TurboLinux confirms $30 million funding round

The company announces a further $30 million in funding from IBM, Intel and others amid a drawn-out plan to go public.

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Stephen Shankland
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TurboLinux announced Wednesday a further $30 million in funding from IBM, Intel and others amid a drawn-out plan to go public.

As previously reported, TurboLinux also secured funding from new investors Fujitsu, Hitachi, SGI and Softbank's e-commerce unit, as well as a number of earlier investors. In addition, the company said Wednesday that financial companies Deutsche Banc Securities and H&Q Asia Pacific have joined the investment round.

The company, one of the major sellers of Linux, secured $57 million in January from Dell Computer, Compaq Computer and a host of Japanese computer makers.

However, where corporate funding for Linux companies in the past often meant successful partnerships, today it can mean something not so pleasant: the need to find some money to keep paying the bills.

"They're having a cash-burn issue, and they need money to remain as a going concern," said Giga Information Group analyst Stacey Quandt. "If they don't have an IPO, how else are they going to do it? A funding round is the most expedient way."

TurboLinux announced layoffs in June as another way to keep expenditures down.

One source familiar with TurboLinux's plans said the company's IPO schedule is moving along, though, and the company intends to file its initial public offering plans with federal regulators soon. An investment bank has been selected to lead the IPO, the source said.

With the high-tech sector bruised by Wall Street caution, it takes a lot longer to make it to an IPO. By contrast, in the heady days of 1999, Linux seller Red Hat saw its shares surge nearly fourfold in its IPO, and computer maker VA Linux Systems set a record first-day gain during its December debut as a publicly traded company.

The new funding gives TurboLinux more room to maneuver in today's choppy IPO waters, providing enough money to fund TurboLinux for about a year, a source said.

However, each time a company gets more financing, it comes at the expense of shares in, and therefore control of, the company. For example, Linuxcare lost more of its own stock when it obtained $30 million in funding to keep the company alive after turmoil that included layoffs, the CEO's departure and a withdrawn IPO.