LINUX SURGE LIFTING TWO AREA FIRMS.

Byline: Jason Z. Cohen Staff Writer

A pair of local technology companies with their fortunes tied to the red-hot Linux operating system posted major stock gains Monday.

Shares of Chatsworth-based MRV Communications, which have been steadily increasing in price in recent weeks, rose sharply on a Barron's story naming the stock as the favorite of one of York Capital Management's fund managers. MRV's stock hit a 52-week high of $55.125 after rising nearly 30 percent, or $12.6875 per share, over Friday's close.

Noam Lotan, chief executive officer, said the company is considering an initial public offering for one of its divisions, the optical access division.

In the Barron's interview, fund manager Dan Schwartz said it is likely MRV will appoint a ``high-profile CEO'' to run the new company. Lotan said no decision has been made on a management team, nor has a timetable been set for the spin-off.

Newbury Park-based Pacific Softworks Inc. flirted with a new record stock price before ending the day ahead by 19.05 percent. The company, which announced the release of an embedded Internet software product designed to run on Linux-based systems, ended the day with a closing stock price of $9.375, an increase of $1.50.

``Linux is getting a lot of popularity because it's an open-source system,'' Lotan said. ``It basically provides the users the robustness of a software that's being supported by thousands of programmers around the world.''

Linux, an operating system designed in 1991 by a Finnish student and distributed free of charge on the Internet, has Wall Street in a frenzy.

Companies whose products are tied to the Linux system have performed remarkably well. Two shining examples are Red Hat Software, which has increased in price by more than 1,800 percent since its initial offering, and VA Linux Systems, which last week set the record for the greatest one-day price jump for an IPO.

MRV is putting its faith in Linux, but with some caution.

``How can you turn down something that's free and also robust? We're not staking the company on Linux, but were staking a division on Linux,'' Lotan said. That division, based in Israel, is generating 20 percent of the company's revenue, he said.

Pacific Softworks also is riding the Linux wave without betting the farm. The company builds embedded software for small, Internet-connected appliances such as in-store displays.

``It's one of our lines, not all of our lines,'' said Bill Sliney, president of Pacific Softworks. ``We still have to wait and see how this all shakes out.''