The End of Linux Hysteria?

2000 could be the year that Linux comes fully into its own, as rising corporate adoption and intensifying media attention brought on by the Microsoft antitrust case have helped to push the open-source operating system into the number two position in world OS sales.

Until recently, it seemed that investors who were searching for a company with a viable free software-based business model had found a superstar in Linuxcare, Inc., a services and solutions provider backed by venture capital powerhouse Kleiner Perkins.

However, analysts and industry observers have developed serious doubts about the IPO hopeful in recent weeks, and Linuxcare withdrew a public stock offering that had showed all the signs of being able to rekindle the romance between Wall Street and Tux, Linux’s penguin mascot.

As the company apparently fell into a tailspin of executive departures and rank and file layoffs, the E-Commerce Times spoke with co-founder and CTO Dave Sifry, who said that the recent highly publicized problems are nothing more than a part of the growing process.

Navigating the Choppy Waters

The troubles began in April, when Linuxcare CEO Fernand Sarrat resigned. Just over a week later, CIO Doug Nassaur left the company as well.

Although the two departures were reportedly unrelated, the Internet was set abuzz with rumors regarding the then-imminent Linuxcare IPO. The collapsing Nasdaq, according to Linuxcare, was the straw that broke the offering’s back, forcing the company to cancel the offering.

“It’s a calculated decision, and I wouldn’t read more into it than basically what it is, which is that we’re postponing the IPO,” explained Sifry. “Our investment banker took us aside and explained that the market is really choppy, so we’re just going to keep an eye on how the markets go.”

“Obviously, you don’t IPO without a CEO,” Sifry added.

Some analysts have pointed out that although Linux-related stocks have returned to more appropriate levels, Linux market share has actually continued to grow. Once Linuxcare gets its house in order, it could still expect a strong offering.

“We decided that it was better for us to get out of the quiet period for now so that we can take off this muzzle and let people know that the company’s still strong,” stated Sifry.

Filling A Need

Founded in 1998, Linuxcare focuses on support, an issue that was identified early as a potential barrier for moving Linux into larger business and consumer markets. According to many industry analysts, a vendor neutral service provider such as Linuxcare could carve itself a niche as more and more businesses seem to be identifying with the flexibility and cost-effectiveness of the open-source platform.

“The fundamental issue that hit us was that there’s no 800-number for Linux,” commented Sifry on the company’s genesis. “You didn’t have any company out there that would support and provide services for any Linux distribution on any hardware platform.”

The San Francisco, California-based company, which pushes what it calls “support for the revolution,” is divided into four areas of “expertise:” Linuxcare Labs; Linuxcare University; professional services; and technical support.

The professional services division works with companies through the planning and implementation phases of a Linux-based system deployment. Although individual distributions produced by such players as Red Hat (Nasdaq: RHAT) and TurboLinux provide customer support, according to Linux programmer James Manning, “IT managers need a company to deal with that will let them sleep at night after a Linux conversion.”

Some experts feel that a vendor neutral, service-focused company such as Linuxcare could also assist if and when Linux becomes more of a force in the desktop market.

The Future

Over the next year, Sifry noted that he is looking for Linuxcare to play a critical role “as Linux continues to grow in the enterprise, the e-commerce dot-com space and the embedded space.”

“We’re making changes, and those things are important in order to build a strong, rational business,” observed Sifry. “But, just look at the IDC numbers, the year-to-year growth of Linux, and where it’s going. I don’t lose any sleep at night.”

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