Linux firms gain from Microsoft's loss

Shares of Red Hat, a seller of the Linux operating system, surged more than 20 percent to close at 104 in the wake of U.S. District Judge Thomas Penfield Jackson's finding Friday that Microsoft is a monopoly. And this happened despite Jackson's description of Linux as a "fringe operating system."

Red Hat was one of many companies around the periphery of the Microsoft empire to benefit from investors' enthusiasm. Generally, the closer the company is to the margins of the computing world, the better it fared as a result of the ruling.

Where Linux companies, Apple, and Be Incorporated surged, more diversified Microsoft competitors such as Santa Cruz Operation, Novell, Oracle, and Sun Microsystems saw more modest gains. Microsoft, for its part, closed the day down about 1.71 percent. (See related story)

Red Hat chief executive Bob Young declined to comment on whether the surge in his company's stock was warranted.

"Our goal is to create value for our customers and our shareholders over a multiyear period," he said in an interview today. "I do not attempt to explain the short-term gyrations of the stock market."

But there's no denying that Jackson's findings "opens the door pretty wide" for Microsoft competitors, Young said. "It creates an opportunity for us in the marketplace," though it's still up to Red Hat to provide a compelling product, he said.

Lonn Johnston, a vice president at privately owned TurboLinux, was more optimistic, saying the Linux-related stock jump today was justified.

"This does make it a more level playing field for all us Linux companies," he said.

Among the other winners today:

• Be Incorporated, which sells operating system software that Apple thought about buying, was up 70.5 percent to 6.5 at the close of the market. That means the company's stock price has climbed back above its initial public offering price of $6.

• Corel, which makes office productivity software such as word processors and has thrown its weight behind Linux as a way around Microsoft, rose 14.68 percent to 7.81 to close the day.

• Applix, which makes office productivity software that competes with Microsoft Office on Linux and other systems, jumped 17.19 percent to 14.06 at the market's close.

• Apple jumped 9.13 percent to 96.38. Though the company competes for the attention of the same desktop computer customers as Microsoft, Apple also is the only non-Windows operating system that runs Microsoft Office software.

• Cobalt, which makes Linux-based special-purpose servers, couldn't have picked a better time for its IPO. Its spectacular debut last week was reinforced today as the company's stock rose another 9.76 percent to 140.625 at the close.

But in the event that Microsoft is split up into two or more units, Applix and Corel might not see things in such a rosy light. Splitting off Microsoft Office software into a separate company raises the possibility that the new company could port its software to Linux since that company no longer would have chief loyalty to Windows.

Sun Microsystems jumped 2 percent to 111.88 at the market's close. Though Sun, like Corel and Applix, has office software that runs on Linux, Sun will give that software away, making it part of a larger strategy to compete with Microsoft.

Shares of Santa Cruz Operation, one of the companies that sells the Unix operating system on which Linux is based, closed at 12.25 in trading, while Novell, which sells its NetWare server operating system, rose 4.63 percent to 21.19.

Merrill Lynch analyst Chris Shilakes sees less effect on Microsoft from the ruling than from how the Internet is changing the computing world. "Our concerns are not on what Microsoft does on the desktop, but how successfully the company adapts to the increasingly server-centric, Internet-centric world," Shilakes wrote in a report today.

Red Hat's Young said he believes much of the effect of the Justice Department's case against Microsoft has already taken effect.

"I can't say I'm quite as jubilant as most of the other non-Microsoft players have been," he said. "The bulk of the benefits [of the DOJ's] case have already been felt in the industry. It's caused the other players--the hardware companies, the retailers--to operate less in fear of Microsoft's retaliation."