ArsDigita sold software that helped manage routine Web site maintenance duties--keeping track of users and managing content, for example--and had a number of high-profile customers such as Deutsche Bank, Finnish cell phone maker Nokia, Boston-based public broadcasting station WGBH and German electronics giant Siemens.
ArsDigitaa trend that other open-source companies later adopted, embracing software in an effort to secure revenue.
The company was profitable at its outset in 1998, co-founder Eve Andersson said on a Web site chronicling ArsDigita's demise. But it faltered after an attempt to follow the start-up route of venture capital funding and expansion.
At its peak, ArsDigita had grown to 240 employees, according to Andersson, but wound down operations Friday when Red Hat acquired 40 employees, including the company's lead developers and consultants.
Andersson was laid off in October.
Red Hat declined to offer details on the price of the deal, but characterized it as a "small asset purchase transaction."
ArsDigita representatives did not respond to requests for comment.
ArsDigita received $35 million in venture funding from General Atlantic Partners and Greylock in March 2000. According to Andersson, the company had revenue of $25 million in 2000.