-flyers sufficiently discounted to make the risk worthwhile?
Re:desktop market (Score:2)
Re:Why no AMD (Score:1)
He did say something like: "We'll keep our options open" in reference to supporting Alpha, which, in political business-speak means "We have no current plans, and probably never will - but thanks for asking."
It seems likely that VA must have some sort of deal with Intel - why else would they not move into the (presumably) easy AMD market?
service, schmervice... we just want the box. (Score:5)
"But you have to understand more about what we offer those customers. On the surface, people think we're a hardware company. We're not - we're an Open Source company. We work directly with those customers to solve their problems using Linux and Open Source."
...that's just not true, at least not in the case of the *entire* list of companies he mentioned.
Specifically, at StarMedia, where i'm chief systems guy, we've got hundreds of VA's boxes racked up around the world... we *love* the hardware, and love VA's ability to get us another truck full of servers delivered really quickly...
...but we don't run linux on *any* of them. Like several other companies who've been challenged to scale *way* up, we run FreeBSD. On VA "linux" boxes.
i (and other members of my team) kind of resent outside companies talking about how we need their consulting help... it *is* kind of fun to get a "sorry, we don't support that" response from such an "Open Source" company...
...we're not so resentful that we'd stop buying servers from VA (did you get that last order, Larry?), we just want to make sure people know there's devil stickers on top of the penguins in our cage.
You can thank the SEC (Score:4)
I guarantee that post was checked by a lawyer before it was posted here.
blame Intel, not VA (Score:2)
it's not as if VA is the only company offering Intel products. They are good products (as x86s go). The monopoly practices are the bad part.
Re:I beg to differ. (Score:2)
Another point i'll make is that these investment banks and brokerage houses really don't give a damn how good a security ACTUALLY is. Whether you, the investor, win or lose money doesn't much affect them. They want to see maximum volume, that is how they make their money. It is in their interest in fact to keep their mouths shut.
"
Not entirely true. Sure, brokerage houses would make a lot of money if the volume simply went through the roof by reaping all of the commisions on the sale, but at the same time, this kinda reminds me of a store owner who rips off his customers is small almost unnoticeable amounts - sure, it's good for profits in the short term, but eventually your customers figure it out and go elsewhere - brokerage agencies don't just get you to buy as much as you can, but try to get you to buy what they consider to be quality - otherwise you don't come back. Repeat customers is what makes or breaks the business in any line of work - quick profits by looking out for nothing but your self interest rarely makes the most money in the long haul.
Re:ummm... nitpick (Score:2)
- "safe" is word without a precise definition. better to speak of risk which is defined as variance.
- you describe call options but they shouldn't really be compared to selling short.
- it is speculating (gambling) to purchase on the belief that a security will move in one direction. better to purchase according to overall portfolio risk/return (hedging or speculating). This has nothing to do with what you were talking about, but I feel I shouldn't go forward without noting it.
- so, if one believes that magically one can predict the future better than the market does, and then consider selling short, better to buy puts than calls. Selling calls is good, too, but has the "same" unlimited loss potential that selling short does.
Gee, there's more to say (in the money, or out?) but I'm getting tired of quibbling. Best to say that the risk adjusted expected returns of all securities are the same -- ??? yep, once you take portfolio weight and co-variances into account.Moderate "What?!?" down: overrated (Score:2)
Then, saying that all other investors (the ones bidding up these prices) are wrong, and that IBM is the only company that's valued right is just ridiculous. You're recommending, therefore, that IBM is where all your money should be: good luck. That was bad advice before Microsoft cleaned their clocks.
Believe the market, all people in it collectively know better than you do. Including all of the rare downturns, recessions and depressions, the market is always the best place to put your money, and nobody has a formula for beating the market. And if anyone did? :) They wouldn't be hanging out on slashdot! :)
Re:What?!? (Score:2)
Back on the first hand, I recall seeing a paper by some academics in a finance department (sorry I don't have a link), demonstrating that companies could increase their stock value simply by adding ".com" to their names.
--
"But, Mulder, the new millennium doesn't begin until January 2001."
I beg to differ. (Score:3)
Another point i'll make is that these investment banks and brokerage houses really don't give a damn how good a security ACTUALLY is. Whether you, the investor, win or lose money doesn't much affect them. They want to see maximum volume, that is how they make their money. It is in their interest in fact to keep their mouths shut.
My bet (and yes, they're a dime a dozen) is that these Dot Com stocks go the way of the Bio Tech stocks of the 80s and 90s, from RedHot to the plague in 1 second, I suspect within the next year or two. No one is going to want anything to do with them. The real shame is that while these stocks Dot Coms are redhot, they push many more legitimate companies out (e.g., VCs now have a totally unrealistic time frame/turnover and growth (not real growth, but valuations rather) expectations with the Dot Coms). And when they finally plummet, the more legitimate Dot Coms that eventually emerge will find it very very difficult to raise capital. I'm counting the days....
Re:No way... Amazon has already won (Score:2)
"I can pay off my credit cards any time I want. All I have to do is sell my car and hitchhike to work instead...."
--
"But, Mulder, the new millennium doesn't begin until January 2001."
Spec your system here (Score:2)
Expect to pay a premium for the individual attention though. It's someone's time, not another unit off an assembly line.
Re:How Not to Drop Names (Score:2)
He's being honest. Yes, many Slashdot readers are annoyed at DoubleClick this week. Yes, many of us think it took eToys rather long to get around to doing the right thing. Both of them are potentially very lucrative longterm customers. And if they perceive the open source community as both a supplier of choice and an outspoken portion of their market, rather than a pack of rabid dogs, they would probably be flexible enough to listen to us. For all I know, they read or were told of the discussions here and elsewhere and rethought their strategies as a result. Let's not criticize Larry too harshly for telling us the truth. I vastly prefer uncomfortable truths to lies and evasion.
And speaking of uncomfortable truths, I will join the growing number asking that the AMD portion of the final question get answered. I'd be happy to accept valid business reasons for making a business decision. I just don't like the impression that the question was ducked. I don't think that was the impression he intended to give.
I disagree. (Score:2)
Historically and empirically speaking, this has been demostrated to be a problem. The 80s and the BioTech crash is a great example of this, it's been demonstrated many times that these firms would keep on pressing them even though they KNEW they the security was fundamentally bad.
Brokering is a fundamentally different issue than selling merchandise. Brokers are merely intermediaries, they don't control the merchandise. The merchandise is beyond their control, and therein lies infinite deniability. Furthermore, most buyers understand that there is a certain amount of risk (unlike merchandise buyers, who expect an absolute gaurantee). So if the buyer were to lose 30% of their retirement money, how are they to know that their problems are the result of freak bad luck, or symptomatic of a larger systemic problem in the brokerage firms? How are they to know that their broker could have known? That it wasn't just the market?
Even without this absolute callousness issue, there is a question of risk aversion. It is not their money that they're putting on the line. A risk of 1% of these companies defaulting might be tolerable to them, but intolerable to the individual that is heavily into those securities. Their customers have to incur some risk anyways (if they want to play the stock market), they add a little more risk, and they can increase their volume by a multiple.... Never mind individual brokers whose interests are not necessarily the same as their brokerage house....Particularly when the customer needs little to no urging.
Re:Prices (Score:2)
It's kind of like the feeling you get when you walk into a gay bar without knowing it... There's something wrong, not with any one thing in particular, but with the thing as a whole, in the way the individual elements fit together. I have no problem with homosexuals, nor with getting a beer in a convenient gay bar, but the feeling you get from the place is different in a subtle, intangible way. I suppose I'll one day be using Solaris and it will dawn on me, much like the revelation that hits you when you notice that the two burly red-neck types are really dancing with each other..
Re:ummm... nitpick (Score:2)
Basically you both have to be in agreement it's going down. But how far down is the real question. If it doesn't go far enough, or heavan forgive, it goes up... you're kinda screwed.
With options, if it goes down, you don't need to buy. With shorts, you can't change your mind and say "oops!" never mind
Re:service, schmervice... we just want the box. (Score:2)
Long Live Chuck!
Re:Stock price should also be discounted for risk. (Score:2)
PS: Are you the guppy I know?
Listen Up (Score:3)
Amazon did not invent these valuations, and neither did Microsoft or Yahoo. This same exact speculative bubble has risen around every new medium invented. You name it... from spices to the ol' tulip bulb mania to railroads to cars to telephone to catalougues to radio to TV to one of the most recent: computers.
How many people remember how many computer makers there were in the early 80's?
I remember a few... how about Apple, Atari, Burroughs, Coleco, Columbia Data Systems, Corona Computers, Delta Data Systems, Digital Equipment, Eagle, Franklin, GRiD Systems, Hewlett Packard, Hyperion, IBM, ITT, Kaypro, Mohawk, Data Sciences, NCR, NEC, Olivetti, Osborne, Sanyo, Seequa, Sunrise Systems, Tandy, Televideo Systems, Texas Instruments, Victor Technologies, Xerox and Zenith.
Most of these companies are not in the computer business anymore, and many of them are not in *ANY* business at all. Yet, they were all trading at hundreds of times earnings (if they were earning anything at all) at one time.... Because computers were going to change the world. Sound familiar to anything we are seeing today?
Also keep in mind that some of the most succesful computer makers today had not even come into existance during this hotbed of speculation... Dell and Gateway for instance. First is not always happily ever after.
The internet will change the world. But make no mistake, it is a speculative bubble right now. It will burst. Some will make it, but the vast majority will fail and be replaced by ones yet to come. At some point, stock price *will* equal the actual performance of the company... it always has, it always will. Because after all, you are actually owning a portion of that company with your shares.
Ever read about the 20's? Ever read about the late 60's and early 70's when the so called "Nifty 50" (the majority of them, technology stocks) lead the market to all time highs and were thought unstoppable? Well, in 1972 they were stopped... and they were stopped for the next 10 to 20 years (some have still not recovered).
I choose to invest in companies that have proven they can perform and thrive in tough markets and have great oportunity for growth well into the future. The internet is a fool's market right now, and the majority of the fools will get burned. Just pray that someone is dumber than you when you sell your shares.
Re:DB Alex Brown (Score:2)
No PIIIs in February (Score:2)
Intel has stated that they will not be able to supply ANYONE with P-III CPUs in February (check TheRegister). What will Dell and VALinux do then? VALinux may actually be OK, since they aren't super-high-volume in sales, they may actually have enough parts in stock to cover it (their prices may also be an indication that they stock up, rather than buy only as much as they need to stay with falling prices as tiny computer OEMs do).
The shareholders will not win (Score:2)
Lets not forget a cheaper price is only a "click away".
Re:What?!? (Score:2)
Re:Listen Up (Score:3)
The ones that fared worst were the tech (and they were high-tech for the 70's too) companies, such as Burrough Comp., Polaroid, Digital Equipment, Eastman Kodak and Xerox.... these were the companies that were selling at the highest valuations (their futures were though to be the grandest). They got creamed the worst.
As for a portfolio of all the computer stocks listed above? I have figured it out. Sure Compaq and Apple did extraordinary. But the combined average annual return for that entire portfolio comes to a fraction over 2% per year. Hmmm... that is not so impressive.
The point is that you stay out of such a speculative market.
Re:Why (Score:2)
quibbles and bits, quibbles and bits (Score:2)
On that latter point, the definition of valuation that talks about dividiends is simply pointing out that the only way owners can get cash value from their equity is by selling the equity or by getting a dividend from the company (and I guess dissolution?), so valuation must be based on future dividends and future value of equity.
To continue, so I can get to my editorial ; ) Dividends are paid after tax earnings, but dividends are then immediately subject to a second round of personal income tax so investors hate getting them. Investors would rather choose when to sell their equity and they'd rather pay the capital gains tax which is lower. But the IRS wants its taxes so thats why dividends payouts are required. It's highly suspect for a company at one moment to not pay dividends because they're "needed for growth," and in the next moment to buy back equity because it's "undervalued". In actuality, stock buybacks are sleazing the tax law to convert income into capital gain so the dividend taxes don't need to get paid, and so that different investors can make different choices about the timing of the income. But it is even more sleazy for the government to tax income twice, so I hate to complain about this little bit of subterfuge. The real answer is to eliminate corporate income tax altogether and simply require taxes be paid on unrealized capital gain, but I guess that will never happen. If the tax rate were flat we could do the opposite: eliminate personal income tax and just tax businesses which would be massively simpler and would end up with the same tax revenue and less drain on the economy.
By the way, if you are a reader who has not really understood what we are talking about here: It is really unfortunate because most of this is fairly simple common sense arithmetic with a few basic concepts but accountants have invented all of this terminology which is more confusing than helpful till you digest it all. suggestion for slashdot certain kinds of the accumulated knowledge I see on Slashdot should be put into SlashFAQs for Finance, Accounting, etc. It's so sad to see it drift away into the past....
Cheaper than a Compaq box (Score:2)
--
Re:No way... Amazon has already won (Score:2)
And if they do that, how long will they make a profit, before a competitor with more aggressive marketing and infrastructure takes over their market share?
Well, no one said it was easy to stay on top. The point is that once they have built their brand and have diversified their product lines to a sufficient extent, they can dial back a lot of these expenditures. It's extremely expensive to launch new product lines.
I mean, you make it sound so easy ... just use "more aggressive marketing and infrastructure to take over the market share". In practice, it's not that easy. Ask competitors of Wal-Mart (or Microsoft, for that matter).
By the way, it's not as if Amazon is hiding any of this strategy. Read their financial reports.
--
consult what?! (Score:5)
As Ryan Nelson, my most senior sysadmin, points out, we do love your hardware immensely, as it suits our purposes well. However, the fact of the matter is that we use FreeBSD, not Linux, which is not where VA's business is focused. As such, we have really not had much involvement with VA outside of ordering hardware, as your team does NOT have the FreeBSD expertise that we require.
In fact, perhaps the only consulting that has taken place was with MY team consulting YOUR team on alternate hardware components to replace those pieces of the host which have no supported drivers under FreeBSD, thus enabling us to continue to use your hardware to meet our needs. Yes, we were offered additional help in developing a FreeBSD driver for the unsupported hardware, for a serious premium.
If you were truly committed to Open Source, you would offer to develop drivers for other popular free Intel-based Unices without any type of monetary demands. This would, in the end, help you as well, as members of other communities outside the Linux community would turn to you for their hardware needs, thus driving your business further among competitors.
Don't get me wrong, I love Linux, and in fact use it at work and at home for my desktops. However, it should be noted that for large-scale operations, Linux does not always meet the requirements, and I would think you'd like to corner the market on these large-scale operations as much as possible.
Sincerely,
Adam Firester
AMD Dodge... (Score:2)
Re:No way... Amazon has already won (Score:2)
Well, I have to admit that I didn't know about this "accounting trick", although I would prefer to see the original data rather than relying on the mainstream press to report accurately.
Still, I think the point still stands. Amazon has by far the strongest brand on the web. B&N has the overhead of real stores, so the overhead advantage should go to Amazon.
Also, you're just focusing on the books. I think most would agree that just the book business would not justify the valuations, but if Amazon can truly become the department store of the web, then they could justify their price.
I mean, it's not as if Amazon has wimpy revenues. There is a lot of room for them to improve their product fulfillment and efficiency. I just don't think they are particuarly focusing on efficiency at this point; their stated short term goals are to build brand and expand their product lines.
--
What?!? (Score:5)
No. VA Linux, just as every Linux,
Now, every company out there seems to believe that they should be valued based on what they think they can do rather than what they are doing now.
It seems that IBM is about the only tech company that's valued anywhere near the levels it's revenue would reflect if it were in any other industry. They actually trade a lower PE ratio than General Electric.
I mostly liked everything else he had to say, but due to the order of teh question, i was set off by him. Build a company. Get the sales. Get the PROFITS. Then you'll get your valuation. Any other order is just insane.
Advertising Linux (Score:2)
Maybe part of the problem is that net based advertising targets the desired audience more precisely.
market-talk (Score:2)
Mostly Fools (Score:2)
No, the point is to invest in the market portfolio. Don't blame me if you don't like the following advice, but you should know that a number of Nobel prizes have been awarded for it. You should spread your risky portolio around and invest in absolutely everything, with each fractional investment weighted by the weight of that security's market cap. That is, if the market valuation of IBM is .5% of all companies in the world, you should have .5% of your money in IBM (including bonds). I said "risk portfolio" because you may choose to have a portion long or short in debt to adjust the overall level of risk.
Now, since such a strategy is difficult to implement, you should be heartened to know that a portfolio of 40 or so diversified equities can be constructed that will perform the same as the market to a few digits of accuracy. This is what index funds are for. BTW, don't forget to include significant (at least 33%) foreign investment or currency risk will predominate.
Now, I realize I haven't explained the whole thing sufficiently to convince anyone, but perhaps some of it will sound like advice you've heard before, and knowing that top economists in the world actually agree on the answer will get a few people to stop listening to this month's flavor from the Mostly Fools who predominate in the personal finance biz.
Re:Prices (Score:4)
MODERATORS: Don't fall for this guy! (Score:2)
Check the so-called-CNN link before you moderate up. He is a TROLL.
________________________________
Re:Mostly Fools (Score:2)
There is such a thing as over-diversification. You do not need to own everything under the sun to get the best results.
A few examples:
Why on Earth would you want to invest in gold or other precious metals? Graph out a performance of gold over the past two years and it has been a nice steady decline (not even taking into effect inflation, which would kill it).
Why would you want to own utitilities (mainly speaking of the power companie), the industry is so over-regulated (even including recent rulings) that real growth (including inflation)is next to nil. While their dividends may be nice and high, they can barely afford to pay them... check net profit vs. payout. Interest rates also have the ability to fuck over the utilities (because they are so highly leveraged).
I like to stay away from luxury items and other cyclicle industries. The other day I was at the
Apple Bagel, I ordered a bagel and coffee, got my bill and it was $7!!!! What the hell, when we go through a little tougher times, how many people are going to pay that much for a bagel and coffee!?
I also trully believe that long term bonds, notes and CDs have no place in a retirement portfolio. It is a fact, that over the long term, and we are talking 10 plus years, bonds are more risky than stocks (as measured by the S&P 500). And the reason is inflation. If you get locked into a 30 year bond at around 6.6% (todays rate), and we go through another decade like the 80's, where inflation reached as high as 20%... you are royally screwed.
With quality, individual stocks, you do not have that problem. They are able to set their prices to keep up with inflation.... so they are AT LEAST going to do as well as the standard rate of living, even with absolutely no growth.
Coca Cola did not raise their price from 25 cents to 75 cents over the past decade to increase their profits... they were merely keeping up with inflation.
I personally choose not to invest in foreign equities, and instead focus on US companies with a foreign presence. Rules and of accounting and disclosure are so much more strict in the United than any other place in the world, meaning I can trust the numbers better. The world market is a guessing game... which eceonmy will be number one next year? Well, the US is consistently in the top 10, and I believe serves as a model for other economies to follow. It has less severe down turns and recovers much faster.
Nobel Prize winners do not apply to the real world, and never will. I would listen to Warren Buffet (who has never once owned any of the "flavor of the month" companies), Fayez Sarofim, Jeremy Siegel and Peter Lynch before I would take the advice of a Nobel Prize winner.
NOT diversifying across the board and using sound fundamentals is how you flourish... through good times and bad.
old news (Score:2)
I was actually using "flavor of the decade" to refer to investment strategies, not particular companies. But, using it the way you interpreted it, the flaw is you have simply substituted the flavor company of the decade for the flavor company of the month. If you only look at "quality" companies based on past performance, you will never get to invest in new companies with new ideas that will take over markets from old dinosaurs. You will always dismiss the new "flavor" as "risky", so your money will be in IBM till after it's clear that Microsoft will cut them down to size, and then you'll sit in Microsoft till RedHat has cut them down, Intel till AMD, Howard Johnson's v. McDonalds, etc. etc.
You will earn money, but by not taking risks you will miss all new trends. If some newcomer got you to pay $7 for a bagel and coffee, it sounds to me like they know what they are doing, or maybe the rent on that streetcorner is high. What, you want to invest in people who get you to pay 26 cents for a 25 cent cup of coffee? I say, shop there a lot, but only invest a little. If Coke can change their price from 25 cents to 75 with changing times, why can't Apple Bagel change their prices as demand changes... or maybe, like Starbucks or Ben and Jerries, they'll make the new prices stick?
The people who run Apple Bagel have all of their money in it and they are paying very close attention to that market. I'm not endorsing their particular strategy. Rather, collectively all of the bagel companies have created and captured the value of the entire bagel market which you are dismissing as a bad investment. I'm saying it is worthy of its share of the market, and McDonalds its share. The problem with your advice is that it offers no particular formula but is based on your opinion, which you form over a long time instead of a short one.
I personally choose not to invest in foreign equities
If your investments are dollar denominated and you earn a healthy 15% return, but the dollar drops 10% against other currencies, guess what? You didn't earn 15%, you earned 5. In your retirement, you'll be the same as your neighbors, but not as well off as you could be. Yes, there are risks in the world economy, but the point is that "hiding" your head in the US sand does not protect you from currency risk. What about the giant size of the collective European economy, achieved from essentially zero at the end of WWII? You don't want to participate in that growth? What about Japan, phenomenal for decades, slow for the last one. What about China? You are going to ignore the growth of a huge economy. You won't realize what you missed since the US economy will also grow, but the rates of return in China will be higher.
Investment returns come from the productivity and ingenuity of people, everywhere they are allowed to create value. And what would your recommendation to Europeans be? To the Chinese? Put all their money in the US like you, or none of it? You are propounding a random collection of thoughts which happen to work OK because you live in a healthy economy, but they are not principles that can be followed all the time, anywhere in the world to maximize return and minimize risk.
Nobel Prize winners do not apply to the real world, and never will.
That's funny... Wall Street hires them, pays them, and listens to them, and hires their students. Wall Street pumps money into economies everywhere. When Wall Street asks for your opinion, it's so that they can design and market an investment flavor to you. Once again, this is not my opinion, this is what is learned and taught by and to the people who run the economy that you love to invest in.
Limitations (Score:3)
Limiting yourself to one OS seems almost hyppocritical. Throughout history OSes have fallen, others have rise, and still some linger in the background. By limiting yourselves to only one OS, you're doing the exact same thing you hated the big boys for doing... (only carrying microsoft). I love the idea of providing a higher level of support, and think that it will be the one clear advantage that VA Linux will have... but this advantage is no good without some sort of flexibility. For all we know, what is OS X today could become the next major OS, running on all types of machines, while OpenBSD may be preferred by customers looking for the highest level of security and cryptography.
Naming a company VA Linux is like Dell calling themselves Dell Windows... it's silly and limits your scope of sales.
oh fuckin' well, just my $.04
Re:Listen Up (Score:2)
First of all, I think a portfolio of the stocks you listed (not that all of them were ever listed as companies, Atari for example) would have done pretty well. There are enough winners on the list to take care of the underperformers. Granted, putting your whole wad into one of them woudl be risky, but thats true today and someone who does that deserves whatever they get.
Ever read about the late 60's and early 70's when the so called "Nifty 50" (the majority of them, technology stocks) lead the market to all time highs and were thought unstoppable?
Hmmm... The nifty 50 I'm thinking of had companies like PepsiCo, McDonalds, Phillip Morris, Avon, Coca-Cola, Polaroid, etc.. Granted, I belive IBM and AT&T were in there too, but the Goldman Sachs Ecommerce Index, it ain't.
I choose to invest in companies that have proven they can perform and thrive in tough markets and have great oportunity for growth well into the future.
Good strategy... Warren Buffet would approve. I agree as well.
The internet is a fool's market right now, and the majority of the fools will get burned.
Hard to say... you only need one or two winners of MS or Oracle like proportions to make up for quite a few tankers.
Re:Stock price should also be discounted for risk. (Score:2)
I will also grant that the formula is kind of useless for companies that don't issue dividends and have no plans to do so. As for this:
The question is -- are these high-flyers sufficiently discounted to make the risk worthwhile?
Well, thats the big question, isn't it?
Re:No way... Amazon has already won (Score:4)
Nope. As Forbes [forbes.com] points out, Amazon's "marketing" costs include packing and shipping books and CDs, and the costs of storing things in its warehouses. That means a major part of their so-called "marketing" costs are intrinsic to each sale itself, and cannot be cut.
At the same time, the entry of competitors is going to cut into Amazon's latitude. Amazon originally discounted a larger number of their books than they do now; the result is a number of customers have defected to BN.com, which has a borader selection of still-discounted books. Amazon's book division can't turn a profit if it returns to the old pricing scheme; it also can't turn a profit (in the long run) if BN.com consistently undercuts it on the same products.
Amazon itself admits its current buisness model is unsustainable in the long run. It is simply my analysis that Amazon will not be able to successfully transition to a sustainable model that justifies anywhere near its current valuation.
Steven E. Ehrbar
Re:What?!? (Score:3)
That's like a utility company complaining that their stock would be valued higher if they were only in the media business or something.. silly.. "
Let's take a look at comparing IBM or a large Computer manufacturer versus VALinux.
VALinux has mindshare with their IPO. They have capital to expand, and they have 50-100 really good open source programmers.
The largest part of the trilion plus technology windfall coming down the pipe will be in services. Larry says that 95% of the servers for 2003 aren't purchased yet and he therefore has a lot of room to grow.
Since Linux is OpenSource(repeat 30 times for effect) the competitive advantage of using that operating system with your competitors is almost null. So you must succeed in hardware and services.
Let's start with hardware. Dell has an outrageous evaluation because they have a direct model and a negative growth cost rate. That is almost every other company except Microsoft must spend more money to make more money. Not Dell. They get your money for the computer and they get the parts just in time so they don't have to pay the parts suppliers for another couple weeks. That's why they can grow so fast. IBM has gotten out of the PC in stores game to adopt the direct model after losing 1 billion in 1998. Wal-mart sells 70% of their product before they have to pay for it. They plan to sell 100% of their product before they have to pay for it by 2003. In low margin/low product differentiation businesses the supply chain is everything.
Can a bunch of Open Source people do that? Maybe, but it certainly is a different skill than writing code.
Let's look at their services business. A quick look at their site reveals they have some very impressive talent. It is quite possible that this is the best group of people to tweak and fix your Linux related server. That is as far as those 100 people can be stretched. After that the talent gets dilluted and they too are better off turning to the community at large to solve their problems rather than doing it in house. After all the Linux community won the best support award a few years ago(not just the people working for VALinux).
Let's compare VALinux to a company like IBM and look at some of the advantages each has. VALinux has better Linux talent and is small and nimble with huge amounts of capitalization. IBM produces a lot of OEM parts that are used by companies like ACER, DELL, and IBM to name a few. So they can tweak the hardware and the software for Linux before they release their products. IBM is manufacturing the new transmetta chip which is relying on mobile Linux. This will give them an advantage. IBM is also porting all four of their server platforms to Linux. It won't take too many years before the thousands of IBMers who will be selling, marketing, manufacturing, and programming Linux will be a serious challenge to VALinux.
Likewise VALinux threatens some of IBM's most profitable hardware with their scalable servers and clustering technology.
I can't predict the stock market. I don't remember the oil crash in the 70's but I know people in my family who lost their retirement. I do remember the wild real estate evaluations in the late 80's that didn't crash until the first couple of year in the 90's.
If that were to happen and VALinux didn't have as efficient a process as IBM or Dell they would hurt very badly very quickly. With respect to services it is going to be interesting seeing the new employees join to get options worth negative hundreds of thousands while their colleagues vest and can afford to just do open source for fun.
It should be interesting.
Cheers,
Amazon
UK Govt: Capital Gains Tax (Score:2)
Put your e-mail address everywhere in your code! (Score:3)
After reading the paragraphs in which Chris DiBona explains how the developers were selected for the IPO, I conclude that the list of people was based on the number of times each e-mail address appeared in the 11 GB of source code he had selected. Or more probably, on the number of files in which the addresses appeared (it would be too easy to cheat by inserting your e-mail address a thousand times in the same file).
I understand that it is not easy to find an objective way to select the developers who contributed the most to the Open Source community. It is especially difficult to have a process that could be automated as much as possible. And it is extremely difficult to be fair.
But still... Now I realize that modesty does not pay when you write your code. Instead of inserting your e-mail address only once at the top of the AUTHORS file (and in the ChangeLog) but not in any source file, it seems to be better to include your e-mail address in every source file that you touch. Sigh!
And of course, don't use spam-traps if you want to get the opportunity to participate in some IPO. Sigh!
Hmmm... As far as I am concerned, I think that I will stick to the old habit of being credited only once or twice, not in every source file.
Worth the wait. (Score:5)
Great.
--Shoeboy
no AMD or Alpha support anymore... (Score:2)
hmm, no response about AMD though. Hmmm
Opinions differ (Score:2)
As it happens, I have a lot of relatives in the securities industry in one form or another. (People who work in pension plans, stock brokers, and so on) They seem to think that the market may be in for some type of "correction" but nothing like a major bloodbath or crash for a long time.
Specifically, I was told that "When your shoeshiner gives you stock tips, it's time to get out of the market" I.e. when everybody and his brother is borrowing money to play the stock market because they've never seen anything BUT a bullish market, you know that it's time to get out, because stocks are being used as a money-making tool completely independant from the company that you're investing in. And that's where the real shit hits the fan. Fortunately, in the opinion of many I have talked to, that hasn't happened yet.
Oh, one other note - maybe that whole stock overvalued thing is a moot point now - check the current price on VA stock (symbol LNUX) - they've been in a tailspin for a while. Mind you, they were so high that you can be in a tailspin for quite a while and still have a decent stock price, but they've lost a lot of ground nontheless.
Re:What?!? (Score:2)
No, what Amazon did was convince people that a long term buisness plan and a brand name were worth billions of dollars despite massive losses in a rapidly changing sector of the economy.
My prediction: Amazon dies in five years having never turned a profit and having been killed off by smaller, faster, smarter rivals with less debt. The brand name is sold to another retailer by the bankruptcy court, and eventually fades away.
Steven E. Ehrbar
Bad grammar alert, sorry Starmedia... (Score:2)
We sell systems based on Open Source software and provide significant amounts of consulting services to companies building major sites on the Internet like eToys, Akamai, DoubleClick, and Starmedia
It was badly formed. Starmedia doesn't buy consulting services from us, but they are a big customer of ours. I can think of a bunch of different ways to say it appropriately, but it was a simple mistake, sorry.
Chris DiBona
--
Grant Chair, Linux Int.
Pres, SVLUG
Re:old news (Score:2)
just real quickly... I am super busy right now, but have you ever heard of Long Term Capital???
Two Nobel prize winners were in charge of that dismal failure.... remember the banks of the world getting together to bail that disaster out?
You can not "figure out" an effective model to the market. Economists think they can, and they are ALWAYS wrong.
Also, this healthy economy has created "experts" out of a lot of people. I do not claim to be one. But I have studied as much as I can about the 30's and the 70's. I am confident that what I do is the best method considering the entire history of the market.... during good times and bad.
Simply Put:
Buying quality companies (at a well-valued price of course) that have proved they can change with the times and weather the storms. Buy on the dips, and NEVER sell. Patience is the key to the most succesful investors.
I will write more later, but if you are interested in debating a bit more... go ahead and e-mail me.
Re:Prices (Score:2)
The difference, of course, was that it came running linux, and all the hardware was supported. this, by far, was the biggest timesaver for me. As a corporate IT manager, I don't have to purchase the absolute lowest cost box. You don't just buy compaq over dell over VA over IBM based on price, you must factor in everything.
VA offered me a box that did what I needed, when I needed it, and it's still running smoothly to this day. (200+ days uptime).
Would the compaq have done the same? Probably. Would I have had problems when I called them for support because of linux driver issues? Probably. What if Linux didn't work on it, the way I wanted? That would have been a problem. I would have had to spend several days setting it up and finding drivers, as well. And is several days of my time worth an extra $500 on the server? YOU BET!
Re:old news (Score:2)
Not sure how you went from talking about portfolio management and buying bonds and everything else under the sun to buying the new, but I will follow:
I do invest in newer companies... but I do not jump into a speculative market. My computer industry post from previous proves that is a losing game. You spread yourself too thin by buying everything, and no one can pick and choose the few companies that will finally be able to dominate the industry. Buying Compaq after they had proven to be succesful, would have yielded much better results. Even with their recent correction.
I will invest in the company that finally proves that it can dominate. The one that has created some monopoly power for itself.
IBM has continued to grow at an excellent rate, despite Microsoft. On the other hand, you did not need to buy Microsoft in the early 80's to ride their success. Ten years ago, Microsoft was a great, proven company. 5 years ago, it was a great, proven company. If you bought that "late" you still would have done incredible. Redhat is a neat, unproven, over-hyped, over-inflated company. It may pan out, a lot of people will make a lot of money... but I am willing to bet they do not completely faze out Microsoft and that Microsoft will continue to perform, just as IBM has continued to perform.
Funny that you mention McDonalds. In the late 80's, everyone in the investment community was hyped up about Russia and the Eastern Block countries turning over communism. Mutual funds that invested in the new companies that were springing up were selling like hot cakes... everyone wanted them because it was such an excellent opportunity for growth. Well, now we know that was a foolish thing to do. Those companies did not grow at a phenomenol rate for the main reason that they were communists. They had no idea how to make money! Instead what you should have been doing at that time was investing in McDonald's. Let McDonalds go over there and run their business. They have proven that they know how to do it! And that would have yielded you incredible results.
Companies like AMD and Amazon have continually proven to me that they know how to lose money. When they prove that they can do it on a regular basis, I will consider investing a larger percentage in them.
Every year, there are certain economies that will outperform the US. But again, that is a guessing game. If you spread yourself too thin, yes, you will get the handful of winners, but you will also get the countless losers. It is no mystery that the US is the business and financial capital of the world. The US economy has weathered and bounced back from tremendously horrible events better than any other country in the past two hundred years. Like the companies I choose, the US has proven it knows how to succeed.
Other markets have done phenomenal. But I do not know those markets as well. Some of the things about them make me nervous. Japan was riding high on doctored financials and profits... they payed a heavy price for it. I am glad I was not a part of it. The US is extremely stringent about its companies, more so than any other government.
But this really is fine with a portion of your money. Ideally, with 80 - 90% of your portfolio
in these quality, individual, proven companies (and you only really need about 10 of them). With the rest, go ahead and have some fun... I am certainly guilty of it. But 99% of the time, the tried and true method will outperform your "guessings" the market.
And yes, these principle have worked around the world, for the past two hundred years. Better than any thereom our model any economist has ever brought out.
Give me Graham and Fisher any time over that crap.
Re:Prices (Score:2)
The difference, of course, was that it came running linux, and all the hardware was supported. this, by far, was the biggest timesaver for me. As a corporate IT manager, I don't have to purchase the absolute lowest cost box. You don't just buy compaq over dell over VA over IBM based on price, you must factor in everything.
VA offered me a box that did what I needed, when I needed it, and it's still running smoothly to this day. (200+ days uptime).
Would the compaq have done the same? Probably. Would I have had problems when I called them for support because of linux driver issues? Probably. What if Linux didn't work on it, the way I wanted? That would have been a problem. I would have had to spend several days setting it up and finding drivers, as well.
You're a different guppy, but... (Score:2)
PS: You're a differnet guppy, but I too currently live in PA, just outside of Philly, essentially the same age, and likely similar studies/profession. Cheers =)
Well... (Score:2)
Dividend policy is highly controversial, as you well know. We could get into the theory for several pages worth each, but i'd rather not. Empirically speaking, however, one look at firms listing on NASDAQ gives you a good idea of what you can 'reasonably' expect. Amazon is, of course, in the red, and as such they can not reasonably issue dividends anyways.
Just for the record, i'm of the opinion that most companies don't pay out enough dividends, but many of these high growth firms, particularly technology firms, really do not have the luxary of issuing them. One thing you must remember is that their cost (not to mention timing) of acquiring capital is higher. Their product/sales are not nearly as stable, nor do they tend to be as diverse, and as such can't necessarily be considered sufficiently sustainable. Many need to reinvest in new projects (e.g., R&D) before the previous one starts paying off significantly. When it comes to liquidity, many are also faced with the possibility of immediate mergers and acquisitions (in addition to growth prospects), making dividends less necessary. In short, they're in a fundamentally different position.
I do agree with you about tax policy for the most part though. =)
PS: Nit pick: In regards to your stock buyback statement(s), it is not unheard of for companies to buy out smaller investors to cut down on paper costs...there are other perfectly legitimate reasons for buybacks as well, but I digress. Cheers =)
I disagree... (Score:2)
Chris DiBona
VA Linux Systems
--
Grant Chair, Linux Int.
Pres, SVLUG
AMD and *Alpha* dodge (Score:2)
I would like to hear what he has to say about AMD though. And it's not just Athlon. Penguin Computing offers K6's in their low-end systems. Why not VA?
___
How Not to Drop Names (Score:5)
If you're trying to endear yourself to Slashdot readers, perhaps you shouldn't emphasize your ties to eToys and DoubleClick this month. Eh, Larry?
Re:What?!? (Score:3)
Oh really? When I was studying finance I learned that the value of a stock should be equal to the sum of a series of expected dividends plus the expected price of the stock when you sell it, all of which should be adjusted for the time value of money. In other words, stock values always have and always will reflect the future projected performance of a company. Amazon didn't invent this.
It seems that IBM is about the only tech company that's valued anywhere near the levels it's revenue would reflect if it were in any other industry.
That's like a utility company complaining that their stock would be valued higher if they were only in the media business or something.. silly..
I mostly liked everything else he had to say, but due to the order of teh question, i was set off by him. Build a company. Get the sales. Get the PROFITS. Then you'll get your valuation. Any other order is just insane.
Hey, if you so damn much smarter than the market, you should short the stock. You should make a killing when the stock goes in the tank, right? Or are you just shooting your mouth off?
How much Raster Worth? (Score:2)
valuation (Score:2)
as i said, it's not perfect. but i do think it would let companies grow in a way that makes a bit more sense than pure p/e. we've neglected the long term benifits for quite some time - this may force the issue on wall street.
desktop market (Score:4)
As you said yourself, Chris, there's tremendous market opportunity here. Why limit yourself to servers? Perhaps an indication linux is still not ready for the desktop... only time will tell, however...
The extras are nice (Score:3)
We hooked up the box to use as a little firewall, and it wouldn't work. When I mentioned 'never mind, it's probably something flaky with our router, thank you for your help' they asked what kind of router it was, and offered to get somebody with Cisco knowledge to help. And this was for free. This was the first machine I ever bought from them, and was the incident that sold me on them for life. (the issue turned out to be a bad cable. DOH! that part of the incident convinced me to buy a good cable test kit)