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THE WEEK AHEAD: Red Hat IPO, economic data on deck

Looking ahead to next week, Wall Street will be paying close attention to retail spending and Produce Price Index figures in the hopes that some shred of data will keep the Fed from raising interest rates later this month.

As weeks go, this past one was a stinker.

Believe it or not, the Dow managed to scrape out a 59-point gain for the week to close at 10,714.03. But technology stocks weren't as fortunate. The Nasdaq lost another 90 points to close at 2,548.20.

With little news to drive the market, Internet stocks continued their free fall.

The only significant piece of news delivered this week was the July unemployment figures.

The Labor Department reported nonfarm payrolls increased 310,000 in July, soundly topping expectations of a 199,400 gain, according to a Reuters' poll of economists. Average hourly wages climbed 0.45 percent, compared with forecasts of a 0.3 percent rise. The unemployment rate matched expectations, holding steady at 4.3 percent.

Those figures have investors all but guaranteeing an interest-rate hike later this month.

"The mood changes in milliseconds," said Alan Ackerman, a senior vice president and market strategist at Fahnestock & Co. "We're in a vulnerable and volatile market."

Regardless of mood or inspiration, the employment data strongly suggests more volatility ahead. "A rate hike in August now seems an almost foregone conclusion,'' said economist Oscar Gonzalez of John Hancock financial services firm in Boston. ``The feared imbalances in the economy may be taking Hold."

If the retail spending numbers and Producer Price Index jump, you can expect at least a one-quarter point raise in short-term interest rates later this month.

Red Hat IPO on deck

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.

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.

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 and Sun Microsystems continue to dominate the playing field.