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TurboLinux gets staked more than $50 million

More than a dozen companies, including Dell, Compaq, BEA Systems and a host of Japanese titans, invest more than $50 million in the upstart operating system seller, as the Linux gold rush rolls on.

More than a dozen companies, including Dell, Compaq, BEA Systems and a host of Japanese titans, have invested more than $50 million in TurboLinux, as the Linux gold rush rolls on.

The investors include a wide range of hardware and software companies, sources familiar with the plan said. Others on the long list include Seagate, Santa Cruz Operation, Novell, Toshiba and NEC. The announcement is set to come Monday, sources familiar with the plan told CNET News.com.

TurboLinux sells Linux augmented with its own software, a proprietary product that makes it easier to group lots of Linux servers together to deliver Web pages. These "Web server farms" linked through TurboLinux's technology consist of dozens or sometimes hundreds of computers and are one popular use for Linux. TurboLinux is expanding from its stronghold of Japan into Chinese and North American markets.

TurboLinux spokesman Lonn Johnston declined to comment on the funding. However, chief executive Cliff Miller told News.com in a December interview that his company planned to announce unusual financing plans in January.

"There's all this money flying around with financing and IPOs. I have to say we're no exception there. We are looking at another round of financing," he said at the time.

There's no shortage of people who want to invest in companies focused on Linux, which competes with Microsoft Windows as well as with the Unix operating system. Caldera Systems this week announced $30 million in funding the same day it filed to hold an initial public offering.

Linuxcare received $32.5 million in investments, but turned away offers that totaled nearly ten times that amount, according to the company. Part of the frenzy was ignited with the successful IPO of Red Hat, a Linux seller which has seen its stock fly through the roof since their August IPO. Since then, other Linux-centric companies have held successful IPOs and seen their market valuation instantly rise into the billion-plus range.

A spokeswoman for BEA Systems, which has been working on a Linux version of its e-commerce software, confirmed the investment in TurboLinux.

Sendmail.com, a TurboLinux partner that distributes its email server software through the premium version of TurboLinux, hasn't invested in the company, but several members of the company's executive team have invested, chief executive Greg Olson said in an interview.

The reason for the investments are simple, said D.H. Brown Associates analyst Tony Iams. Established hardware and software companies see a new market opening up with the arrival of Linux, and they want to ensure themselves a foothold, he said.

One person familiar with the investment round said TurboLinux plans to use the money to increase its presence in Europe and North America, where other Linux sellers currently are strongest. In addition, Caldera Systems and Red Hat are expanding into TurboLinux' stronghold, Japan.

Though TurboLinux hasn't announced plans for an IPO, many believe the latest investment is evidence those plans are ripening. "Obviously, this is positioning them to go public," one source said.

The TurboLinux deal is the second Linux investment for Dell, having invested in Red Hat in April. Dell representatives declined to comment on the deal.

SCO, a Unix seller that signed a deal to support TurboLinux products, has announced plans to invest in several Linux companies. It's already invested in the Linux Mall and in Caldera Systems.

Intel announced an investment in TurboLinux in October. Like Intel, Compaq, Novell and Oracle also invested in Red Hat.

Representatives from Compaq, Fujitsu, NEC, Toshiba, Novell, Seagate and SCO weren't available for comment.

With its "clustering" software for Web servers, TurboLinux has a strong product offering, D.H. Brown Associates analyst Tony Iams said. "It's targeted at an area that's especially critical in the Linux space: the ability to build clusters of Web severs," he said. "That's one of the areas in the server market where Linux has the most traction."

TurboLinux also has been "very diligent at forming partnerships and getting investors to buy in," Iams said. "I attribute a lot of their strength to that kind of work."