Linux firm hopes cash infusion will steer it to IPO

Atipa, based in Kansas City, Mo., has been selling Linux computers but believes that better profit margins can be found selling services and helping customers migrate to Linux, said chief operating officer Mike Jacobs. The company is opening new support offices in several major cities to get close to potential customers, he said.

The change in the company's business mirrors a shift under way at Atipa's main competitor, VA Linux Systems, which went public in December. Jacobs acknowledges VA Linux's lead but argues that "with the market expanding, we think there's room for a number of players. Our intention is to be one of the premier ones."

Atipa likely will be one of the Linux companies headed for an initial public offering, a move that generates cash and publicity for the company while making its actions answerable to shareholders. Giga Information Group analyst Stacey Quandt expects the IPO "before the year 2000 is out."

Linux, an operating system that works like Unix and competes with Microsoft Windows, has been the ticket for several hot IPOs recently, including Red Hat, Andover.Net and Cobalt Networks, with more in the pipeline.

Linux companies that already have filed to go public include Caldera Systems and Linuxcare. In addition, representatives of Lineo and CyberNet Systems have told CNET News.com that they have IPO plans in the works. German Linux seller SuSE also is a possibility, but the company said today there are no official plans for an IPO.

Atipa's Jacobs declined to comment on his company's IPO plans. But in the meantime, Atipa has $30 million from Soros Private Equity Partners, TA Associates and W.R. Hambrecht that will be put to use in hiring new staff for the growing services operation and in expanding its marketing efforts.

"We're on a significant growth curve," Jacobs said. The company currently has 48 employees but plans to have 125 in six months, he said. "We're recruiting in several different cities. In the very near future, we'll have coverage for most major U.S. cities," including New York, Seattle, Phoenix and Austin, Texas.

But perhaps the most important new support site will be in Silicon Valley, an office that will be run by Marc Torres, formerly head of SuSE's North American operations. In the next three to six months, Atipa hopes to have 20 people in the Silicon Valley office.

Torres is an asset because his "management experience and Linux passion will enable the company to maintain and foster relations with the open-source and Linux communities," Quandt said.

In addition to the service sites, Atipa has opened sales offices in Austin, Kansas City, New York, San Francisco and Denver, Jacobs said.

Currently, about 50 percent of Atipa's revenues are from hardware sales, with 30 percent from software sales and 20 percent from services. "As things move along, we certainly see the professional services side moving up to 50 percent and the hardware decreasing," Jacobs said. "As time goes on, there's going to be significant margin squeeze in the hardware market."

Shifting to services isn't the only change in the works at Atipa. The company also plans to make special-purpose servers dedicated to storing information. Atipa's abilities in storage have been improved with the company's acquisition of Enhanced Software Technologies, a company that makes backup software for Linux and Unix.

But Atipa faces serious competition. VA Linux is only the closest competitor of several. Linuxcare, Red Hat and IBM all have serious ambitions to sell services such as helping to plan and install Linux systems. And the Santa Cruz Operation, a seller of Unix, has major professional services relationships with three of the top four sellers of Linux.