Linux maker Mandrake: We need cash

MandrakeSoft issues a plea for its customers to buy more of its products, club memberships or stock to help the Linux seller move into the black.

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2 min read
Linux seller MandrakeSoft issued a plea for cash Friday, encouraging people to buy products, MandrakeClub memberships or company stock.

The company, based in Paris but drawing much of its revenue from North America, needs $4 million to pay debts and cover expenses in order to attain profitability. It's the second time this year the company has sought help from its customers.

"A very difficult time has arrived for us: We have a very big short-term cash issue," co-founder Gael Duval said in a statement.

MandrakeSoft isn't the only company to struggle with the business prospects of Linux, an open-source clone of the Unix operating system and one of several technologies once popular with investors. For example, the SCO Group changed its name to emphasize its Unix products, and Lineo, a maker of Linux for gadgets, this week was acquired under its new name Embedix by a Motorola unit.

SuSE, based in Germany and second to Red Hat in market share, declined in November to state whether it expects to be profitable for 2002. Rival TurboLinux has sold off a distributed computing software business and retrenched to its Japanese stronghold.

Linux companies have seen some business success, however. For example, Red Hat, the top seller of Linux, has edged into profitability.

MandrakeSoft held an initial public offering on the unregulated Marche Libre exchange in Paris in 2001.

At the time, MandrakeSoft was trying to extricate itself from a change in direction that had seen it move from selling Linux to selling online educational services. The new strategy had sent revenue plunging, and the company was spending about $1.5 million per month, according to MandrakeSoft.

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The company embarked on an expense-cutting campaign last year, but said Friday it won't be able to attain profitability by the end of the 2002, as it hoped. It now hopes to move into the black in the spring of 2003 with the release of its next version of Linux.

"If you are concerned about MandrakeSoft's future, this is the time to mobilize," the company exhorted customers in a message posted on the company's Web site Friday.

Specifically, the company asked customers to join the MandrakeClub or upgrade their membership level. The members of the club get access to more software, quicker downloads and special promotions.

MandrakeSoft estimated it could meet the current cash hurdle if 20,000 of the company's estimated 200,000 customers signed up for a silver-level membership, which costs $120 per year.

The company also suggested customers buy products or company stock. Current shareholders may purchase stock at about $2.10 per share through a warrant operation, the company said.