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Andover.Net deal makes some wealthy, others disappointed

The company's acquisition by VA Linux creates two classes of investors: some who will be bitter because they bought the stock near its high, and others who will profit because their timing was choicer.

It's been a fast, bittersweet trip for Andover.Net and its shareholders.

The company, an information site in the hot Linux market, today announced it accepted a buyout offer from computer maker VA Linux--a move that comes just two months after Andover.Net launched an IPO.

The speed at which Andover.Net moved from IPO to takeover target amazed some analysts.

"This is unprecedented," said Richard Peterson, an IPO analyst with Thomson Financial Securities Data. "That deal went public a couple months ago and already they're tossing in the towel.

"Usually an IPO is a long-term process where you build shareholder value. But they didn't give it enough time to put the foundation down on shareholder value."

Although Andover.Net's transformation from IPO to acquisition was quick, it's not the first time such a fast ascension has happened in the high-tech realm. Mede America, which hit the public markets last February, announced in April that Healtheon would purchase it.

The acquisition has created two classes of Andover.Net investors. Some will be bitter because they bought the stock near its high and are facing a loss (unless VA Linux shares rise dramatically). Others will reap a sweet reward because they bought the shares during the past few weeks in the $30 range--or because they got in with the company on the ground floor.

Under the terms of the deal, which is valued around $1 billion, each share of Andover.Net's common stock will be exchanged for $3.81 in cash and 0.397 a share of VA stock. Based on yesterday's closing price for VA Linux, that values Andover.Net's shares at $58.17; Andover.Net's shares jumped nearly 30 percent today to about $46.

Before the acquisition announcement, Andover.Net shares had lost roughly two-thirds of their value since their IPO last December.

The shares were sold to institutional investors and company insiders for $18. In their first day of public trading, they jumped to $63.38 and subsequently reached $90.

But since then, the stock has fallen steadily, closing yesterday at $36.

Bruce Twickler, Andover.Net's 53-year-old founder and chief executive, will see his 12.6 percent stake valued at $131 million. Based on his ownership stake and the $60 million in cash that VA Linux is paying, Twickler will receive $6.7 million in cash and the remainder in VA Linux shares.

Twickler, who founded the company in 1992, is no stranger to technology companies. He served as vice president of Microcom during the late 1980s and early 1990s and had a brief stint as president of Shiva between 1987 and 1988. Twickler also was president of Hayden Software in the early 1980s.

Adam Green, the company's chief technology officer, will see his 2 percent stake valued at $20.8 million, according to documents filed with the Securities and Exchange Commission.

Green joined Andover.Net in 1996 after serving as a vice president at Clear Software. Green also was a consultant and contract trainer at Alpha Software and Powersoft.

Andover.Net executives were not immediately available for comment.

Although Green and Twickler are netting big returns, some individual shareholders who bought shares near their high feel they have been left holding the bag.

"Geeze! This...couldn't even get bought out for what it traded at the first week of the IPO," said one message posted on the Raging Bull Web site. "Looks like a lot of you folks that bought high may never see your $$$."