"IF YOU need a poster child for the volatility of the market this year, you might choose VA Linux Systems Inc. (LNUX), the Sunnyvale company that produces workstations and servers embedded with the open-source code first developed by Linus Torvalds.

VA Linux Systems' great success might have been its greatest curse. Four months ago, it was labeled the most successful IPO in history, soaring 700 percent above its offering price of $30. Its first-day close was $239.25.

The stock has slipped relentlessly since, finishing at $38 Wednesday after dipping below its IPO price Friday. A child prodigy has become an ordinary teenager. A Mozart suddenly is churning out Muzak."

"Consider this whole drama from the standpoint of the established players. What looks like something supremely irrational -- how can VA Linux Systems be worth $10 billion in December and $1.6 billion in April? -- suddenly begins to assume a vulgar rationality."

Remember, the fund managers and institutional buyers who participated in the IPO got the stock at $30. And they were able to ``flip'' it for a big profit on the first day. Because supply was kept low -- only 4.4 million shares were allowed to float initially -- the demand insured a steep opening price. The stock cost $299 per share the first time the public could buy it. And many did, simply on the belief that it would go higher."

For that matter, at least some of the institutional players and investment bankers were in a position to sell the stock short, which means they could make money as the shares declined in value. With more information about who was buying and who intended to flip, they could make better judgments than the average investor. The identity of short-sellers isn't public, but the latest reports show that 1.6 million shares of LNUX are being held in a short position."

"In fact, the only people who don't benefit from this cozy arrangement were the investors who bought VA Linux during its first four months on the market. And as I say, it's hard ordinarily to feel that sorry for people who swallow the hype. I just wish there wasn't such a cottage industry producing it."