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Linux start-up lays off employees

Mission Critical Linux is forced to lay off 90 percent of its staff after unsuccessful attempts to attract a buyer.

Mission Critical Linux, which once hoped to lead a second, more mature generation of Linux companies, was forced to lay off 90 percent of its staff after unsuccessful attempts to attract a buyer.

Mission Critical Linux specialized in a high-end version of Linux that came with "clustering" features that allowed one server to take over when another server crashed. Last Friday, the company announced new funding and a restructuring that eliminated its services and consulting work and significantly pared down its product line.

Now more details are starting to emerge that show just how drastic that restructuring was.

Rick Angell, chairman of the start-up since its founding, said he spent most of the last six months trying to sell Mission Critical Linux to first one, then another company--a situation the company initially denied. Such a sale would have returned "a reasonable amount of money to investors and saved a significant number of jobs," Angell said in an interview.

But "those hopes proved not to come to fruition," Angell said.

"The company has been stripped down to a much smaller entity," with six employees compared with just less than 60 a month ago, Angell said. One of the six is founder Moiz Kohari, who has returned to the company after months away.

Mission Critical Linux, which secured its first major funding--to the tune of $20 million--from General Atlantic Partners in June 2000, once hoped to raise Linux to the stature of its more technologically mature Unix operating system cousins. To accomplish this, the start-up snagged several engineers who had worked to create Compaq Computer's respected Tru64 version of Unix and put them to work on its high-end "Convolo" clustering project.

But it proved harder to sell the Convolo product and services than the company expected. "We didn't have anywhere near the sales we hoped for," Angell said.

A tale of two deals
So the company began considering offers from other companies, Angell said. It had hoped to finalize a deal with one company, but a more attractive offer came from a second, and Mission Critical Linux decided to pursue that one instead.

But that fell apart, and in the meantime the offer from the first company had been significantly reduced: Mission Critical Linux would have had to lay off staff, with no severance and probably still would seek relief in bankruptcy court, Angell said.

Nondisclosure agreements prohibit Angell from saying which companies were interested in Mission Critical Linux, but sources have said one was Red Hat, the leading Linux seller.

With buyout hopes on the wane, Angell formed a new corporation--which soon will be named Mission Critical Linux LLC--and bought the old company's assets with funding from undisclosed investors. "The money is already in place," he said, though "the exact names of the investors have not settled." He would say only that a combination of individuals and venture capitalists had chipped in.

"We've raised more than enough to see (the new company) through the next year," Angell said.

Linux, invented by Linus Torvalds and developed by a large group of programmers, blossomed in the late 1990s into a viable operating system for servers and became the heart of numerous start-ups. But with the end of the Internet hype and the economic pullback, many of those companies have struggled for survival.

Mission Critical Linux still faces competition from Red Hat, which is working on a high-end version of Linux that has some similarities to Convolo. Red Hat said in January that it had hired Brian Stevens, the former chief technology officer of Mission Critical Linux.

The new Mission Critical Linux will work to try to decrease the "failover" times in the Convolo NetGuard product, will continue to develop its Convolo DataGuard product to make the Network File System (NFS) software more robust, and will perform some custom programming work for selected customers.

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