| Sumario: | The writer discusses the price of Internet stocks, considering in particular a company called Red Hat, which is a software company that markets a type of Linux—it supplies manuals, packaging, and tech support for an operating system that by definition and on principle is free. He points out therefore, that Red Hat makes its money by selling a niche product that is available more cheaply elsewhere and that its whole business model is based on its main product being free. He notes that the company went public in fall 1999 at a price of $16 per share and points out that by December, shares were priced at $235 each. He states that this means that a company that sells only software that is available free is now valued at $19.5 billion. He argues that it is difficult to justify the share price and that one possible explanation is that there is a large number of investors who are ignorant of what Red Hat does chasing a very small number of shares. He discusses the possibility of Red Hat using its Linux-boosted share price to buy into profitable businesses.
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