ChiliSoft founder plans to give away most of windfall

Cobalt Networks acquires ChiliSoft for about $70 million in stock--but founder Charles Crystle plans to put much of his proceeds to philanthropic use.

Cobalt Networks acquired ChiliSoft for about $70 million in stock today--but the ChiliSoft founder plans to put much of his proceeds to philanthropic use.

Charles Crystle, chairman and former chief executive of ChiliSoft, said today he plans to donate about $11 million of the $15 million he expects from the acquisition toward boosting high-tech education opportunities in Central America.

Crystle stepped down as chief executive in November; he felt he was better suited to run start-ups and was just plain burnt out from trying to run an increasingly large company. "I was just dying," he said. "I weighed over 250 pounds and felt like hell. I was in a bad mood all the time. That was for a year and a half."

Then he took a two-month trip to Central America. "I lost a lot of weight, had a lot of fun and relaxed for two months," he said. But now, "It's time to get back into things."

ChiliSoft makes software that allows Web servers to use Active Server Pages (ASP), a technique developed by Microsoft to assemble Web pages on demand--for example, when generating a list of search results. Microsoft's version, though, only runs on Windows servers; ChiliSoft brings ASP to Linux and several versions of Unix and offers a version for Windows that the company says better stands up to heavy computing loads.

Cobalt, which makes special-purpose servers using the Linux operating system, signed a deal to acquire ChiliSoft. Cobalt will offer the software on its Web servers, the company said. In addition, Cobalt will be able to license ChiliSoft software to other companies wishing to use it.

Merrill Lynch analyst Steve Milunovich estimated the acquisition will increase Cobalt revenues by $6 million this year and $12 million the next.

"Cobalt has enhanced its competitive position through the acquisition and remains the unit leader in servers sold to the service provider market," Milunovich wrote in a report today. However, he said Cobalt's attempt to become profitable might be delayed a quarter, as increasing competition forces it to spend more money on marketing.

Cobalt's buy-out of ChiliSoft fits an acquisition pattern that has emerged since November.

Linux is an operating system cooperatively developed by a collection of amateur and professional programmers. It's now backed by major computer sellers as well as several large software companies. Linux competes with Windows and with Unix, on which Linux is based.

The popularity of Linux has led to several strong initial public offerings in recent months. Using their high stock valuations, companies such as Red Hat and VA Linux Systems have been on a buying spree, acquiring others in an attempt to secure as much Linux territory as possible while the market is still young. CNET's Linux Center

Cobalt now has some noted business partners through its acquisition. ChiliSoft's ASP software is used at PSINet and Excite, Crystle said.

Crystle's Central American work will fund non-profit organizations to help build training programs to teach high-tech skills and set up high-tech businesses, he said. "We're interesting in catalyzing positive change. The dollar goes a lot farther in Nicaragua than in the United States," he said.

Crystle isn't totally checking out. He plans on setting up a business incubator in New York to try to set up businesses that can make money through the tremendous popularity of MP3-encoded digital music files.

But meanwhile, he preaches the benefits of benevolence.

"My advice to people who are making a ton of money is to pass on the yacht, rent a boat and put money into social ventures," Crystle said.

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