Industry watchers across the board say the upcoming initial public offering from Orem-based Caldera Systems Inc. should be a smash hit.
They also agree the company has a lot of work ahead if it wants to avoid becoming a one-hit wonder in the Linux market.Caldera Systems sells Linux-based software for businesses. Linux is an emerging operating system based on "open source technology" and has begun taking business away from competing Microsoft and UNIX systems.
Caldera Systems is expected to launch its IPO later this week, selling about 5 million shares on the NASDAQ stock exchange for $8 to $10 per share. That price is already up from last week, when the estimated price was $7 to $9 a share. Either way, the company could boost its value over the $300 million mark.
Based on the market reaction to other Linux-related IPOs, few doubt the company will have a banner first day on the market. VA Linux Systems recorded the biggest first-day rise in IPO history, leaping from $30 to $320 a share. And Red Hat, the industry's most recognized Linux company, saw its stock soar from its opening price of $14 per share to a pre-split $302 four months later.
Those performances might attract other investors who missed the initial Linux buzz, industry analyst Dan Kusnetzky said. Kusnetzky is program director at International Data Corp., based in Framingham, Mass., and has followed Linux since 1994.
"Caldera can wrap itself in words like the World Wide Web, e-commerce and Linux," Kusnetzky said. "With those sorts of tie-ins, people who didn't know the market extremely well might become very excited because they missed the opportunity to get on the Red Hat bandwagon or the VA Linux bandwagon. Those are the people who are likely to bid up the offering."
Indeed, the market is a-buzz with talk of Caldera.
RedHerring.com, an online-investor forum, ranks the company's IPO among its "Red Hot" ratings. The IPO Reporter also gave the company its highest rating.
And David Menlow, president of IPOfinancial.com, an IPO newsletter for individual investors, said Caldera is "at the upper end of the stocks we expect to do well at the beginning."
But, industry insiders agree Caldera will have to do more than make a good first impression.
"While there may be flashes when the stock goes up very high, it's the next round of buyers Caldera has to worry about," Kusnetzky said. "Those are the buyers who will want to know Caldera -- who they are, what they do, and why they (investors) should become involved with the company."
In a nervous market environment filling with Linux offerings, Caldera's greatest challenge might be getting enough face-time.
"Caldera has great products," Kusnetzky said. "It has most, if not all, the same partnerships with hardware and software suppliers as Red Hat does. But to have sustained success, the company needs to have built a brand, an image people recognize. Something that distinguishes it from everyone else."
Is it too early, the company still too new to survive the open market?
"The Red Hat offering and the VA Linux offering have taken quite a bit of thunder out of the marketplace with regard to Linux stocks," IPOfinancial.com's Menlow said. "But I still believe there is room in the marketplace for a few more offerings, and Caldera Systems is going to be one of the beneficiaries of that because it will beat other competitors into the market."