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LinuxCare goes the IPO way
Just as the title says, LinuxCare has filed for its IPO. Linux Weekly News has posted a summary of the S-1 filing. The full S-1 can be found here. Many people are waiting for Linuxcare to go public. I wish them very good luck.
YET
ANOTHER
MEANINGLESS
IPO
STORY
They're solving the chicken and egg problem. People don't want to get into Linux because there are not many support solutions, and Linuxcare doesn't have too much revenue b/c there aren't that many people using Linux. Show the world that there is good support, and more people will give Linux a try. This leads to more revenue for LXCR, thus improving services, thus attracing more people to Linux, and so on...
--
Deepak Saxena
Deepak Saxena
"Computers are useless, they can only give you answers" - Picasso
but the open source buisness model seems "made up". I use & love linux but these IPOs are foolish. IBM, DELL and other "real companies" will crush VA systems and the rest of these new overvalued companies will fall and fall soon.
As a linux geek I take care of my own linux. The summary tells that the company lost more than normal to-be-gone-IPO companies, and that it exists only a year, with a lot of new people just hired. I think I'll wait with buying. - lot's of laughter, lot's of joy, I was here before killroy
Wow thats a lot of words. Some big some small. Then I thought what difference it would make in my life if I did read it. So I read the first sentence and it was "blah blah blah". So I post appropriately.
You might be thinking WTF is this dork talking about. Well, I do not exactly disagree with you since I often find myself thinking the same thing.
What am I trying to say? you ask. Actually nothing. I find that making sense creates a false impresion of myself. Then I see that people begin to expect me to make sense. That as you already know is quite annoying.
When I find myself making sense in front of others (mistakenly, of course). I usually say something like "I wish the blue gnomes would try to be more direct in their attempts to control the other gnomes." Then people realize that any sense that they though I had made was purely coincidental.
Life in my universe is much more peaceful.
So the question remains, Which is your favorite cereal?
PEACE
But more of an odd scary than a " I just saw Casper scary"
This is a flame. It's also sarcastic in parts.
This company is really little better than LinuxOne. It is attempting to get rich off the backs of OS programmers everywhere, and trade on the popularity of the Linux name.
In reality, all this company does is sell support and consultancy. Like about, oh 2000 other companies. Except they focus on Linux, which as we all know is a radically new OS with hardly any similarity to any other OS, so re-training people to be Linux consultants will be REALLY hard, and other companies will find it SOO hard to catch up. Also, Linux is frequently used in massive fault tolerant systems where you really need expert help from the kind of people who understand the code at the lowest level. By contrast, Linux is hardly ever used for simple http and filesharing jobs where, frankly, you can get all the help you need in house or from contractors.
This company makes a loss TWENTY TIMES its REVENUE. That's like spending twenty pounds to make one pound. Bargain. I know, I'll ask LinuxCare to send me a cheque for 1000 quid, and I'll send one back for 100 quid, a deal apparently twice as good as the deals they are making now.*
72% of this company's revenue comes from three clients. That means that those clients hold an axe above the company's head. They are practically a division of their three main clients.
"If we fail to adequately promote and maintain our brand name or are unable to
continue using "Linux" as part of our brand name, our business may be adversely
affected.
"
Ha ha ha well isn't that topical. Sorry, couldn't resist. Let's defend this company's use of 'Linux' because they are a really nice company that we all like.
". Mr. Linus Torvalds owns the
trademark to "Linux" and has approved our use of the word Linux in our company
name as well as in the title of our websites.
"
Oh, that's all right then. So long as they have the Royal Warrant....
*My argument here argument is complete sophistry but it's fun so I put it in anyway.
In case you hadn't noticed, I REALLY AM NOT IMPRESSED by all these IPOs. And yes I'll bitch about it on Slashdot until they change the name from 'News for Nerds, Stuff that Matters' to 'Boring Industry Headlines and Capitalist Gossip and Speculation and Back Patting and Hype + some Interviews with My New Rich Friends and Reviews of Films and Books by my New Famous Friends.'
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Red Hat owns no intellectual property due to the nature of the GPL. Its work can be legally plagiarized by anyone (Mandrake, ...etc.) and Red Hat will just be watching and do nothing. This is why they went on an acquisition spree.
VA Linux is just another commodity hardware manufacturer, with some Linux expertise. There is nothing to prevent Dell and Compaq to do the same thing it does, and maybe even better.
Linux Care is different in that it capitalizes on the service portion of things, and have no commodity hardware or GPL handicap.
They have the makings of a long run winner company.
But after all, it is execution that matters.
2bits.com, Inc: Drupal, WordPress, and LAMP performance tuning.
There are some interesting ones that I had not heard about before; several large companies (several of their customers, actually). Rather interesting.
BTW: Who are the underwriters for this? Do we know yet?
--jss.
Personally, I think LinuxCare is a little premature in their offering. I won't go so far as to accuse them of trying to cash in on the market's current love affair with all things Linux, but it may seem that way to some ;)
On the plus side, their management team seems to be pretty experienced and certainly knows the computer/technology industry, even though (as LWN notes) they haven't worked together for very long. The company shows strong revenue growth and it has a long list of technical talent.
OTOH, they're burning money like crazy and it looks like that's going to continue. They seem to have venture capital backing from Kleiner Perkins Caufield & Byers (which through KPCB Holdings, Inc. owns 21.1% of the company), but it appears KPCB only made that investment in May 1999. I didn't read enough of the S-1 to find out exactly how much the principals have invested in the firm in dollar terms, but I'm guessing it's not that much.
IMHO, they should go through a few more rounds of private/venture capital financing before looking to public markets. Always be wary of people that want to spend your money and not their own :) However, it could be that KPCB has no more cash to give and they don't want to bring in other VC firms.
My final assessment: LinuxCare will be a good investment, just not right now.
By chance, are you referring to LinuxOne - NOT LinuxCare?
- Jeff A. Campbell
- VelociNews (http://www.velocinews.com)
- Jeff
(I noticed this got moderated as funny.. so now I'm not sure if it is supposed to be a joke or not.)
Anyway, LinuxCare is nothing like LinuxOne. They have a good reputation, and have hired some very big names in Linux Development. One of the core Samba developers (Andrew Tridgell) works for them, as does one of the guys who developed PHP (Rasmus Lerdoff). Try matching that expertise!
I believe that one of the "three major customers" is IBM, who has contracted out all|some (not sure) of it's Linux support work to LinuxCare. That is a pretty good recommendation - Tech Support reputations don't some much better than IBM's
Sure, (just about) anyone can set up a Linux web server, but I'd pay to have the guy who developed PHP available if I couldn't get something to work in PHP. Same with Samba. And say you want to develop a Kernel Driver - you could hire someone, or LinuxCare will do it for you.
I disagree totally with you - what is it we always say the way to make money off Open Source software is? Sell support! And when it comes to Linux Support, these guys have the best reputation I've heard of.
Compare that to Red Hat, say. How are they going to make money? Selling CDs? I doubt it - they are going after the support market, too - bu LinuxCare is vendor neutral, and tightly focused.
I am fully aware of the differences between all the Linux IPOs floating around these days, from the legitimate to the scams. If you had taken the trouble to follow the link I posted above, you would see that it is you who are in error, and that I am indeed talking about LinuxCare (although everything I say goes double for all the other Linux rip-offs hanging around)
The link that you posted above goes to the linux one story.
Whoever moderated it up must not have followed the link either....
LinuxCare has a business model that is actually going to make money. It is true that it might take a year or two, but it will work.
Unlike Redhat, who basically make money by selling a disribution, and then support for it, LinuxCare's primary busines is support. There is a huge market for that.
When a company does a role out of Windows today, they will normally get a support company in to help. The same will be true for Linux (if it succedes on the Desktop). Even in the server area, there is a big market for security auditing, and general support for Linux boxes.
LinuxCare has hired some really good developers - the core developers of Samba & PHP among others. That gives them a good reputation, and excellent expertise in two core Linux areas - file serving & web serving.
They have a "stategic relationships" to die for (from the IPO statement):
That's going to look good on a pitch to any manager - "sure, you could go with a Microsoft certified solutions provider for your Linux support, or you could go with us.... does the MCSP have IBM on their list of clients?"
Just incase you aren't convinced, look at this (also from the IPO thing):
NO, if you trouble to read the story and its comments, you'll see that I am talking about LinuxCare! I think I can be considered an authority on what I myself mean!
I was wondering if Transmeta was going to ride the wave of their announcement yesterday and be the next IPO we'd hear about. They are not strictly an open source related company, but I think nearly everyone here was listening yesterday. I didn't expect the announcement would come for a few days or even a couple of weeks, but it was the next one I was waiting for.
The net will not be what we demand, but what we make it. Build it well.
Once again, I feel obliged to post a warning about these Linux IPO stocks. As much as we may like a company like LinuxCare that contributes to the "Linux Community", that affection does not necessarily translate into a good investment.
Don't confuse buying their stock with furthering their cause. Once the shares of LinuxCare are sold to the large brokerage houses through the IPO process, the amount of money that LinuxCare receives is fixed. Sure, if the shareprice rises, it means profits for the original shareholders but the company doesn't have more money to pour back into into Linux development (except if they use their company stock as capital to make additional investments. i.e. AOL buying Netscape).
Look at some of the figures for this company. Their revenue for the first 9 months of 1999 was only $304K. They are now $7 Million in debt. Even if revenue grows 10X next year, their revenue will still be only $3MIL. Take a close look at the market capitalization before you buy. With revenues so low, you can't really justify the huge market caps of a Red Hat (17 Billion dollars on 16 Million in sales).
Look at a well established software company like Compuware that is heavy into providing services. Its market cap is $9BIL on just under $2BIL in sales. Compuware is growing at 35% per year. Sure, there will be growth in Linux. Huge growth. But consider how much you might be paying for so little revenue let alone actually showing a profit.
This isn't a technical question or a moral one.
Linux activism can only go so far.
Dave
Are you really stupid enough to think that that guy was serious?
It's people like you who make me think eugenics is a good idea.
there is no mention of their IPO on their website www.linuxcare.com
So now anyone who mentions that LinuxCare's IPO might not be all that it seems is a "troll" now, are they? Well, you'd better tell that to Bruce Perens then, who seems to agree with me. LinuxOne is just a two-bit shop in California with a stolen prospectus and a remarkably liberal (not in the political sense, of course) interpretation of the GPL.
I'm old enough to remember the Microsoft "astroturf" campaign, and it wouldn't surprise me if the above poster/censor is part of a similar operation put together by LinuxOne.
- revenue = employed consultants * hours * fee
In the Wallstreet bull market, many companies that are grotesquely over valued (and yes, that does include two Linux companies) often have their market caps defended by the fact that they could see "network effects" or "explosive growth". For Linuxcare to end up being valued as highly as Redhat and VA are today however, there would have to be the expectation that soon they would have more Linux consultants onboard then their are Linux users today (ok, not quite, but still). Consultant companies see neither network effects or value increases of their holdings and products, all they can do to make more money is hire more employees. I think that is worth considering when investing in this company.-
We cannot reason ourselves out of our basic irrationality. All we can do is learn the art of being irrational in a reasonable way.
Credit Suisse First Boston
FleetBoston Robertson Stephens
Hambrecht & Quist LLC
I don't see any "directed share program" or "friends and family" in there. Oh, well.
Frequent mention is made in the filing of Linuxcare's plans to deliver its services via the Internet. They seem to want to automate as much as possible, thus reducing their personnel needs. They count heavily on their information systems development to bring this about. To the extent that they are successful in this regard, they may encounter some criticism from the Linux community - support databases and associated systems are a competitive advantage only if they are kept proprietary.
/. If you were not given the software then you don't need the source. It is /. being nice that they give it away.
I'm sorry, but I'm sick of people asking for things for free (as in beer). Those that want the slashdot code, have really no right to it, unless you bought the software or was given it. As RMS has stated, the GPL applies only to distributed software. Now if Linux Care does not distribute the software for these databases and associated systems then they don't have to give it away or give the source away. Same goes for
Yes you can make money with GPL. But you don't have to give everything away! You only give the rights and the source of those products that you distribute. And it has been made clear that companies are an entity that can protect its software that is used internally, and externally as an interface and not a product (Like slashdots web page generation utilities that are internal and used externally).
So if you complain that LinuxCare doesn't give away its internal software, then tough. They don't have to.
Steven Rostedt
Steven Rostedt
-- Nevermind
He really trolled you.
"Linux Care is different in that it capitalizes on the service portion of things, and have no commodity hardware or GPL handicap."
I don't see in what it is that different from Redhat, after all a distribution is just a service: the install help and the book, all this in a nice package.
So Redhat is a service company like LinuxCare but Redhat has something more: their name.
Linuxcare cannot say they are the expert #1 in any distribution because they don't do any, while Redhat is not only a service company BUT also an expert in a well known distribution.
It's true that anyone can take their distro and make another, like Mandrake, but this isn't a problme, this just further the number of distributions they are expert in (Mandrake being 99% like Redhat like they themself say).
In the end their will be concurrence and the best comanies will stay alive, isn't that what we all want to see???
"The obvious mathematical breakthrough would be development of an easy way to factor large prime numbers." Bill Gates,
Uh, I don't think they can mention it. It's part of the law of IPOs. No public pushing of their stock, and mentioning it on their web site would violate that.
Steven Rostedt
Steven Rostedt
-- Nevermind
Once upon a time, my daddy told me that I'd never make any money selling my time. He should know - he's a lawyer. The moral of that story is, LinuxCare will never make as much as money selling time as a firm that sells hardware, software or in the case of many other .com companies, hype.
It used to be about News for Nerds. Now its all about IPO's and money. Too bad.
forget it. I'll wait.
Tried port scanning linuxcare?
/.
If they can't manage to run their own site without doing default installs and exposing numerous and inappropriate servers/services to the net, how can I trust them to help my business set up our linux hosts correctly?
They need to get their own house in order before they charge anyone else for software support.
I'm sure this will be Yet Another Big Linux IPO, but there's no reason for it. I agree that this is little better than LinuxOne trying to profit off the hard work of the community while making minimal contributions (if any).
I haven't read the filing but I am very curious what a support company spent/lost so much money ($10m) on. They don't have a software product so they don't need a large team of engineers and hardware. They don't manufacture anything. They don't need to do much of anything but have a web site, a bunch of phone lines with geeks attached, and some marketting. Which pocket did $10m fall into?
Also, the 32m VC funding raises the question of who runs the company? Are the founders still in control or this is a big time sell-out-to-the-VC's thing? Is LC really a pro-OS company? Do they use OS software to run their company and web site? What's going on? Just because they use Linux in their name and Linux approves of their use doesn't impress me.
Also, this story has no business being on
This isn't a news for nerds story. It's hype and "suit" noise. I feel badly for anyone wasting their hard earned money investing in a garbage company like this but to each their own. I've certainly made some bad investments before but never on anything like this.
Best of luck to them. If they can fleece the sheep for $92m+ then the sheep deserves what they get afterwards. Anyone still holding onto any VA Linux (LNUX) purchased at the 300+ range with a market order?
The trouble with that distinction is that those being successfully trolled can't tell the difference.
As the previous posters pointed out, a company earning $300k for the past 9 months of operation isn't exactly fit to go public, but they are doing it quickly so they'll have an option to cash out their shares after the 6-month waiting period. This is more money siphoned out of the public.
Some people have a misconception that selling services is more profitable than selling software - the opposite is true. The fact is that if doing the type of stuff that LinuxCare is selling becomes massively profitable, it will become an intensively competitive field.
And Red Hat competes in the same marketspace that LinuxCare is in.
But of course, they all do Linux, so that means they will be infinitely profitable in the future? If you buy shares, your answer to that question is "yes".