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2HRS2GO: Linux investing matures?

Is Linux losing its stock market magnetism?

Salon.com (Nasdaq: SALN) this morning announced plans for a website dedicated to Linux and other open source software and the stock price went down. Scarcely a month has passed since Salon shares jumped after the company agreed to provide content for the website of Linux standard bearer Red Hat (Nasdaq: RHAT).



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For that matter, Red Hat, Corel (Nasdaq: CORL), VA Linux (Nasdaq: LNUX) and VA Linux's pending acquisition, Andover.net (Nasdaq: ANDN), are all down today in the face of an other wise positive market. With the exception of Andover.net, none of those stocks have been anything to crow about over the last four weeks. Or over the last three months, if you've been holding on that entire time.

Everyone knew a slowdown was inevitable. All stocks pause occasionally, especially after massive run-ups. And it's not as if any of the prominent Linux players are cheap, even now.

But I wonder if the publicly-traded window for up-and-coming pure Linux players isn't closing fast, if it hasn't closed already.

A reading of recent news articles seems to indicate Linux viewpoints has matured at a breathtaking pace. Mainstream tech sites like ZDNet don't view it merely as a gee-whiz technology anymore, just as general news publications no longer treat the Internet as communications magic, but as a legitimate medium.

As I've said before, Linux offerings, even supposedly superior ones, won't help poorly managed technology providers. The best products in the world can't save a company from itself.

Yet there's certainly a market for Linux-related services and applications, and as the technology continues to improve, more businesses will use it. You'd be crazy to ignore a decent OS with a base price tag of zero.

The rate of adoption is breathtaking. But that same accelerated pace of awareness and acceptance -- partly driven by the recent market craziness -- draws the attention of major technology names. Already, some of the most prominent Linux announcements come not from just the Red Hats, but established technology giants like IBM (NYSE: IBM), or at least veteran software makers like Corel (Nasdaq: CORL).

The entry of Big Guys draws attention from the up-and-comers, because the current large-cap-oriented stock market generally prefers known entities with a good track record. Unfortunately for those seeking quick-hit Linux stock plays, the technology still forms such a tiny part of an IBM that it's pointless to buy those stocks purely for Linux. Besides, it's almost impossible to send a large, widely-held issue skyrocketing purely on day trading strength, although you can nudge it a bit.

Corel, VA Linux and Red Hat all see what's coming, which is why each has already begun acquisitions. A year ago there wasn't a single publicly-traded pure Linux play on the market, yet the field is already consolidating. The Web content industry, the stock market's previous speed benchmark, took a few years to get to the same point.

On a corollary note, Linux-related PR is losing steam. Not only Salon, but a company like Computer Associates (NYSE: CA) recently failed to get any sort of bump from Linux news releases.

Not that I'm saying enthusiasm will disappear entirely. It never will as long as he current market environment continues, and no doubt a Linux company with the right backers and smart bankers can still debut with a huge IPO pop. But VA Linux CEO Larry Augustin's wish might be coming true after all.

Good for the Linux industry. Bad for Linux momentum traders. I wouldn't weep for them, though; traders can always a hitch a ride on the next thing barreling down the road.

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