LinuxOne aims to raise $24.75 million in IPO

LinuxOne, despite having no revenue, is hoping to cash in on Wall Street demand for Linux firms.

Stephen Shankland principal writer
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Stephen Shankland
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LinuxOne hopes to raise $24.75 million in an initial public offering despite having no revenue.

LinuxOne, founded in March, plans to offer 3 million shares at an expected price of $8.25 each. The firm no doubt is betting that it too will benefit from the warm reception Wall Street has given a series of Linux-related IPOs in recent months.

Linux companies Red Hat, VA Linux Systems, Cobalt Networks and Andover.Net all posted losses in their recent quarters. Yet all have soared on Wall Street. Combined, their market capitalization at noon today came to about $27.5 billion.

Linux is an open-source operating system based on Unix and available for free or very low cost from several companies. It's currently popular for use in servers, and many believe Linux competes both with Microsoft Windows and with various versions of Unix.

LinuxOne plans to trade on the Nasdaq stock market under the symbol "LINX."

Other companies are moving toward the Linux light as well. Internet.com, which operates several Net news sites, has seen its stock nearly quadruple from 16 in October to 63 today through the acquisition of Linux-related Web sites. The company's stock popped up more than 18 points yesterday on news that the company acquired LinuxStart, a jumping-off point for Linux newcomers. Internet.com's acquisition of LinuxStart was its fourth such acquisition.

Like Red Hat and the other three publicly traded Linux specialists, LinuxOne also is in the red. But, unlike the gang of four, it has yet to produce any revenue, according to documents filed with the Securities and Exchange Commission. LinuxOne has reported a net loss of about $158,000 since its inception.

As a gauge of how relatively new the company is, LinuxOne's first product entered beta testing the same month the company filed its intent to go public.

LinuxOne has elaborated on its business plans since it first filed for an IPO in September. In addition to selling its principal product, a version of Linux, the company will sell Linux software to read Macintosh disks, software to help move from Windows to Linux, and hard disks with Linux pre-installed. The company also plans Chinese, Japanese, French, Spanish, German and English versions.

The Linux firm also has inked some deals since it filed its IPO plans. It has signed a non-exclusive agreement under which Srinet will sell LinuxOne's Linux version in China and Japan. German publisher Data Becker will insert LinuxOne CD-ROMs into five magazines it distributes in Europe. And Sichuan International Economy's Science and Technology Promotion Association will "provide for distribution of all LinuxOne products in southwest China," the company said. The company hasn't received any revenues from the deals so far.

The LinuxOne CD will cost $29.95 for a basic version, or $79.95 including 30 days of technical support.

As previously reported, large sections of the LinuxOne SEC filing are identical word-for-word with Red Hat's filings.

Michael Morrison, the company's attorney, acknowledged the similarities to Red Hat's own SEC filings in an earlier interview.

"Of course, [Red Hat and LinuxOne] are both in the same business, so a lot of the information that applies to Red Hat would apply to Caldera, SuSE, Mandrake and the rest," he said.

LinuxOne hasn't been greeted warmly by many Linux fans and the open-source, software-sharing community that supports the operating system. Bruce Perens, a long-time advocate of the open-source philosophy, has declared: "I'd like to run LinuxOne out of town on a rail." He fears LinuxOne's practices could "taint" investor approval of Linux-related ventures such as one Perens himself is working on.

LinuxOne formerly had planned a "self-underwritten" IPO. Now, however, it has enlisted the services of Capital West Securities in Oklahoma City, Okla. Capital West has underwritten 10 public offerings, and prospective investors "should consider Capital West's limited underwriting experience in evaluating this offering," LinuxOne stated in its filing.

Before starting the firm, LinuxOne chief executive Wun Chiou founded Pacific Microelectronics, which became the publicly traded NetUSA, whose stock price is currently 50 cents.

Like many Net companies, Internet.com also has has been posting losses.

Internet.com also has acquired Linux Today, LinuxPlanet and Linuxcentral. The strategy resembles that of Andover.Net, which based its IPO largely on the popularity among Linux fans of two sites, Slashdot and Freshmeat, that Andover.Net acquired in recent months.