Linux peddler Caldera considers IPO

In the wake of Red Hat's plan to go public, Caldera Systems prepares itself for an IPO or a buyout, another sign of the Linux momentum.

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Caldera Systems, a seller of the Linux operating system, is preparing itself to go public or be acquired, the company said today.

Possibilities for initial public stock offerings of Linux companies moved from rumor to reality last week when Red Hat, the leading seller of Linux and a prime Caldera Systems competitor, announced plans for its own IPO.

"We are making sure we have all the business practices and the business model in place so we can have the option" of going public or being acquired, said Benoy Tanang, vice president of marketing for Caldera Systems, in an interview today.

Linux computer maker VA Linux Systems chief executive Larry Augustin has said his company is considering an IPO as well. In addition, Linuxcare has been mentioned as another possibility, but Linuxcare CEO Art Tyde said "we haven't taken any steps" toward an IPO.

Tanang declined to say who might be interested in acquiring the company. "There are a lot of big giants out there in the hardware and software business looking to see whom to invest in," he said.

Going public raises money and gains publicity for a company but also brings increased pressure from stockholders for a return on their investment--for example, in rising stock prices. Red Hat said in its filing with the Securities and Exchange Commission that it intends to use the money to improve its products, increase its technical support services, and develop its Web page.

Linux, a Unix-like operating system that runs on almost any processor, began as a non-commercial programming project but is entering the for-profit landscape. In the last year, the operating system has been embraced by many big-name hardware and software companies as an alternative to Windows.

Tanang declined to describe Caldera Systems' profits or losses but did say the company exceeded its goals in recent quarters. In addition, he said revenue for the first fiscal quarter of 1999 increased 224 percent over the same quarter the year before.

The introduction of a new heart and soul for Linux, kernel 2.2, was the basis for a new version of Caldera Systems' OpenLinux product aimed at Linux newcomers. That version was responsible for a sales surge part way through the second fiscal quarter, Tanang said.

Although Caldera is still calculating the numbers, it appears that year-over-year revenue growth for the second quarter was more than double the 224 percent rate for the first quarter, Tanang said. "It reinforces that the target we chose was right: newbies," he said.

The Red Hat IPO "hasn't changed the timeline" for Caldera System's preparations for going public or being bought out, Tanang said, though he added that his company is "happy that Linux itself has received such an enthusiastic response, not just from commercial hardware and [software companies], but from Wall Street itself."

Linuxcare's Tyde was more cautious. "I think there's going to be a lot of hype around these IPOs," he said. "I'd hate to see an investor dump a boatload of money into these companies and lose their shirt."

Linuxcare doesn't sell Linux, as Red Hat does, but it does compete in the business of providing training, certification, and technical support for the operating system.

Caldera Systems is one of the three independent companies that once made up Caldera.