Linuxcare files for $92m IPO

Linux support and services specialist - and one-time supposed Red Hat acquisition - Linuxcare this week registered its decision to IPO with the US Securities & Exchange Commission (SEC).

The scheme calls for the release of an as yet undecided number of shares worth $92 million (which is very likely to change in the run-up to the issue) in total. The IPO is likely to take place in March, and Linuxcare stock will trade under the symbol 'LXCR'.

The 'details' of the IPO come in Linuxcare's S1 SEC filing. The S1 also presents a good picture of what this privately owned company has been up to since its foundation just over a year ago. Take its finances. To 30 September 1999, the company had achieved revenues of $518,111, which clearly did little to offset the $10.6 million it has lost.

Since then it has received $32.5 million in VC funding, but it's clear that the company's business model is precarious. Elsewhere in the filing, Linuxcare notes that 72 per cent of its revenue comes from just three key customers. Linuxcare describes its business as comprising four strands: technical support, education, professional services and certification.

To date, the last two have barely contributed to the company's bottom line. That said, much of its business in these areas will come from its recent acquisitions, the Puffin Group and Italy's Prosa. The filing says that the proceeds of the IPO may be used to fund further acquisitions, though the company isn't talking to anyone right now, apparently. More likely it will be used to keep the business afloat - Linuxcare reckons the proceeds will allow it to operate for a year, at which point it will need a significant cash injection, unless its business has exploded, of course.

And there lies the rub. Is there sufficient business out there? Clearly there is increasing demand for Linux support and services - the S1 filing notes that Linuxcare handled 15,000 support calls in Q4 1999, up from a mere 140 in Q3. At that rate of growth (10,700 per cent), Linuxcare should soon be raking it in (provided it has enough people to deal with it all).

The snag is that almost every other Linux company out there is out to grab a share of the same business. Linuxcare also fields Linux-related tech support queries for a number of much larger support and services companies and PC firms, including Dell and IBM Global Services. There could easily come a time when these customers might choose to handle those calls themselves and - for Linuxcare, worse yet - offer tech support services in competition with the smaller specialist. ®