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Linux companies attracting deals

Despite a grim market, the operating system continues to be a deal-making catalyst across the high-tech landscape.

A grim market notwithstanding, Linux continues to be a deal-making catalyst across the high-tech landscape.

After generally spectacular initial public offerings, Linux stocks have slipped downhill. Stock in three Linux companies traded last week below IPO prices, dragged down by the stock market descent.

But wheeling and dealing hasn't tapered off. In addition to several IPOs in the works, Linux companies have been attracting investments from established computing companies.

"There's a lot of interest in open source, despite the market's recent downturn," said Keith Bachman of WR Hambrecht. Linux is the most prominent example of the open-source model, in which anyone may participate in the creation and distribution of software.

Open-source companies, and in particular, the use of Linux in embedded devices, are very active areas for public and private investments, Bachman said. "In the hot sectors, there is more money than good deals," he said.

TurboLinux, which sells Linux along with server software, today announced investments from Oracle and Pacific Century CyberWorks. TurboLinux will certify and optimize its version of Linux for Oracle's database software and will help to bring the combination of Oracle to the Asian market where TurboLinux is strongest. Oracle already has a similar arrangement with Red Hat, TurboLinux's biggest competitor.

The other TurboLinux investor, Pacific Century CyberWorks, which invests in technology companies, is a subsidiary of Pacific Century Group and has partnered with Intel in extending computing throughout Asia.

The size of the investments in TurboLinux weren't disclosed. In January, TurboLinux received a whopping $57 million in equity investments from numerous companies, including Dell Computer, Compaq Computer and several Asian companies.

Lineo, a sister company to Caldera Systems, has bolstered its own expansion efforts. It announced today the acquisition of Fireplug and Inup, the fifth and sixth companies to be snapped up in Lineo's buying spree. The companies will help Lineo's effort to propagate Linux in "embedded" devices--single-purpose equipment that typically has limited computing abilities.

Inup, based in France, builds a type of computer that distributes its workload across several processor boards that can be added or removed without shutting the system down. The technology, called CompactPCI, is popular among telecommunications companies.

FirePlug is the creator of ThinLinux, a stripped-down version of Linux for Intel-based computers.CNET's Linux

The use of Linux in embedded devices is increasingly popular both among start-ups and some companies that already have a strong position in the embedded device market. However, it's not yet clear exactly how Linux will be controlled in this area.

Red Hat, a leader in the use of Linux for servers, is angling for a leadership position in equipment through the embedded device contacts the company inherited with its acquisition of Cygnus Solutions. But others, such as the Embedded Linux Consortium, have a broad membership, and Linux is collaboratively developed.

Motorola has invested in Lineo and Lynx. Lynx already sells its LynxOS for embedded devices and is adding a Linux version called Blue Cat to its stable.

Lineo has plans to go public, and Lynx is a likely candidate. Lynx received more than $20 million in investments from Motorola TurboLinux.