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Second-tier Linux sellers agree to merge

Mandrakesoft plans to buy Conectiva for $2.3 million. Will the combined company be ready to take on the heavyweights?

Mandrakesoft has agreed to acquire Conectiva, a move to combine the weight of two Linux sellers that individually have failed to achieve the dominance of Red Hat or Novell's SuSE.

Mandrakesoft, based in Paris, will pay $2.3 million (1.79 million euros) in stock for Brazil-based Conectiva, the companies said Thursday. The consolidation will help give the combined company more heft, though Mandrakesoft co-founder Gael Duval has tempered his initial expectations.

"This won't elevate us to the status of Red Hat or Novell/SuSE yet, of course, but this is a significant growth for us," Duval said in an e-mail. Further growth plans include an expansion to woo small and medium-size businesses in the United States, he said.

More acquisitions are possible. "We need still more organic growth and external growth--more acquisitions," Duval said.

In two months, the merged companies plan to announce what name they'll use, Duval added.

Mandrakesoft and Conectiva are profitable, the companies said. Conectiva, with 60 employees, had revenue of $2.2 million in its most recent fiscal year and became profitable halfway through, the companies said. Mandrakesoft had revenue of $6.7 million and net income of $1.8 million for its most recent fiscal year.

They also are two members of the Linux Core Consortium, which is seeking to homogenize Linux variations to make it easier for software and hardware companies to certify that their products work with Linux.

Mandrakesoft has struggled financially but in 2004 emerged from bankruptcy protection. In September, it approved a stock sale that it said could be used for acquisitions.

Although Mandrakesoft is based in France, much of the company's revenue comes from North America.

Mandrakesoft customers include France Telecom, Carrefour, Total, Verizon Communications and several French governmental ministries. Conectiva customers include HSBC Bank, Casas Bahia, Siemens, Praxair subsidiary White Martins and the Brazilian armed forces.