LinuxOne's IPO filing irks the faithful

The company announced its intent to go public in a filing with the Securities and Exchange Commission on September 22, saying it hoped to raise $23 million. The filing came less than two months after the phenomenal success of the initial public offering of Red Hat, the leading seller of the open-source Linux operating system, and before several other planned Linux-related IPOs.

What observers find interesting, however, is that some passages of the LinuxOne filing read like a mirror image of Red Hat's filing.

Indeed, many of the descriptions LinuxOne provides of its strategy and market opportunity are identical to the words found in the earlier Red Hat filings. For example, both companies "seek to establish a position as a leading provider of open source software and services" by "expanding our professional services capabilities to capture large corporate business on an enterprise basis" and "increasing market acceptance of open source software, particularly through technology alliances and sharing our development efforts and resources with third-party developers."

LinuxOne representatives did not return phone calls. Red Hat spokeswoman Melissa London said that when her company saw the filing, "there was recognition that it looked awfully familiar" to the filing Red Hat wrote.

"We're not going to take any action," London said of the filing. "We suspect we'll see a lot of Linux-associated IPOs coming up, and we trust that the market itself will be able to discern what's going to be worthwhile and what's not."

The SEC said it was concerned with other matters. "The concern of the SEC when documents are filed with us is that the disclosure be accurate and complete," said SEC spokesman John Heine. "There's no copyright on publicly filed documents, as far as I know."

There are differences between the companies' plans. One of Red Hat's aims lies in creating a Web site that will be "the definitive online destination for the open-source community." By contrast, LinuxOne has more modest hopes of creating just "one of the definitive online destinations."

In addition, LinuxOne is assembling a collection of Linux games and intends to offer access to a Linux game Web site for $9.95, the company said.

The filing has also irked some Linux fans who frequent the Slashdot discussion site, who have derided the fact that LinuxOne's product is only in testing and pointed out that some sections of LinuxOne's SEC filing mirror Red Hat's.

"Talk about IPO bandwagon," said Slashdot commentator Joseph Elwell. "Can I IPO? What are the logistics involved here? I can have a Linux distribution."

The similarities are curious in light of the share-and-share-alike ethos of the open-source world, in which individuals and companies freely share the underlying programming instructions, or "source code," of software such as Linux.

Since Red Hat's IPO, the company's market capitalization has risen nearly $5.9 billion and has catapulted two of its top employees to billionaire status, depending on daily market fluctuations.

Analysts also were skeptical about LinuxOne's future. A new Linux distribution, in order to rise above the 30 or so already available, will have to add something the others don't have, said International Data Corporation analyst Dan Kusnetzky.

"Another Linux distribution without some value-add seems not destined to be succesful," Kusnetzky said. "There are large numbers of obstacles in the way of coommercial success of Linux, and one more distribution will not solve those problems."

LinuxOne has some obstacles to overcome
Although the papers may be similar, LinuxOne differs significantly from Red Hat.

For one thing, the company has been around only since March, and its product is still in beta testing. It has no revenue so far, but it incurred expenses of $17,872 between is its inception and July 31.

Jonny Lo, an employee reached by phone Friday, said the company has eight engineers and five managers.

LinuxOne plans a "self-underwritten" IPO, the company said. It plans to sell 3 million shares. LinuxOne chief executive Wun Chiou, 57, owns 2 million right now, and the Global Village Foundation, "a charitable organization of which Dr. Chiou serves as a director," owns 2.1 million, the filing said.

Choiu gave 2 million of the shares to the foundation as a gift, and the foundation bought the other 100,000 shares at $1 apiece. He also gave family members a total of 1 million shares.

Before starting LinuxOne, Chiou founded Pacific Microelectronics, which became the publicly traded NetUSA, a company with a current stock value of 69 cents.

The company has grand ambitions, though. "The LinuxOne Operating System is our principal product. Since it was only introduced in September, 1999, we do not have a history of operations, but we believe it will become one of the more popular Linux-based operating systems in the world," the company said.