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MontaVista signs Linux deals, cuts staff

The software company signs up Toshiba and Ericsson as major new business partners but lays off 20 percent of its staff.

MontaVista Software, a company selling Linux for non-PC computing products, signed up Toshiba and Ericsson as major new business partners but laid off 20 percent of its staff.

MontaVista--along with Coollogic, Red Hat, LynuxWorks and Lineo--is paring Linux down to get the Unix-like operating system to work on special-purpose devices such as elevators, factory robots, modems, VCRs or airplane radar systems. These "embedded" devices require operating systems and higher-level software tuned specifically for the task at hand.

But times have been tough for embedded Linux companies, as the economic malaise has curtailed customer and manufacturer interest in embedded product categories such as handheld computers and telecommunications equipment. Lineo withdrew its initial public offering plan in January, and LynuxWorks followed suit in June. Red Hat has said customers in the embedded market are delaying orders.

MontaVista was worried that securing financing would be difficult and laid off about 20 percent of its staff in May, lowering its employee count to its current level of about 140, said Sheila Baker, vice president, marketing. Cuts came chiefly from internal computer system operations and from customer support, she said, adding that the company still is hiring a handful of people in sales and marketing.

MontaVista, which expects to become profitable in 2002 and which raised $35 million in previous investment rounds, now has a somewhat more optimistic view of the financing market, Baker said.

"In April, there was a lot more concern than we have today in terms of the capital market. It's turning out to be not nearly as hard as people led us to believe," she said, adding that investors now are approaching the company about funding deals instead of the other way around.

The current funding round always has been in the company's business plan and isn't a response to a delayed IPO, Baker said. But the company is seeing the effects of the downturn. "I would definitely say that it's taking people longer to make decisions," she said.

Toshiba and Ericsson are helping keep the company's revenue growing each quarter, though.

Toshiba will use MontaVista's software in printers, set-top boxes and digital televisions. In addition, MontaVista's Hard Hat Linux will be a standard operating system for Toshiba's TX39 and TX49 chips, the companies said.

Ericsson's Norwegian division also bought several subscriptions allowing the use of MontaVista's programming tools. Ericsson earlier selected Red Hat to develop software for a screen phone.

Meanwhile, competitor Lineo is making progress as well. Earlier, Sharp signed a contract to use Lineo's Embedix operating system in the company's upcoming Zaurus handheld. Now the company has signed a partnership with Applied Data Systems, a company that creates hardware for embedded Linux devices such as handheld computers.

Lineo's Embedix software will be used on an Applied Data design called the Graphics Client Plus System, a 4-by-6-inch electronics board that has a StrongARM chip, serial ports, an Ethernet connection, an infrared port, a USB port and a touch screen.

Embedded Linux companies are taking on the established leader in the embedded software market, Wind River Systems, which has countered with its own open-source plan involving the FreeBSD and BSD/OS versions of Unix. Microsoft also is trying to make its presence known in the market.