Proceed With CautionW.R. Hambrecht touts its Dutch auction system as a more democratic IPO that gives individual and institutional investors equal access to bid on shares. But only nine companies have ever used the OpenIPO system -- and just three out of 229 IPOs since January 2002, according to IPO Vital Signs. Furthermore, the aftermarket performance of such firms is uneven. Google's auction might change opinions about such offerings, but OpenIPO might be the only option for Lindows. The company's tiny revenue may be lower than what institutional investors require, said Dion Cornett, an analyst with Decatur Jones, who covers Red Hat and Novell ( NOVL). A handful of hedge fund sources said they'd also stay away. That leaves retail investors, who are advised to proceed with caution. "People should not be touching Lindows," said FTN Midwest Research software analyst Trip Chowdhry. "As an investor, do you want to go back to the dark ages of dot-com, where you gave money based on concepts and hoped and prayed, or reward companies that have worked to establish niches ... and continue to execute well?" he asked, putting IPO-bound Google and Salesforce.com in the latter camp. Lindows' "unproven concept" is selling its Linux desktop operating system and complementary subscription services bundled with low-cost personal computers, targeting primarily smaller PC manufacturers and international markets. Not everyone is as critical as Chowdhry, however. "Fundamentally, I like their position on the low end," said Cornett, noting it's an area untouched by Red Hat and Novell, which are targeting business customers. Earlier this year, Prudential Securities analyst Brent Thill enthusiastically described his experience buying and then navigating a $231 Lindows PC from Wal-Mart ( WMT). "It amazed us how simple, or more accurately how familiar, the whole experience was," Thill wrote, reporting no notable problems navigating the open-source version of Microsoft Office, going online, installing drivers and playing MP3s.
| Going Dutch: W.R. Hambrecht's Auctions Enjoy Mixed Results |
|Company||Offering Price||IPO Date||Current Stock Price*||% change to date|
|Peet's Coffee & Tea||8||1/25/2001||22.4||180|
|Nogatech||12||5/17/2000||Bought in 2000 for $170 million, or equivalent of $10.46 a share, in 2000||NA|
|Andover.net||18||12/8/1999||Bought in 2000 for $800 million to $1 billion||NA|
|Ravenswood Winery||10.50||4/9/1999||Bought in 2001 for $148 million, or $29.50 a share||NA|
|*Stock price as of April 27, 2004. NA = not applicable. |
Sources: W&R Hambrecht, Baseline, news reports.