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Linux Software Vendor Red Hat Says It Will Go Public
By THE ASSOCIATED PRESS
URHAM, N.C. -- Red Hat Inc., which won investments by major information technology companies seeking to build a software challenger to Microsoft, says it will go public with a $96.6 million stock offering.
The company, which found a way to sell software that is available free worldwide in packaged versions backed with technical support, said Friday it has filed a registration statement with the Securities and Exchange Commission for an initial public offering of its common Stock.
Goldman, Sachs & Co. will act as lead underwriter of Red Hat's IPO. Other underwriters include Thomas Weisel Partners and ETrade Securities Inc.
The number of shares to be sold was not disclosed.
Red Hat revealed in the filing that up to this point virtually all of its income has come from selling boxes of Red Hat Linux software. The company is looking at its Web site and income from services, like custom development and training, as sources of future revenue.
Red Hat is close to profitability, the company said it its SEC filing. Revenues have been doubling annually and are listed as $10.7 million for 1999. Its net loss for the fiscal year, which ended Feb. 28, was $130,000. Red Hat spends about 20 percent of its revenue on research and development. Since March 1998, Red Hat's staff has grown from 36 to 130 employees.
Stacy Quandt, an analyst with Giga Information Group in Santa Clara, Calif., said Red Hat will be closely watched after making the first Linux-related IPO.
"This is the first of many," she said. LinuxCare and VA Linux Systems, both based in Northern California, also are IPO candidates.
The single biggest chunk of the company is owned by board member Frank Batten Jr. of Norfolk, Va. Batten, chairman of the media company Landmark Communications, owns 25 percent of Red Hat. Landmark owns The Weather Channel and major regional newspapers, including the News & Record of Greensboro, the Virginian-Pilot of Norfolk and the Roanoke (Va.) Times.
Of all of the technology companies -- like IBM, Netscape, Oracle and SAP -- that have made highly publicized investments in Red Hat, only Intel was identified as a significant owner of the company, with a 5 percent stake.