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The Almighty Buck Businesses Google Red Hat Software The Internet

Google and Red Hat added to Nasdaq 108

Posted by CmdrTaco from the well-isn't-that-special dept.
Rob writes "Google Inc and Red Hat Inc are two of the big technology-related stocks to be added to the Nasdaq-100 in the latest annual reordering of the 100 largest non-financial stocks on the Nasdaq stock market. Meanwhile, the addition of Raleigh, North Carolina-based Red Hat reinforces the credentials of the open source Linux operating system on which the company has built its business. "
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Google and Red Hat added to Nasdaq More

Google and Red Hat added to Nasdaq

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  • Flashbacks (Score:2, Insightful)

    by tsa ( 15680 )
    I get more and more flasbacks from the late '90's these days. Let's hope this time people keep their heads together.

    • Re:Flashbacks (Score:5, Insightful)

      by mysqlrocks ( 783488 ) on Tuesday December 13, 2005 @11:19AM (#14247357) Homepage Journal
      It's not all good news, FTA:

      The news was not so good for Level 3 Communications Inc, which was removed from the Nasdaq-100 two years after it joined it. Other tech-related stock to be removed included Intersil Corp, Molex Inc, QLogic Corp, Sanmina-SCI Corp, and Synopsys Inc.

      Stocks rise and fall but I don't think this means we're in another bubble.

    • Re:Flashbacks (Score:5, Insightful)

      by IAmTheDave ( 746256 ) <basenamedave-sd@ ... m minus math_god> on Tuesday December 13, 2005 @11:20AM (#14247370) Homepage Journal
      I get more and more flasbacks from the late '90's these days. Let's hope this time people keep their heads together.

      I think they have. Both of these companies have proven business models, and took quite some time to get their stock this high (Google did it overnight, but after years of being private and still awesome.) These are not "I'm going to open an online pet store, but first I need an IPO" type companies.

      • Re:Flashbacks (Score:4, Informative)

        by timeOday ( 582209 ) on Tuesday December 13, 2005 @11:46AM (#14247633)
        And since you didn't quite come out and say it: both RedHat and Google are actually profitable.

        I don't know how RedHat lasted long enough to start thriving, it seems like they used to lose money year after year.

        • I don't know how RedHat lasted long enough to start thriving, it seems like they used to lose money year after year.

          That's typically how most companies get started.

          • That's typically how most companies get started.

            Well, IIRC it has been pretty dramatic. Not like ebay and google which started making money pretty early on, before they got big. RedHat was another small company losing a little money until their IPO. Then in 1999 they had a big IPO and their price zoomed into the stratosphere, at least 5x what it is today. And by then they were losing big money. Within 2 years of the IPO their stock price plunged from a max of 150 down to about 3. Companies like eba

      • It's a bit late to hope people keep their heads together, and definitely late to speculate that they might actually be doing so.
        Google & Red Hat both have price/earnings ratios over 80. That is an order of magnitude beyond where it makes sense to buy the stock based on hoping to make money because the company makes profits. That leaves the other way to make money from stocks: buying in earlier and making money by selling to those who buy in later, and lose their money. Like any pyramid scheme, it m
    • Red Hat already survived through the bubble. There was a time when their stock was worth $150 a share. The fact that they survived past that horrible time period for many companies says something about their stability and quality of management. I think Google got into the game right near the end/middle of the bubble, but I'm sure they'll be fine too. I think this time around folks have learned from their mistakes.
      Regards,
      Steve
    • Is it just me or did the Beta Google Mail just quit working? Coincidence?

  • Nasdaq /= Nasdaq-100 (Score:5, Informative)

    by richmaine ( 128733 ) on Tuesday December 13, 2005 @11:20AM (#14247372)
    The subject line really surprised me, as I was sure that those stcoks had been on Nasdaq since they went public. (Pretty much everything is on Nasdaq). I guess I should have known better than to trust a slashdot subject line. The Nasdaq-100 is not the same thing as the Nasdaq.

    Sort of reminds me of all the management types here at work who don't know that ISO means anything other than ISO 9000.
    • Slashcode's prolly got a lame 34 character limit for the headline ;-)

      J.

    • Indexes and exchanges (Score:5, Informative)

      by jfengel ( 409917 ) on Tuesday December 13, 2005 @11:33AM (#14247509) Homepage Journal
      Well, I wouldn't say "everything" is on the NASDAQ. NASDAQ is one of the major stock exchanges in the US; the biggest and oldest one is the New York Stock Exchange. A particular stock is usually traded only on one exchange. NASDAQ is heavy on tech stocks, and NYSE is heavy on older, more blue-chip kinds of companies. Most of the companies that affect Slashdot are listed on the NASDAQ, but for most of history it's the NYSE that's been considered the more important index.

      The NASDAQ 100 is an index; that is, it's a number designed to tell you how the NASDAQ as a whole is doing. The most famous index is the Dow Jones Industrial Average; when people say "the market is up" they usually mean the Dow.

      The Dow is designed to track big old industrial companies like steel, sugar, and railroads. They're "blue chips", meaning they turn in reliable, consistent profits, and are thus supposed to be a good measure of the overall long-term health of the economy. It's heavy on NYSE companies, though NASDAQ companies are gradually creeping their way onto it.

      • Re:Indexes and exchanges (Score:5, Informative)

        by birge ( 866103 ) on Tuesday December 13, 2005 @12:10PM (#14247861) Homepage
        Well, you're right about informing us that the NASDAQ is a stock market. Thanks for that bit of advice. But I think the rest you have a bit wrong. The DOW is not really considered a proxy for the market, just large-cap industry. The S&P 500 is more considered the 'market'. The NASDAQ 100 isn't the NASDAQ index. When people say the NASDAQ hit 2500, they mean the NASDAQ composite, not the 100. The 100 is an index of the largest stocks in the NASDAQ, that's all.

      • Re:Indexes and exchanges (Score:1, Funny)

        by Anonymous Coward
        They're "blue chips", meaning they turn in reliable, consistent profits

        Ah, like Transatlantic Zeppelin, Amalgamated Spats, Congraves' Inflammable Powders, and U.S. Hay. But not that up and coming Baltimore Opera Hat Company.
    • I was sure that those stcoks had been on Nasdaq
      Yep. GOOG and RHAT on Nasdaq. Pretty much everything is on Nasdaq Not entirely true. IBM, for example, is listed on NYSE, but not on Nasdaq. Generally stocks listed on one exchange aren't listed on another.
      The Nasdaq-100 is not the same thing as the Nasdaq.
      True. The Nasdaq-100 is an index, much like the Dow Jones Industrial Average or the S&P-500.
    • don't know that ISO means anything other than ISO 9000

      Or know "computer" means anything but "Windows" or "internet" means anything but "AOL"...

  • Good time to buy Red Hat stock it would appear (Score:3, Informative)

    by digitaldc ( 879047 ) * on Tuesday December 13, 2005 @11:27AM (#14247453)

    A year of solid revenue growth has seen Red Hat's share price rise to $25 from $16 a year ago.

    I would guess the stock will rise higher in the next few weeks, not a bad time to buy RHAT stock.

    "Red Hat, Inc.: Stock Rating 9 - Red Hat, Inc., a mid-cap growth company in the technology sector, is expected to significantly outperform the market over the next six months with average risk."
    From: http://moneycentral.msn.com/investor/srs/srsmain.a sp?Symbol=RHAT [msn.com]
    More info here:
    http://finance.yahoo.com/q?s=RHAT [yahoo.com]

    • Re:Good time to buy Red Hat stock it would appear (Score:5, Insightful)

      by Golgafrinchan ( 777313 ) on Tuesday December 13, 2005 @11:52AM (#14247687)
      Sorry to be a finance geek, but...

      Of course, if you believe in the Efficient Markets Hypothesis [investopedia.com], then these future expectations of growth are already built into the price of RedHat. In other words, people already expect RedHat to outperform the market over the next six months, and therefore RedHat's price has already risen to account for that. And although the company itself might perform well, the stock has the same expected return over the next six months as the rest of the market.

      On the other hand, if you don't believe markets are efficient... you might have an argument here. :)

      • Re:Good time to buy Red Hat stock it would appear (Score:4, Insightful)

        by dcavanaugh ( 248349 ) on Tuesday December 13, 2005 @12:10PM (#14247860) Homepage
        Everyone says that future expectations are built into today's price. Back in July, plenty of people said that the RHAT price of $15 included plenty of expectation for future growth. Even so, I bought at $15 and now it's $24+.

        The market is efficient in a broad sense over the long run, but individual inefficiecies exist everywhere you look. If this were not the case, there would be no big winners (or losers) and stocks would be on a par with fixed income investments.

        Need an example of market inefficiency? Martha Stewart (MSO). No profits, dismal TV ratings, lousy fundamentals, yet the stock price is stubbornly clinging to $20. Imagine, an entire company whose purpose is to sell the image of a 64-year-old ex-con. They have been flying on vapor since she got out of jail and the TV ratings proved that nobody cares. I expect it will go down the toilet, but it can float in a circular whirlpool pattern longer than you might think.

        I am not a financial advisor. This is not investment advice. Your actual mileage may vary.
        • The market is efficient in a broad sense over the long run, but individual inefficiecies exist everywhere you look. If this were not the case, there would be no big winners (or losers) and stocks would be on a par with fixed income investments.

          You're looking at it after-the-fact. If RedHat is $24 now and is $48 by this time next year, does that mean the market was inefficient -NOW-? Of course not. The (semi-strong) EMH says that $24 right now is a fair price given all publicly known information. If it

          • Does that make the market inefficient? Yes. Because "the market", as you refer to the millions of individuals and institutions that trade, has no idea if they will be right in the future, they just hope fervently that they will be. How in the world do you think bubbles evolve? I assume there are no undervalued stocks where you live?
            • I don't think you understood great-grandparent's definition of the EMH. Golgafrinchan wrote that EMH states that future *expectations* are reflected in the current price. So if the market *expects* RHAT's price to increase from yesterday's price by 10% over the next year, and the overall market *is expected* to grow 8% over the next year, then today's RHAT price today should be up 1% from yesterday's. That 1% increase happens independently of whether RHAT actually goes up 10% or drops 15% in the next year.
          • "And as far as Martha Stewart goes ... The fact that it hasn't dropped to the penny range means that 'the market' sees the company rebounding. Does that make the market ineffecient, simply because you disagree with it?

            Maybe yes, maybe no. I'm betting "yes". Time will tell.

            Perhaps there is some confusion about accuracy and efficiency. Call it whatever you like, the market makes mistakes. Individual companies can be overpriced or underpriced. Some stocks are hyped by the media, brokers, or the financial a
      • And to continue the finance geek thing...

        When a stock is added to an "index", it will open itself to others who "buy the index", thereby increasing the price of that stock without any actual interest in that specific stock. Therefore, the stock can actually increase without investors even caring about the particular stock.
      • The efficient markets hypothesis works great for companies that are growing at the risk-free rate quarter after quarter. But it doesn't work for high growth companies because the questions of human fallibility enter the equation.

        For example, how do you value Google, which previously has had revenues growing 95% year-over-year? Well, a truly conservative investor would say that Google is worth 14 times its yearly earnings. This is how those investors judge industrial companies like Caterpillar and America
  • The news was not so good for Level 3 Communications Inc, which was removed from the Nasdaq-100 two years after it joined it.

    Fallout from their spat with Cogent [theregister.co.uk] perhaps?

  • Where will they settle? (Score:5, Insightful)

    by tnk1 ( 899206 ) on Tuesday December 13, 2005 @11:36AM (#14247538)
    Google has been an innovative and interesting company, and Red Hat probably has the best name recognition for Linux in the business. These steps make sense.

    The big question with Google is if these laurels that people keep heaping on them will last when Google inevitably loses stock value, for whatever reason. Hopefully, being added to an index like this indicates that some smart people feel that they are here to stay. However, I think most financial people slept through their classes on "Long Term Investment" in business school (if indeed business schools actually offer classes like that anymore).

    Google's success = Innovation and they will need to keep innovating if they want to remain relevant. There is always going to be a Microsoft or other competitor who can figure out a way to clone Google's offerings with "just enough" functionality, the right price point, and some evil marketing ploys to create instant competition.

    To remain in this game with a high level of quality means new ideas and the willingness to go to places no one thinks can be reached. That will become harder as some of the money pumped into them starts acting like cholesterol: slowing them down and cutting off blood flow to people's brains. Ph.D's may be good at what they do, but they aren't immune to corrosive influences of cash and the lures of prestige. There is going to come a point where Google starts to face the potential for crippling hubris, and at that point, the company will reach it's first real test as a long-term investment. If it can get over its own reputation and keep going, then you have a company worth owning. If not, then they go the way of the 90's, sooner or later.

    • These steps make sense.

      You make it sound like some guy made a deliberate selection of these companies based on business models/predicted future/whatever. That is not the case at all. The rules for being in on the NASDAQ-100 are fixed and well defined. I won't bother looking at the exact rules, but I'm betting good money it has something to do with turnover and market cap.

      I am always surprised that these news stories get such attention. Any journalist could calculate these lists and publish them a few da

      • The NASDAQ 100 membership requirements are easy to remember you have to be: a. listed on the NASDAQ (duh) b. one of the largest 100 companies in a c. not a finanical company (bank or insurance) d. meet these qualifications on a quarterly or semi-annual update to the membership period (this reduces flip floping between 100 and 101 on a daily basis). The Russell indices are also managed in this manner (primarily by size). DOW and S&P are chosen by comittees (S&P has some elegibility requirements as w
    • People say Google can't be overvalued because it's making so much profit, unlike all the dot.coms back in the day.

      But people forget that there were plenty of tech companies that WERE making craploads of profits back then, like Sun and Cisco and various telecom manufacturers. Just because they had profits didnt mean they weren't overvalued stocks. Cisco and Sun fell 90% anyway, because they were in a speculative bubble.

      Who would have imagined that Don Lapre's late night infomercials telling you the secret
      • I think it can be argued that the FOMC [federalreserve.gov] can be partially to blame for the speculative bubble that occured. They destroyed savings by forcing interests rates to the bare minimum (lower than COLA), printed new free money left and right, and offered millions of Americans extra money at very little cost. When people are given all this "free" money at low interest rates, they tend not to value it as much and generally take higher risks. Once the market started to move up (possibly because the first owners of t

  • Who loses (Score:5, Informative)

    by jfengel ( 409917 ) on Tuesday December 13, 2005 @11:42AM (#14247601) Homepage Journal
    You don't just add companies to the NASDAQ 100. You also have to drop them. The losers this time:

    Career Education Corp.
    Dollar Tree Stores Inc.
    Intersil Corp.
    Invitrogen Corp
    Level 3 Communications Inc.
    Millennium Pharmaceuticals Inc.
    Molex Inc.
    Novellus Systems Inc.
    QLogic Corp.
    Sanmina-SCI Corp.
    Synopsys Inc.
    Smurfit-Stone Container Corp.

    I've never heard of most of these companies. And that's one of the problems with the NASDAQ 100 as an index. Its contents change often, to drop losers and reward winners. Which means that the NASDAQ 100 is constantly rising as long as they can find some stocks going up.

    How can you compare today's NASDAQ 100 index with yesterday's if the stock on it change? They weight the numbers to ensure that yesterday's number is the same as today's, but it means that tomorrow's number is on a completely different scale. The NASDAQ will almost certainly go up because you've replaced losers with winners, but that makes it hard to use yesterday's numbers with tomorrow's numbers to help visualize the overall trend.

    The NASDAQ 100 index is far flakier than the relatively stable Dow Jones Industrial Average, which is why the NASDAQ 100 is less often reported than the Dow. It's supposed to measure the health of the hot tech stocks in the US, which means it's going to be flaky, but it also makes the number somewhat less useful.
    • Smurfit-Stone Container Corp.

      Anybody else read this as some sort of profanity against the Stone Container Corp.?
    • ... which seems to imply that a NASDAQ-1000 would be more useful since the turnover on membership would have a lesser impact and give a stabler, more meaningful index. yeah? perhaps they struggled to find 1000 meaningful tech stocks...
    • The NASDAQ will almost certainly go up because you've replaced losers with winners, but that makes it hard to use yesterday's numbers with tomorrow's numbers to help visualize the overall trend.

      If you believe this then you should invest in an index fund, which would then give you an almost certain result. However I believe your logic flaw is to assume past performance is a guarantee of future returns.
    • The responses on this thread seem to imagine that the NASDAQ-100 is based on some kind of nefarious scheme. Pay attention folks: this index is very simply defined, it's the top 100 NASDAQ stocks by market capitalization, membership refigured once a year in December. AFAICT there is no choice or strategy involved on the part of the index makers. You can argue all you like about whether an index defined this way is actually interesting or not --- but the fact that (eg) Red Hat is now "in" has nothing to do
  • I guess I should call Granma now and ask how much money she's made off of Google stock.
  • Reinforce the credentials of open source software?

    Hmm. So if they are removed from the index does this destroy or undermine the credentials of open source software? I think none of these statements are correct.
  • Unless the stock certificates are open source (read: free), I'm not buying. HYPOCRITES!
    • But they *are* open source. You can read them for free. You can even print them up. Of course, if you actually try to sell them yourself as stock certificates, you're likely to get a little tap on the shoulder from some Federal guy...
  • The managers of Nasdaq want to see 5k again, and so adding GOOG and to a lesser extent RHAT will add to the volatility and maybe even whip people up into a buying frenzy. Engineering the index membership based on a financial agenda is extremely dangerous.

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