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TurboLinux Layoffs
Here's the original anonymous submission we'd received:
TurboLinux, who had just became noticed in the US as a Linux distro, laid off a huge number of their employees. The exact number isn't known, but it is at least 50% of most departments.
Some interesting numbers: Product marketing was trimmed to 2, IT from 12 to 4, large numbers out of marketing and sales. Their security developer was also let go, along with their only build engineer (won't it be interesting to see how long it takes them to release another distro?).
The leaving packages were all pretty much the same, as near as can be told: 4wks. pay if you accept the severance package and sign their NDA/IP contract (for those employees that hadn't earlier).
That last bit is actually important as TurboLinux had a rather draconian NDA/IP contract that some people refused to sign until it was reviewed. It was an affront, the employees felt, to the open source spirit that TurboLinux said it thought was important. Even if it was similar to the IP contract that most big companies have their employee's sign.
Overall, TurboLinux liked the idea of open source, but couldn't make it work well in the US. There are problems of getting the developers in Japan (the original TurboLinux distro is from here) and the US in sync. China had an easier time sync'ing with Japan, but that was still difficult.
It appears that TurboLinux's solution is to have Japan do the US distro, and let whats left over of the US development team work on "Enterprise" products. No word yet on what "Enterprise" might mean in this case, however.
The Japanese office is probably doing better. Open Source Linux is actually pretty popular and the customers are much more descriminating there. A japanese Debian would do very well there, for example. TurboLinux US gave the time, resources, or developers needed to ever make a first class product. One year ago, US development was one person out of 4. Yesterday, US dev consisted of about 25 people out of about 200 people total in the US. This is the opposite of the way most startups grow.
This afternoon, I spoke to Lonn Johnson, TurboLinux's VP of Marketing, and asked him the real deal on what happened today.
Emmett: Did you lay off people?
Lonn: We had some people laid off today, and also, some expenses were cut today.
Emmett: What percentage of your workforce did you lay off today?
Lonn: You're not going to like this answer, but as a privately held company, we just don't release numbers.
Emmett: What other cuts did you make?
Lonn: There was cuts in different parts. Marketing took some cuts, sales took some cuts, some of the international offices took some cuts, but we didn't close any. It's just a little belt-tightening.
Emmett: Is it a major reorganization? The stats we've received is that you've basically cut most of your departments in half.
Lonn: That would be inaccurate.
Emmett: How inaccurate is that?
Lonn: If the statement is that fifty percent of the staff got cut, that's pretty inaccurate. You can specifically talk about the development team. Almost no impact on our development team.
Emmett: We're told you lost someone who does builds, as well?
Lonn: There were only a couple of people in development affected worldwide. It could be one of the people who was a build person. I don't have a list here. That could be.
Emmett: What was the purpose of the cuts?
Lonn: The main reason we're doing it is just market realities. The market has changed. In the old days, not just Linux companies but lots of companies were going as quickly as possible to grab market share, build products, develop technologies, and do all kinds of stuff. The market said, 'That's cool, you can worry about profitability later.' You can certainly see in the last month, that that's no longer cool, and you need to have a pretty clear path to profitability. So, we took some steps today that did involve some layoffs, and some expense cuts to get our bottom line expenses in line with our revenue and profit growth.
Emmett: Do you plan on bringing the people back that you've laid off in time?
Lonn: It depends on what our staffing requirements are. There's no future layoffs planned. Depending on how we grow our business ... gosh, the people who were laid off today are fantastic people. There's no question about performance or capability, just simply minding our bottom line.
Emmett: If you go back into a hiring phase, will those people be given first chance at their old jobs?
Lonn: I don't think we have anything in writing that says that. The answer to that is 'I don't know.' We're not a big industrial company with rules about these things. We haven't gone through this process before. I don't think anybody gave a thought to that.
Emmett: I'm told that the people being laid off today were given four weeks of severance pay if they accepted the severance package and signed the NDA and intellectual property contract, which I'm told is pretty draconian. Is that true?
Lonn: I don't want to get into specifics about what the package is, but everybody received a severance package.
Emmett: I'm told that a lot of the employees felt that the NDA was a bit of an affront to the open source spirit that TurboLinux obviously feels is important. Do you feel that that is the case?
Lonn: No, I don't. It's a standard NDA in the Valley. It doesn't affect people working on open source projects. It's all open source, so intellectual property is immaterial. It's all under the GPL.
Emmett: Any last thoughts for this story? I mean, is there any particular way you'd like to spin this or have it be shown in the press other than what you've already said?
Lonn: The main thing is that there were some layoffs today, and some expenses cut. Little impact on our developer teams, and no future layoffs are planned. The basic gist of this is getting our bottom line in line with our expenses, and on target with our revenue and profit growth. We're fortunate that we're sitting on a large pile of cash, because we raised a record round for a Linux company in January.
Emmett: How much did you get?
Lonn: We raised 57 million dollars in January, and we're still sitting on most of that, so it was not something that was done out of necessity.
Emmett: So, these layoffs and cuts weren't a last-ditch effort to save the company.
Lonn: Oh, God, no. Far from that.
quoth emmett:
In the interest of 'keeping it real,' I immediately contacted TurboLinux and spoke to their VP of Marketing, Lonn Johnston, to get the story straight.
Of course! I know that when I want truth, I just go straight to someone who works in marketing!
deus does not exist but if he does
A few months ago the Los Alamos National Laboratory magazine "BITS" featured an article on some of the people who now work for TurboLabs, and who were then working at LANL's Advanced Computing Lab. They produced a machine called Rockhopper, which had 128 nodes of dual-processor PIII machines IIRC. The networking architecture was characterized as a "superset of Beowulf", with much higher speed connections than mere 100Mbps ethernet and other architectural improvements. I believe their goal was to scale up this SuperBeowulf type of machine to much greater levels of performance. Then they quit the Lab and formed TurboLabs. I look forward to seeing some results someday soon from such a capable team.
I sincerely hope these folks are doing fine since we all got run out of town on May 10th by that damn fire.
If they chopped their U.S. staff and boosted their Asian staff it would be simple recognition of where their future lies. With Red Hat's domination of the U.S. Linux server market, it is unlikely that they can get market share with "just another distro" in the U.S. Thus it makes sense to chop money-losing efforts and re-focus their efforts elsewhere.
-E
Send mail here if you want to reach me.
tchrist? You mean Tom Christiansen? Man, I hope not, because I'm not sure I've ever seen or heard of anybody who was more interested in "liberating the user with regards to information [sic]". Of course, I'm not sure I've read many people who felt more free to tell you exactly what they thought, and I was sad to see the day when as free a thinker as tchrist found slashdot an unreceptive forum for his contributions.
Babar
You're not reading what the guy said.
They aren't in danger of running out of money, but they are in danger of not becoming profitable in an acceptable time frame.
Just because you have enough money to keep all your employees does not mean it is financially sound to do so.
If they are spending $10,000,000 per *year* just on people -- and the figure is likely to be higher when you consider facilities, managerial/HR overhead, equipment, etc -- try to think of how much they have to make per year to be profitable.
Assuming that they only lost a quarter of their gross income to taxes, and they had 200 employees to start out with (I don't know how many employees they had, I'm just using your example) they'd need over $13M in gross revenues annually just to break even. Again, not counting anything but salaries.
Assuming a couple million for manufacturing/distribution, as much for marketing/sales operations (people wont buy what they don't know about) and say, a couple million for everything else I mentioned above, that's $16M per year in costs or more than $21M in gross revenues...
Now, cut $5M off the top if they cut half their staff... Now they only need about $14.7M in gross revenues... At $50 per sale, that would mean they have to *sell* 293,000 or so copies of TurboLinux EVERY YEAR.
These numbers are wildly off, I'm sure. But the same principle applies regardless of the numbers. Yes, cutting staff reduces their ability to do things like develop cool clustering and such. But if that cool clustering stuff isn't resulting in increased sales that meet or exceed the cost of the overhead of doing the development... Well, you do the math.
You need to remember something: Companies do not exist to give you, the employee a paycheck. Companies exist to make money. Employees are a resource used to that end. It's the simple realities of economics.
-JF
MrJoy.com -- Because coding is FUN!
I agree but the problem that all these companies had and every other dot com or "tech" company had was they were in a market where they could IPO and get ridiculous amounts of money that was completely out of line with there profit potential and track record.
.... never ending double digit or triple digit growth is not realistic anywhere ).
Look at Amazon, yahoo etc.... Lots of people wrote this off by saying oh well the markets playing by new rules now and PE ratios and other indicators are irrelevant because the net has changed everything. Well the net has changed things but not to the extent people though... people are concerned about profitability ( though I am loath of the type that is sometimes expected
So what happened? Well all of these companies got huge amounts of cash either from venture ( vulture ) capitalists and decided to try to grow big quickly, lots of staff and spending etc and it occurred before they had sound business palns and revenue models in place and all of a sudden... THE BUBBLE BURST! So companies that weren't being run based on there economics got a rude awakening and companies that hadn't tried to grow too quick or took on huge expenses especially labour before their rvenue supported it aren't going to have this problem.
And this is not only in Linux or OSS or in "tech", dot com companies. Even typical product companies that develop computer unrelated products can get nailed by this. I saw a company do the Linuxcare thing of focus on the IPO so much that things like current profitability or cash flow was forgot and it killed them.
But who didn't, everyone saw the money that was being made, hand over fist overnight... IPO millionaires especially if its a net related company and everybody wanted in on it and not just companies, investors too. But it was a wonderful market, everyone was gonna become a day trader and work from home and make their huge money.... well guess what... thats over and now well get back to making slightly more sound judements about things instead of just buying because who knows what the next thing is so, buy everything.
This isn't a Linux story or an OSS story, its the same old story that been told for years, companies that dont plan carefully and develop sound business plans get into this kinda problem and the fact that these ones are OSS will make people question the ability to make money with it.
I agree that I think that there is a revenue model that will work but maybe these wont be multi-billion dollar companies and maybe they wont have billion dollar a year profits, maybe instead they will make a few million a year and perhaps that should be enough. Whatever happend to being able to have a business that made money consistantly and had some growth but wasn't some superstar M$ 800 lb gorilla.
Hey, there's lots of work to be done in the techie industry. Microsoft laying people off would mean that some of them would get jobs doing something productive. ;)
That's why I picked them in particular; no useful research comes out of Microsoft.
My blog: http://www.seebs.net/log/ --- My iPhone/iPad app: http://www.seebs.net/seebsfrac/
If you were the Chinese government, would you want to use software (i.e. Windows) that can be embargo'd by the U.S.?
And how, pray tell, do you plan to embargo something that can be infinitely regenerated if only one copy of a distro gets through the blockade? It's not as though the PRC has ever been one to respect copyrights.
There are infinitely many reasons why the PRC shouldn't go with Windows, so you'll have no trouble picking another one.
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
Confusious say: No company make money by selling free product and paying many many 100K per year employees.
Confusious type "apt-get upgrade" and laughs at any company that bets the farm on making themselves rich selling that which is free...
Confusious glad he has no money to invest in silly stock market...
(+1 Funny) only if I laugh out loud.
Go ahead, then. Name real research that came out of microsoft. Not reimplementations, but genuine new ideas. e.g., patching Kerberos to make it incompatible doesn't qualify as "research". It has to be real *progress*. I haven't seen anything they've done that wasn't done elsewhere first. They may have been the first to mass-produce a given thing, but that's not research, that's monopoly power.
My blog: http://www.seebs.net/log/ --- My iPhone/iPad app: http://www.seebs.net/seebsfrac/
I don't think that counts. They didn't *invent* CSS. They just implemented. That's not research, that's *development*.
No new concepts. No new technology. Just an implementation, using old techniques, of a spec someone had already written.
My blog: http://www.seebs.net/log/ --- My iPhone/iPad app: http://www.seebs.net/seebsfrac/
Let me just say that I believe that Open Source companies will find development models and sales models that work. On the other hand...
This is two high-profile Linux companies with significant lay-offs in a short amount of time. With Redhat, Caldera and even (somewhat) VA Linux stock in the toilet right now, things don't look all that rosy for some open source camps. That's the bad news.
The good news is that I think realistic business models and business plans are, on the whole, good for everyone, including Open Source. Companies like Redhat and VA Linux were always more focused on product quality and value to customers (and delivering on a plan) than going public and making money quick on the NASDAQ (even though it turned out that way for those two). I think that as more organizations do some belt-tightening, the overall tone of the high-tech and open-source economy will improve.
Businesses with good products and services and a plan to deliver them to people who want them for reasonable prices deserve to survive. Other businesses don't. That's just the way it is.
The Japanese office is probably doing better. Open Source Linux is actually pretty popular and the customers are much more descriminating there.
It is interesting to note, however, that most of the TurboLinux distribution in Japan has been through freely giving away the product. Sales are actually pretty low if you look at the numbers. This fact has been commented on by a number of the other distributions as well. It will be interesting to see how the Japanese and Asian markets trend towards support and service. Linux is a natural for adoption in China and the like: If you were the Chinese government, would you want to use software (i.e. Windows) that can be embargo'd by the U.S.? Linux cannot be placed under embargo by the United States, as it is a combination of International efforts
Just food for thought.
Domenic R. Merenda
Director of Strategic Business Development
BeOpen.com
...And one more thing: I thought that TurboLinux had come under significant criticism for failing to GPL their clustering software (which was alleged to bear some resemblance to the Linux Virtual Server technology which RedHat started to package in 6.x and is open source).
The VP of Marketing here contends that "...it's all GPLed". Is he right?
As far as the original person wondering what they meant by "enterprise" products, I can only guess they're unaware of TurboLinux's TurboCluster Server clustering solution, which I've been working with for the last year.
TurboLinux Workstation and TurboLinux Server always struck me as "just one more distro," while TurboCluster Server was definitely a horse (or box) of a different color, and for quite some time was the only server clustering (as opposed to computational clustering) solution available in packaged form for Linux.
(My other thoughts on TLTCS are somewhere right around here for anyone curious.)
Anyway, it looks like they'll be continuing to support and focus on my favorite product, so I guess I should be happy. I should probably also mail my friends and see if they're still around... maybe we can pick some of them up where I work! ;)
--
And remember that the $80K salary that brings them up to the "poverty line" isn't the only expense that the company has. The company gets to pay:
- Payroll taxes of one sort or another
- Medical benefits, Dental Subsidies
- Company costs for 401(k)
- Whatever other "HR stuff" gets thrown in the mix
- Rent on the real estate that the individual occupies
- The cost of the PC at programmer's desk
- The costs of adding programmer to LAN (running cabling and such)
The latter items may not be big ticket items, but it all adds up. I would find it unshocking if, to the $90K required to attract the staff member, there would be another $90K per year of costs to "house and service" the employee.It's not obvious that nuking an employee will instantly save all of these costs, but I'd think it quite realistic that each employee costs well over $100K/annum in the California market...
If you're not part of the solution, you're part of the precipitate.
Come on people - layoffs are an inevitable part of the corporate world. It happens to all companies - slashdot and its readers don't need to get all hysterical just because the lastest round happened to be a Linux-related company. If the Coca-Cola company also fired some of it's empolyees in the same manner, would we care? Why is this any different? Are computer geeks so spoiled by well paying, stable jobs that they can't face the prospect of *gasp* losing a job?
So, if they can let people go & still make their earnings & growth goals, why spend the extra cash?
In the interview, Lonn was bitching about not being profitable and just not having the revenue to maintain the current employee level. My response to that is, Maybe the whole "let's get TL into the market by giving it away FREE!" move wasn't such a hot idea. For every copy of TL that was sold at CompUSA (or wherever) for $20 that had a $20 rebate on it, TL took a bath. Instead of making money for each sale, they were spending money to cover the cost of the CD's, books, and boxes. Apparently, TLS and TCLS sales didn't quite pull in enough to make up that deficit, did they? Maybe whoever came up with that idea should have been laid off a few months ago.
Secondly... the idea that they're looking for more funding is laughable. TL has managed to pimp itself out to just about everybody, and they've got more than enough cash to keep running for a while now... they need revenue now more than they need money. Although I guess an "investment" in the form of a $10 mill purchase of product would be extremely helpful... maybe it's time to talk to Oracle and see if they'd be willing to change the terms of their buy-in.
The bottom line is that management dropped the ball when it made its marketing decisions, totally failed to provide the leadership needed to unify three different code bases (English, Japanese, and Chinese), and couldn't figure out exactly what company goals should be (other than "let's go make some money!")... so now other people are paying for it.
It does no good to forge ahead if you don't know where you're going.
Well at least the way the current Linux companies are going...
I believe in Linux, but I think that Microsoft has such a great "support channel" that it will be incredibly hard... Not that I think Microsoft is great, but as a MS developer, I have yet to find the "other" products supportive...
There's too much to name here, but I think any rational MS Developer knows the difference...
The slashdot user-based is HIGHLY technical, and so am I, but the OVERWHELMING majority of the world isn't.
Take a look at MSDN... It is an amazing resource... At least compared to what is out there... And FWIW, I am moving to Java, but Sun's horrible Java site is lame...
All the Java/Sun zealots claim that UNIX/Java/Linux is all about doing-it-yourself. While I agree (my roots are Amiga), I have realized that the mainstream world isn't like that.
We can bitch all we want, but until we satisfy the real-demand, Linux will just be a niche-developer environment.
Just the other day I was complaining to a gung-ho Java/Linux guy about how the Java tools suck wind. He retorted by saying "well when MS is broken up, the apps group won't be constrained to just the Windows environment".
That says a lot about Microsoft and their competition (Symantec/BEA, Borland/Inprise, Sun/Forte, etc.)... Competitors today can't build tools (namely IDEs) that don't suck...
I'm impresseed with TurboLinux getting a good grasp on what the road to success means. They appear to really have their act together and exhibit a maturity that is often missing in Valley startups. This was a smart move on their part and it's a sign that Linux really has "grown up" (in all meanings of that phrase). I wish them success.
Speaking out of almost complete ignorance, I'd think that open source software development should be cheaper than proprietary, since you have community contributions, effective debugging by the userbase, and can build upon other open source software.
Is this really true, or does cost of labor and initial research drown it all out?
If it is true, are Linux companies currently exploiting it well enough? (For instance, is TurboLinux's clustering software costing them too much by not being open enough early enough?)
All speculations welcome...
"You can't get something for nothing." - my grandfather, on the stock market and Reaganomics.
<>
I'm merely being realistic. Sure, they aren't in danger of running out fo money *right now*, but they will be if they don't make the right business decisions.
How much good does it do any of the employees if the company goes bankrupt? I've actually had that happen to me. It's not fun when you've put your heart and soul into something only to have the CEO tell you "well, the funding fell through and we're out of angel capital..."
I don't neccesarily think this is a particular great way for economics to work, but that's how they do. You waste enough money, you go out of business. If an employee is not raising the bottom line at least as much as they are lowering it, then the employee is a drain on resources.
-JF
MrJoy.com -- Because coding is FUN!
<>
The only perspective that matters is that of whoever holds the purse strings -- the investors.
<<Even many people who start up companies are more interested in making a culture of innovation (no, I do not mean Microsoft), and money is a resource to that end. >>
I worked at such a company. It no longer exists. Mistakes were made -- we let concerns other than the bottom line drive us and we paid for it.
<<Concepts do not exist in a vaccuum, they do not have an independent reality from those who consider them.>>
Yes, so? An employee is essentially a very powerful tool. Just as a compiler provides an important function, so does an employee -- coming up with ideas, concepts, whatever.
I'm not saying that employees are just substitutes for machines -- far from it. Employees are the most important tool a company has. But they are still a tool. They are a means of accomplishing a goal.
Survival -- and that means making more money than you spend -- is the first goal of any long-lived company.
-JF
MrJoy.com -- Because coding is FUN!
A company may fall apart if it can't earn a profit. This does not imply that a company's primary purpose is to earn money for its owners, any more than a human's primary purpose is to find air to breathe.
The purpose of a company really does depend on your perspective. If you're an owner, then perhaps its purpose is indeed to earn you money. But if you're an employee, its purpose is to provide you with a paycheck. If you're a customer, its purpose is to provide you with a good product. If the company fails at any of these three, then the company will eventually fail, at least in "normal" market conditions.
Put another way, if employees are a resource used by the company to make money, then companies are the same to employees. How can either statement be more correct than the other? Even money itself is a meaningless number, until it is used to purchase something worthwhile. In the end, it's people that matter. Our economic system is in place because supposedly it results in people's maximum well-being. It exists within our democratic system, not the other way around.
If a company does some great R&D but then goes out of business, has its existence been worthless? Or if it keeps a bunch of employees off the street for ten years? Or if it profits for ten years, but then stops profiting? It may have to close down, but that doesn't mean it's been a waste of time.
You might profit from studying a little philosophy; you'd be surprised how much it applies to real life. In particular, the concept of "objective truth" is a tricky one. I don't think you've examined it, or have a clear idea of what "perspective" means, based on your responses to that AC and to wobblie. No one person knows everything a priori; you have to combine what you know with what others know, to get a fuller picture. It's like those ten blind men and the elephant.
I think a lot of companies have had problems where employment growth outpaced revenue growth. At Comdex, a lot of booths were fairly empty during much of the show; this, in my opinion, means the booth was too large.
I hope TurboLinux makes it; it's the first Linux distro I've seen that worked "correctly" for me on the very first try, and it seemed quite polished. A lot of work went into this distribution; I hope they keep it up.
Oh, well. Just think, someday the headline will be about Microsoft cutting jobs...
My blog: http://www.seebs.net/log/ --- My iPhone/iPad app: http://www.seebs.net/seebsfrac/
When you add everything up (taxes, medical insurance, misc. benefits), the annual cost per employee is probably closer to $100K.
First off, I'll say i use turbolinux at home for my mudserver. It's a nice distro, with no problems once i put a 3com ethernet card in. I haven't tried or worked with the clustering product.
Forget for a moment that this is a linux/open source company. What they are doing makes perfect sense and is sound business strategy. The stock market is in a very precarious position, having fallen quite a bit and still poised to test the bottoms. This is a company that still needs venture capital support and cannot afford to suffer major losses, even short term.
By taking a proactive approach to this, they leave themselves in a position to rebuild those departments if the situation reverses. Without the cuts, they leave themselves open to serious damage if the market turns seriously sour.
Another variable in this is the MS vs. DOJ case. Truthfully, no one knows what the results of that will be, or how soon they will be felt. They are trying to put themselves in as stable a position as they can, to take advantage of whatever course occurs.
This seems to be a nice melding of talented suits and geeks in the same company. A mix you don't see all that often. (a young microsoft comes to mind as another... then they got big and bought whatever they needed).
This will be an interesting case to see if an open source (mainly) company can thrive as a business model, especially during a bear market. That no one has seen or knows the answer to yet.
I'd like to think it can. And I think TurboLinux is showing the way how.
Of course I use Microsoft. Setting up a stable unix network is no challenge
Admitted, we don't have anything like MSDN yet - but that's changing... Stuff like developer.kde.org/ and developer.redhat.com isn't quite what it's supposed to be yet, but it's definitely getting there.
As for IDEs, maybe the proprietary ones suck - but did you check out KDevelop lately? While I personally still prefer the vi/make combination over any IDE, it should be easy enough for anyone to get started.
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