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Major Caldera shareholders may sell

Two major investors in the seller of Linux and Unix operating systems will be able to sell previously restricted stock, the company says in a regulatory filing.

Two major investors in Caldera International, which sells the Linux and Unix operating systems, will be able to sell previously restricted stock, the company said in a regulatory filing Monday.

As a result of a Securities and Exchange Commission filing, Tarantella will be able to sell 16 million Caldera shares through a dealer or broker, while MTI Technology will be able to sell 5.3 million shares. Tarentella got its shares through the sale of its Unix software to Caldera. MTI was an early investor.

"What this will allow is for them in an orderly way to sell their shares if they want and when they want in the future," Caldera Chief Financial Officer Bob Bench said in an interview. "That way we can work with them in placing those shares with institutions that like our space now...as we and each of those two large shareholders would like to work those shares on the market."

When the Orem, Utah, company raised $70 million in its March 2000 initial public offering, a few months after rival Red Hat went public, Linux still was on the list of hot technology opportunities. Not long after, though, Linux started to lose its luster, sending investors' skepticism out in force and Linux companies into survival mode.

It's not clear how much money the Caldera investors will get for their stock. Lineo, LynuxWorks, Linuxcare and Turbolinux all withdrew from IPO plans in recent months, citing a weak market, though French Linux company MandrakeSoft is braving the stock-offering waters with an effort to sell about $3.7 million.

Caldera laid off 32 of its employees in April. With the Unix software acquisition, the company now has 619 employees, it said in the filing.

In its first quarter with the Unix and Linux software products, Caldera hopes to garner $18 million to $20 million, Bench said. Overall, though, the company expects an operating loss of about $15 million to $16 million.

One issue the company faces is encouraging customers of its OpenServer product, which the company is no longer developing, to migrate to OpenUnix or OpenLinux products. To encourage this transition and to make the two other products work more similarly, the company will release programming tools in the fall, Bench said.

"As the two products are integrated, we have two or three fairly major products...that will be released this fall. We believe that solution set will give us a tremendous bridge for our current customer base to move forward on the new platforms," Bench said.

Caldera details several other challenges in the regulatory filing.

•  "We have not been profitable. The operations recently acquired from Tarantella have not been profitable and their revenue has been declining," the company said.

•  Mixing Unix and other proprietary software with the open-source Linux could be a problem with the open-source programmers who collectively develop Linux. "By including proprietary technology in our products that is not freely downloadable we may run counter to the perception of Linux as an open-source model and may alienate the Linux community," the company said. "Negative reaction such as this, if widely shared by our customers, developers or the open-source community, could harm our reputation, diminish our brand and decrease our revenue."

•  The acquisition of the Unix products from Tarentella means a company much larger than what Caldera is accustomed to. "Key personnel have little experience managing this type of growth. This growth is likely to strain our management control systems and resources, including decision-making, responsibility and accountability management, support, accounting and financial reporting, and management information systems," the company said.

•  The company faces three lawsuits alleging that it and its underwriters violated federal securities law during its IPO. Specifically, the suits allege that the underwriters "received compensation for the distribution of securities in the offering from parties other than Caldera," the company said.

•  And the company has been shifting business models. The old plan was selling Linux to computer users more familiar with Microsoft Windows, but the company doesn't expect OpenLinux's sales for this market to "continue to be a significant part of our business as we continue to shift focus to corporate users," the company said.