Linuxcare says funding round will be last

The struggling Linux services provider has begun its third round of funding with hopes of raising between $25 million and $35 million.

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Linuxcare, a struggling provider of services for the Linux operating system, has begun its third round of funding with hopes of raising between $25 million and $35 million.

The funding should be sufficient for Linuxcare to execute its plan to achieve profitability, with or without an initial public offering, said Dave LaDuke, co-founder and vice president of marketing.

"If we continue to execute to plan, we won't need to do funding any more. The next round could very well be the last round we have to do," LaDuke said. The company likely will finish the investment round in July, said spokeswoman Michelle Nemschoff.

Linuxcare has been trying to regain its balance after losing its chief executive and chief information officer, announcing layoffs and postponing its initial public offering. On the financial side, Linuxcare expects to meet its revenue projections for the current quarter, LaDuke said.

The new round of investment, while enough to provide the company with operating funding, will mean that the current management will own a smaller fraction of the company's shares as others buy equity in the company.

"We will dilute," LaDuke said.

Board members are scrutinizing a 10-person list of candidates for the new CEO post, he said, and interviews will begin when the list is down to four.

The cooling enthusiasm on Wall Street also has taken its toll on TurboLinux, a seller of Linux software that laid off part of its staff last month.

Linuxcare is moving ahead with its traditional business, including two contracts with IBM worth hundreds of thousands of dollars. One Linuxcare project for IBM is to keep track of differences in the major versions of Linux; the other is to customize Caldera Systems' version of Linux for two models of IBM's laptop.

IBM requested the version-tracking database and paid Linuxcare "six figures" to develop it, LaDuke said. The company will offer the database service to others as well, he added.

In addition, Linuxcare tuned a version of Caldera Systems' version of Linux to IBM laptops so that the system can take full advantage of the machine's sound system, power management, video system and modem. IBM ran into trouble when it won certification for use with Red Hat's Linux while still facing problems with the modem, power management and PC Card slots.

Linuxcare charges $100,000 for such customization services, LaDuke said.

Meanwhile, it appears Linuxcare is also helping IBM bring Linux to an upcoming high-performance IBM server chip. IBM programmers this week acknowledged the assistance of Linuxcare's Paul MacKerras in bringing Yellow Dog Linux to IBM's upcoming Power4 chip.

The Power4 chip will have two CPUs packaged together, IBM has said. It has 170 million transistors, will run at 1 GHz or faster and is expected to show up in IBM servers in the second half of 2001.