Is it possible you're running on windows? Since you don't chomp your input, you're going to try to create a file called 'john\n.txt', which might blow up on a windows filesystem. What is the exact error you get when you try to create the file? Try this:

#!/usr/bin/perl -w

use strict;

open (NAMES, "names.txt") or die "Failed to read names: $!";
while my $name (<NAMES>) {
  chomp $name;
  open(OUT, ">$name.txt") or die "Failed to write $name.txt: $!";
  print OUT " hellow";
  close OUT;
}
close NAMES;
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