It's very sobering to attend a high-energy, Web 2.0-oriented conference like this week's TechCrunch40 and then pull up a few stock charts. Simply put, Wall Street still doesn't get open source. Consider Red Hat, the most mature public provider of open source and the proud owner of JBoss, one of the most technically savvy companies around: In two years, shares of Red Hat have lost nearly 20% of their value -- 18. It’s very sobering to attend a high-energy, Web 2.0-oriented conference like this week’s TechCrunch40 and then pull up a few stock charts. Simply put, Wall Street still doesn’t get open source. Consider Red Hat, the most mature public provider of open source and the proud owner of JBoss, one of the most technically savvy companies around: In two years, shares of Red Hat have lost nearly 20% of their value — 18.6%, to be exact. Given the enormous jump in the use of open source applications and infrastructure by mainstream companies since 2005, you’d think the flagship Linux provider would be valued higher. Red Hat’s financials aside, there are a lot of reasons for the disconnect. Most significant, I think is the lack of understanding of the open-source model. Software investors are still used to thinking about license revenue, even though ongoing maintenance revenue of even traditional vendors (Oracle, is a good example) is becoming more and more significant. The open-source model, of course, is based on the sale of support and services. Most puzzling to investors is the huge spread between the number of downloads and the number of paying customers. A general rule of thumb is that only 1 in 1000 downloads result in direct revenue, although some companies do better. Does that one-sided figure call the open-source business model into question. I don’t think so. By definition, open-source companies are very lean; after all they have a huge base of developers in the community who contribute code that the companies don’t have to write. That leanness extends to the culture. Simply compare the palatial headquarters of many conventional software sellers to that of MySQL, for example, which doesn’t even have a receptionist, notes Bernard Golden, CEO of Navica, a systems integrator and publisher of an open-source-oriented newsletter. Also more significant is a change in the way IT departments view their role. “In the past, IT departments were really specialists in vendor management. They’d pick up the phone and the vendor would (in theory, anyway) solve a problem. Now the model is much more like the travel industry, where travel agents have been supplanted by self-serve sites like Orbitz or Hotwire, says Golden. Open-source customers don’t expect their vendors to send engineers on site to produce a proof of concept or other sophisticated services. They’re more likely to do it themselves.That said, it’s worth noting that Microsoft has gained share in the server business at the expense of Linux, a somewhat surprising reversal of form. Microsoft picked up 2 percentage points, bringing its market share to 67.1% of servers shipped during the second quarter, according to data from Gartner. Linux accounted for 22.8% of server shipments, down from 23.1% the year before. One likely reason. Microsoft, and other vendors of conventional software, have turned the tables on their open-source competitors by cutting prices. Sure, a quarter or two hardly makes a trend, but you can be sure Wall Street is watching those numbers. Technology Industry