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Caldera files to raise $57.5 million in IPO

The same day its sister company settles its antitrust case with Microsoft, Linux specialist Caldera Systems files papers for an initial public offering.

The same day sister company Caldera settled its antitrust case with Microsoft, Linux specialist Caldera Systems filed papers for an initial public offering.

Orem, Utah-based Caldera Systems is planning on raising approximately $57.5 million in its IPO, based on its registration filing fee on file with the Securities and Exchange Commission. To date, Caldera Systems has not stated the number of shares or the initial asking price.

The company no doubt hopes to capitalize on Linux fever among investors. Linux companies such as Red Hat and VA Linux saw their shares climb to astounding heights in 1999 IPOs. Like most Linux companies, Caldera Systems will seek to make money through selling software, but also through providing consulting services and support. The company is trying to position itself as a leader in Linux for e-commerce systems.

And like other successful Linux companies, Caldera Systems has relatively small revenues and continues to report losses. Revenues came to $3.1 million in the fiscal year ending last October while the overall net loss came to $9.4 million. Revenue came to $1.1 million in both 1997 and 1998 while losses came to $8.1 million and $8 million, respectively. The company had 108 employees at the end of last year.

Linux is an "open source" operating system gaining popularity among corporate users. Because the source code is exposed, customers can tweak the OS and even obtain copies for free.

Caldera Systems is part of the Canopy group, which also owns Caldera. Today, that company settled its long-standing lawsuit with Microsoft.

Robertson Stephens, Bear Stearns & Company, Wit Capital Group and First Security Von Kasper, among others, will serve as underwriters.

Caldera, which plans to trade on the Nasdaq market under the symbol "CALD," detailed its close ties to former Novell chief executive Ray Noorda in its filing. Noorda, through his ties with the Canopy Group, MTI Technology and the Noorda Family Trust, controls 84 percent of Caldera Systems stock.

His influence is among the various risks Caldera Systems faces, according to the filing. "Mr. Noorda will be able to determine the outcome of actions that require stockholder approval. For example, Mr. Noorda could elect all of our directors [or] delay or prevent a transaction in which stockholders might receive a premium over the prevailing market price for their shares, and control changes in management," the company said.

Chief executive Ransome Love, by comparison, owns 1.6 percent of the stock, and chief technology officer Drew Spencer owns less than 0.2 percent.

Caldera also detailed various business partnerships. It owns about 2 percent of Troll Tech, a Norwegian software developer that wrote the Lizard installation program used by Caldera Systems and core parts of the KDE graphical user interface for Linux, one of the two most-popular such interfaces. Troll Tech owns about 106,000 shares of Caldera Systems.

The company also owns about 17 percent of its sister company, Lineo, which like Caldera Systems was spun off from the parent company Caldera. Caldera Systems exchanged 1.25 million of its own shares for 3.2 million shares of Lineo stock. Lineo is working on software, including a pared-down version of Linux called Embedix, for "embedded" devices, products in which most workings of the hardware and software are hidden from the user to promote ease of operation.

Caldera Systems plans both server and client software products tailored for specific uses, the company said. Along with the products themselves, Caldera Systems will charge for optimization and certification services.

On the server side, Caldera Systems said it plans to release new software by June 30 called eBuilder for developing and deploying e-commerce software that runs on a central server. Caldera will bundle eBuilder with its own Linux server software, called eServer.

Much of the eBuilder software is licensed from Evergreen Internet's ECential product. Caldera Systems invested $2 million in Evergreen this month and issued the company 200,000 shares of Caldera Systems stock.

The eBuilder product allows the use of software modules written in Sun Microsystems' Java software, a popular method of "bridging" across multiple computer systems.

Caldera Systems is paying Sun $1.3 million for an 18-month license to the Java software. The license may be extended for two years after that for another $2.3 million, Caldera Systems said.

Caldera Systens also signed three-year licenses for use of PersonalJava and EmbeddedJava, two varieties that run on smaller gadgets. Caldera will pay undisclosed royalties for products sold with these versions of Java.

Caldera licensed Java for use on systems running Intel's Itanium chip, Motorola's PowerPC and Sun UltraSparc chips.

Most of Caldera Systems' sales went through indirect channels--other companies that were responsible for ultimately selling the product to customers. Distributors including Frank Kaseper and Associates, Ingram Micro, Navarre, Tech Data and MediaGold were responsible for 73 percent of Caldera Systems' revenue in fiscal 1999.

"We plan to continue to develop relationships with new distributors to introduce product and service offerings into new markets, including foreign countries," the company said.

Caldera has signed a deal with United Systems Engineers to rework Caldera software for use in Japan, a deal that gave USE about 16,667 shares this month and a further 16,834 upon completion. The deal is valued at about $270,000.