TurboLinux plans IPO as investor wariness wanes

The company files to go public and hopes to raise about $60 million, an indication that the Linux IPO freeze might be thawing a bit.

Stephen Shankland principal writer
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Stephen Shankland
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TurboLinux has filed to go public and hopes to raise about $60 million, an indication that the Linux IPO freeze might be thawing a bit.

The move puts TurboLinux in league with competitors Red Hat and Caldera Systems, two other companies that focus on selling Linux software and services for use on servers. And like those competitors, TurboLinux isn't profitable, posting a net loss of $30 million on revenue of $2.9 million for the six months ended June 30.

Linux IPOs, once all the rage on Wall Street, now are being treated with the same scrutiny other technology businesses are facing. There has been a Linux IPO hiatus since Caldera Systems went public in March, but lately a number of companies have started to prepare for the market.

Lineo and LynuxWorks have both filed to go public. Unlike TurboLinux, Lineo and LynuxWorks sell Linux products and services for non-PC "embedded" computing devices.

TurboLinux no doubt hopes its IPO will resemble Red Hat's instead of Caldera Systems'. Red Hat's IPO price was a split-adjusted $7 a share and it currently trades at $12.56, whereas Caldera Systems currently trades at $3.44, well below its IPO price of $14.

TurboLinux got its start in Japan but has been expanding to North America and China. Still, the Japanese market remains central to its business, according to a company filing with the Securities and Exchange Commission.

Japanese sales accounted for 95 percent of the company's 1999 revenue and 75 percent of the revenue from the first six months of 2000, the company said in its statement. In disclosing risks to shareholders, the statement added, "Although our new business plan focuses on sales in United States and international markets, we have only limited experience in selling our products outside of Japan."

U.S. revenue accounted for 14 percent of the company's total for the first six months of 2000, TuboLinux said.

TurboLinux is in CNET's Linux Centerthe midst of a transformation from just selling the Linux operating system to adding two other major product lines. The company first wants to bundle Linux with higher-level programs such as Oracle's database software. It also wants to promote its EnFuzion software for running computations across a host of networked computers.

TurboLinux has "not yet generated meaningful revenue" in either area, the company said in the SEC filing.

Deutsche Banc Alex Brown, Dain Rauscher Wessels, SG Cowen and WR Hambrecht are underwriting the IPO. TurboLinux plans to trade on the Nasdaq under the symbol "TLUX."

The founders of TurboLinux, Cliff and Iris Miller, recently left the company to form a new start-up, Mountain View Data. As part of the separation agreements with the pair, TurboLinux bought 2.1 million shares at about $7.5 million and paid Cliff Miller $550,000 and Iris Miller $300,000.

The filing reveals several hitherto private details about the company:

 TurboLinux acquired an Australian company, Active Tools, for $8.4 million.

 In a round of layoffs in May, a total of 52 people lost jobs, about 16 percent of the company.

 Cliff and Iris Miller remain the largest shareholders, with 31 percent of the company each. Chief executive T. Paul Thomas owns 4 percent.

 August Capital and its partner Andy Rappaport each own 16 percent of the company's shares.

 Dell Ventures owns 9 percent of the company, while Intel owns 6 percent. Asia Pacific Growth Fund owns 7 percent.

 Even though the company had to raise more money in the last two months, the company's valuation didn't change from an earlier round. During both rounds, a total of 24.1 million shares were sold at $3.65 apiece.