Red Hat is red hot on first day of trading

Shares in the much anticipation initial public offering (IPO) of Linux distributor, Red Hat, more than tripled on their first day of trading yesterday.

Starting at $14, Red Hat closed up 38 1/16 or 272 per cent, to 52 1/16 in its initial public offering, the eighth biggest gain for a US stock in first day trading.

The stocks soared up as high as 56 3/4 in early trading. The company's first day gain, 272 per cent, followed other high scoring first day achievements such as theglobe.com at 606 per cent, Ask Jeeves at 364 per cent and eToys at 283 per cent.

In regulatory filings, the company said its version of Linux represented about 56 per cent of commercial Linux shipments last year. The company will use the proceeds from the sale for working capital and for other general corporate purposes including establishing more offices abroad.

Linux is becoming an increasingly popular alternative to Microsoft Windows software on corporate network and Web servers. Last year, Linux was the fastest growing computer server system, winning more than 17 per cent of all shipments compared with 36 per cent for Windows NT, 24 per cent for Novell and a little more than 17 per cent for all Unix-based systems, according to IDC.

Still Linux' success is "an open question," said Matthew Nordan, an analyst with Forrester Research. "No large companies are running big applications on Linux," he said. Although revenues were $2.8 million for the three months ended 31 May, its losses were $2.1 million.

Red Hat boasts strategic alliances or investment relationships with Compaq, Dell, Netscape, IBM, SAP and Oracle. Intel holds about 4.5 per cent of shares following the sale. The company sold 6 million shares and Dow Jones estimated Red Hat's market value to be $2.96 billion.

"It's really the first test case for Linux in the broader public marketplace," said Brian Behlendorf, a leader of the open source Apache Web server project.

Robert Young, Red Hat's chief executive and Marc Weing, the company's chief technology officer, each hold about 9.1 million shares in the company.