Open-Source Loses Some Glitter

FRAMINGHAM (05/08/2000) - It was a bad week for Linux. High-profile services company LinuxCare Inc. withdrew its initial public offering (IPO) last Monday and then announced layoffs. Meanwhile, reports surfaced that the next version of the operating system kernel will be late.

LinuxCare called off its IPO after the sudden departure of CEO Fernand Sarratin and the downturn in the IPO market. "Because of the delay in our IPO, we needed to reduce our burn rate and decrease our costs," said LinuxCare spokeswoman Michele Nemschoff. The San Francisco-based company is restructuring to focus on higher-margin enterprise integration services. It's also laying off an undisclosed number of workers in the process.

Analysts said they see LinuxCare as the first big victim of a Linux shakeout.

"LinuxCare will get bought out or go bankrupt - forget about an IPO," said Jeff Hirschkorn, an analyst at New York-based Inc. Hirschkorn said only a handful of top-tier Linux players will do well.

"There's still a lot of uncertainty about whether you can survive just on services for open-source products," said analyst Bill Claybrook at Aberdeen Group Inc. in Boston.

Also last week, Linux kernel developers said the release of the much-anticipated Version 2.4 kernel, expected in July, may slip a few months.

Products based on the kernel probably won't be available until fall. The delay proves that open-source development isn't immune to the slipping schedules that have affected other operating systems. However, executives at Linux distributors Red Hat Inc. and Caldera Systems Inc. said they aren't worried about the delay. "We're very supportive of [Linux developer Linus Torvalds] taking the time to get this right," said Drew Spencer, chief technology officer at Caldera in Orem, Utah.

The Linux 2.4 kernel is highly anticipated because it will offer greater symmetrical-multiprocessing scalability - a boon for servers - and better support for Universal Serial Bus, which is important for desktops and appliances.

Because many companies' revenues are at stake, and because of the media scrutiny, the kernel team is under "tremendous pressure," said Erik Troan, director of operating systems engineering at Red Hat in Durham, North Carolina.

"That's probably one of the reasons they are slowing it down."

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