THE DAY AHEAD: Caldera preps IPO as Linux hype fades

Will Caldera Systems (Proposed ticker: CALD) miss out on all that Linux IPO euphoria? Stocks such as Red Hat (Nasdaq: RHAT) and VA Linux (Nasdaq: LNUX) have come down from the stratosphere, and Linux has lost some of its Wall Street luster.

Losing some of the Linux hype is healthy for the market, but it's not going to do Caldera any good. Caldera, which recently settled a lawsuit with Microsoft (Nasdaq: MSFT), needs all the Linux hype it can get.

Caldera: Room for one more Linux stock?

The company, which offers Linux operating system software and systems for specialized servers, has lost some of its good timing. Caldera got a lot of attention in January when it filed for an IPO in the midst of the Linux gold rush.

Now it's a different story.

Caldera is offering 5 million shares expected to price between $7 and $9 Thursday night for trading Friday. Robertson Stephens is the lead underwriter.

According to the Linux IPO script of two months ago, Caldera's price range should be bumped up and the stock should rocket. VA Linux set a first-day IPO record so Caldera could also hit the jackpot.

Don't bet on it. The stock market is volatile and Caldera could come off as a "me too" offering. Caldera's IPO should be good, not great, according to David Menlow, chief of IPOfinancial.com. "There's a little room for a few more Linux companies, but you won't get a 300 point pop," he said.

Caldera's regulatory filings definitely have a "me too" ring to them. For starters, Caldera distributes its version of the open-source Linux operating system and sells services and support around it. It's a formula used by Red Hat and VA Linux.

Caldera, which began operations in 1994, goes on to cite statistics showing the market for Linux servers will balloon and emphasizes its strategy of focusing on "Linux for eBusiness."

It's so boilerplate.

Caldera's focus on e-business hasn't brought in a lot of sales so far. Caldera's sales for the year ending Oct. 31 were $3 million with a loss of $9.36 million. For the quarter ending Jan. 31, sales were $553,000 with a loss of $5.5 million. For investors, the most disconcerting part of those financials is the January quarter -- sales were flat from a year ago.

Nearly 75 percent of sales come from distributors such as Ingram Micro (NYSE: IM), Navarre (Nasdaq: NAVR) and Tech Data (Nasdaq: TECD).

Compared with its other Linux peers, Caldera is also lagging. VA Linux reported sales of $20.2 million for its January quarter. Red Hat reported sales of $5.4 million in its latest quarter ending Nov. 30. Red Hat reports earnings at the end of the month.

Put simply, there's nothing terribly distinguishing about Caldera, which is why we're in for a potential so-so IPO. VA Linux and Red Hat have gobbled up much of the mind share, and there may not be room for many more Linux players. Caldera said growing a brand is one of its biggest priorities.

And Caldera will need a strong brand to rise above the noise. Caldera faces competition from Berkeley Software Design, Microsoft and a joint venture involving Compaq (NYSE: CPQ) and The Santa Cruz Operation (Nasdaq: SCOC) to offer software for specialized servers. Cygnus Solutions, owned by Red Hat, VA Linux and Wind River (Nasdaq: WIND) provide similar software with their hardware packages. Throw in Sun Microsystems (Nasdaq: SUNW) as competition too.

"We also compete with other providers of Linux operating systems, particularly Corel (Nasdaq: CORL), MacMillan, Red Hat, SuSE and TurboLinux," the company said.

Aside from the Linux crowd, Caldera also competes with more established companies including IBM (NYSE: IBM) and Novell (Nasdaq: NOVL).

It could be tough in the IPO aftermarket for Caldera, especially since much of the Linux hype has faded.

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