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Linux sellers merge, eye profitability

Linux retailers LinuxMall and the Linux Store agree to join forces, hoping to become the first publicly traded Linux company to achieve profitability.

Two Linux retailers, LinuxMall and the Linux Store, agreed today to join forces, hoping to become the first publicly traded Linux company to achieve profitability.

LinuxMall had been on track for an initial public offering, chief executive Dave Shaw said in an interview today, but it opted instead to merge with The Linux Store, a company already publicly traded on Nasdaq's over-the-counter bulletin board system, where it is currently valued at $2.13. The Linux Store's ticker symbol, "EBIZ," reflects its roots as the computer maker Ebiz Enterprises.

The merger creates a Linux distributor and retailer not far behind existing publicly traded Linux companies.

The merged companies, with 112 employees and a total of $25 million in revenue last year, will operate under the LinuxMall name. Shaw will be chief executive of the combined company, and Linux Store chief executive Jeffrey Rassas will be president. LinuxMall chairman Mark Bolzern will remain in that position.

While the $25 million revenue figure is still small compared with some retailing giants, it's not far beneath the range of Linux bellwethers such as Red Hat, which garnered $13.1 million in revenue its last quarter. VA Linux Systems had $34.6 million in revenue in its most recent quarter.

"We think we are well positioned to be the first profitable Linux company," Shaw said, predicting the company would be in the black "in the very near future." Red Hat and VA don't expect profitability until mid-2001 and late 2001, respectively.

With today's Linux Store stock price, the stock-for-stock deal was valued at $35 million, Shaw said.

Though unfavorable market conditions contributed to LinuxMall's decision to derail the IPO, that consideration was secondary in the merger, Shaw said.

The two companies go well together, Shaw said. The Linux Store sells hardware and software designed for businesses; LinuxMall sells software aimed at the consumer market. LinuxMall also acquired a distributor that sells Linux products to retail stores, including Fry's, Barnes and Noble and Borders.

The merged company has requested the "LINX" ticker symbol and plans to be listed on the main Nasdaq exchange in coming months, Rassas said.

The Linux Store, based in Scottsdale, Ariz., got its first claim to fame by offering inexepensive Linux computers, but the company shifted gears to offer all manner of other products as well as its own computers. The company also operates Linux Wired, an Internet service provider, and the Linux Lab support site.

LinuxWired will get more subscribers when Corel releases its next version of the Linux operating system this June. It will be configured to easily use the LinuxWired service. CNET's Linux Center

In October, LinuxMall of Aurora, Colo., received an investment from Unix and Linux services company Santa Cruz Operation and Chase H&Q. Those two companies will maintain their investments and keep their seats on the LinuxMall board, Shaw said.

On June 13, LinuxMall will ship its first full-color catalog, Shaw said. They're not the only one, though. Creative Computers, which runs the PCMall and MacMall retail businesses, has expanded its effort with an initiative called eLinux.com.

Creative Computers had revenue of $238 million in its most recent quarter. However, its new eLinux.com and eCost.com subsidiaries lost $7.1 million and dragged the company to an overall loss of $6.8 million, or 66 cents per share, the company said.