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Linux server maker's coffers growing

Egenera, a maker of high-end Linux servers, receives $44 million from earlier investors in a third round of funding. The company's CEO says this should be the last private round.

Egenera, a maker of high-end specialized Linux servers, has received $44 million from earlier investors in a third round of funding.

Taking a cue from the go-go Internet bubble years, Egenera will use the funding for faster global expansion, said Debbie Miller, a computer industry veteran who became the company's new chief executive in April.

Egenera focuses on Wall Street customers such as Credit Suisse First Boston and other financial services firms, a global business the company had to support.

"We had to expand worldwide more quickly than we originally thought," Miller said. "We raised the money when we didn't need it, which is always the best time." The company has raised $94 million total.

Server companies have been taking a beating with the recession and spending cuts, and financial services companies have imposed particularly fierce expense controls. But the Marlboro, Mass., company said its valuation--the price it commands per share--increased in the latest round of funding.

Crosslink Capital led the round, joining other new investors Lehman Brothers Venture Capital, UBS Capital and Mizuho Bank. Returning investors included Spectrum Equity Investors, Austin Ventures, CSFB Private Equity, Kodiak Venture Partners, Goldman Sachs and YankeeTek Ventures.

Miller declined to say how much the valuation increased but said it was more than 20 percent.

Sun Microsystems has been strong among financial services companies, but Egenera, Intel and IBM are using Linux as a way to grab some of that business. Linux is a clone of Unix products such as Sun's Solaris operating system, so it's a relatively easy step for customers to move their software to Linux.

Miller declined to say whether her 125-person company is profitable, but she did say, "We fully expect this will be the last round of private funding we'll ever need."

Miller took over from Vern Brownell, founder and now chief technology officer. Brownell and Kenneth Zolot launched Egenera after Brownell left his post as CTO of Goldman Sachs. Zolot had been a consultant to Goldman Sachs.

The company has about 20 blue-chip customers for its BladeFrame systems, refrigerator-size cabinets with as many as 24 four-processor "blades." With special software, jobs can be shuffled among different blades easily to adjust to changing workloads or to work around a failed blade. As many as five cabinets can be harnessed into a single pool of such resources.

The BladeFrames start at $250,000 and head north of $1 million. The company is planning updates that will accommodate eight-processor servers, Itanium processors and, later this year, Microsoft's Windows .Net Server operating system, Brownell said.

Miller was CEO of Internet software maker Covia before joining Egenera but is better known for her work helping to launch IBM's AS/400 servers, now called the iSeries line.

The day after Miller was appointed, Egenera named Mike Thompson to the chief operating officer post. Thompson was formerly senior vice president of worldwide sales and marketing at Stratus Technologies, which makes fault-resistant computers. Thompson also worked at Tandem Computers, whose high-end machines, now sold by Hewlett-Packard, run the stock exchanges of New York, London, Hong Kong and Tokyo.

Meanwhile, co-founder Zolot has left the company, an Egenera representative said, to pursue new entrepreneurial opportunities.