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Eazel faces the eraser

Funding woes threaten the maker of an easy Linux interface and spark threats against loose-lipped PSINet workers.

Many thanks to those who wrote in expressing concern about my health and sobriety after last week's absence. But the true reason for the missed column was a labor action. My 12-year-old son, Vermel, who doubles as the household accountant, had become suddenly stingy with the petty cash, citing market conditions.

"We have to tighten our belts," Vermel explained in what has become a tiresome refrain. "We can't just go throwing money around to whoever asks for it the way we did six months ago."

Versions of this lecture must be ringing in the ears of more than a few CEOs in these parts, especially at Eazel, the start-up founded last year by former AOL and Mac guys who were going to make Linux so easy that your great-great-grandparents could use it.

Unfortunately, they didn't figure out a way to get easy money. Part of the problem was that these gentlemen, who profited handsomely from their previous efforts in the consumer computing arena, balked at putting any more of their fortunes into Eazel. As a result, the company has spent the last several months trying to get its financing ship to come in. In March it laid off half its crew to arrive shipshape.

Since winter, the company has been assuring the Rumor Mill that funding was just around the corner, holding up signed term sheets as evidence.

Try cashing a term sheet at the bank, and you'll see what a pickle Eazel is in this week.

Rumor has it that Sun Microsystems was among those providing Eazel its last rays of hope, which last-minute clouds are now eclipsing.

"Sun pulled funding," the Rumor Mill was breathlessly Skinformed. Eazel will "shut doors in days. Last board meeting this week."

Eazel CEO Mike Boich responded: "I don't know that Sun was ever a committed investor. We never announced that we had funding from Sun."

Was Eazel in discussions with Sun? Boich wouldn't comment. Is the company shutting its doors? No comment. Will the final board meeting come this week?

"We have a board meeting coming up today or Monday, and we'll be making some decisions," Boich said grimly.

Sun also declined to comment specifically on the Eazel non-investment but certainly wouldn't rule it out.

"It's possible Sun may have decided not to be included in the round," said rumor control professional Diane Carlini. "We're constantly looking at potential investments--last year we invested in 40 companies. But investments at this point in time are a little trickier because the VCs are not putting out as much as they were six months ago."

Sun doesn't lead investments, Carlini pointed out, but only participates in them.

You can take it with you
Eazel's got plenty of company on the brink, as the latest rumors out of PSINet amply demonstrate. PSINet executives and managers are apparently having a hard time keeping employees wholly loyal, an understandable predicament for a company flirting so publicly with bankruptcy. After recent layoffs, computer managers sent around a memo pleading with employees to return their equipment and to please stop scavenging. Some people "are trying to get ahold of excess equipment and such for their own benefit," the manager warned.

But the real problem is information, which apparently still wants to be free despite the best efforts of executives that come from the school of need-to-know management. Shortly before he resigned, longtime CEO William Schrader sent an e-mail to employees warning that somebody was sending internal e-mails to competitors and reporters. Citing the Navy's inspiring "Loose lips sink ships" motto, he warned staffers to "Please, stop doing this, and stop now."

Eric Schmidt's adventures in broadband
The pothole-filled road toward a broadband nirvana has been well documented. But the plebeians among you may be pleased to discover that frustration with high-speed cable, DSL and wireless connections isn't restricted to the everyday consumer.

Outgoing Novell CEO Eric Schmidt is still attempting to wrestle to the ground a fixed wireless service from Sprint, having had two technicians study the situation at his Atherton, Calif., estate.

These technical consultants determined that a swaying tree was blocking his ability to get a sustained connection with the sometimes beleaguered Sprint service in Silicon Valley. The result? Schmidt is waiting for DSL from XO Communications to be installed. Stay tuned. I just got DSL this week, so take advantage of my expanded capacity and send me more rumors.

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