Linux companies continue to struggle

From...

By Rick Perera

(IDG) -- There's more bad news for companies seeking to make a profit from the open-source Linux operating system, as an embedded operating system maker announces layoffs and a supplier of Linux-based server hardware files for bankruptcy protection.

Lineo, which makes the Embedix operating system and RTXC development tool, will eliminate 60 jobs and "spin out" another 100 employees in peripheral activities, the company said in a statement last week. The cuts will leave the Lindon, Utah company with some 110 workers focused on "core" activities, including embedded systems for handheld devices, residential gateways, routers, VPNs and digital television.

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Lineo plans to divest peripheral activities to partners and third parties, it said. The company has added numerous additional services and hardware sales to its portfolio over the past 18 months.

While the technology market has softened, demand for embedded operating systems remains high, said Lineo Chairman and CEO Bryan Sparks in the statement.

Lineo is responding by focusing on its Embedix and RTXC operating system tools and solutions, he said.

Meanwhile, EBIZ Enterprises, which makes the Terian line of servers for the business market, announced last week it is filing for protection under Chapter 11 of U.S. bankruptcy law. The company will file a reorganization plan with a Phoenix court "within the next couple of weeks," CEO Dave Shaw said in a letter to shareholders dated Sept. 7.

EBIZ, based in Scottsdale, Ariz., has more than 80 employees. The company's subsidiary, Jones Business Systems, which sells and services desktop Linux- and Unix-based platforms, also filed separately for bankruptcy protection. EBIZ completed its acquisition of Jones Business Systems in January, announcing at the time that the merger made it "one of the largest companies in the Linux/Unix industry," with more than $50 million in annual revenue.

Shaw stressed that the plan is to reorganize, not liquidate, EBIZ.

A reorganization plan will give the company the opportunity to rearrange its financial obligations, continue operating and also continue to provide ongoing service and support, he said.

Other companies in the Linux sector to face recent struggles include software makers VA Linux Systems and SuSE Linux.

VA Linux, which sells the Web-based SourceForge OnSite Collaborative Development System, announced in June that it would quit the hardware business and eliminate 35 percent of its staff. In its fiscal fourth-quarter report, released Aug. 23, the company said it had successfully completed the "transition," but at a cost of one-time charges of $267 million, against revenue of only $16 million for the quarter. VA Linux expects first-quarter revenue -- excluding final hardware shipments -- to be in the range of $3 million to $4 million, resulting in net losses of $10 million to $13 million.

SuSE, which sells its version of the Linux operating system through major hardware and software vendors, as well as offering retail versions of the software for desktop PCs, is still reeling from a financial crunch and the resignation of top executives last month. The company is in negotiations with potential investors over a new round of financing, however, and is "confident that it will be wrapped up shortly," spokesman Christian Egle said Thursday.