Turbolinux files for an IPO
The picture that emerges is that of a fairly straightforward Linux company. Unlike LynuxWorks, Turbolinux (which seems to have downcased the "L" recently) does not see Linux as a loss-leader for proprietary products. We also get a glimpse into the departure of founders Cliff and Iris Miller, which turns out to have been an extraordinarily expensive action on the company's part.
The revenue picture is most interesting - Turbolinux (then Pacific HiTech) made $4.7 million way back in 1995. That fell seriously to $1.5 million in 1997, then climbed back up to $4.9 million in 1999. In the first six months of 2000, revenues have been $2.9 million. In 1998, the company actually turned a profit - $700K worth. No self-respecting high-tech company can go public while making profits, though, and Turbolinux is no exception - the ink turned red in 1999 with a $9.5 million loss, which was outdone by a $31 million loss in the first half of 2000.
They have $27 million in the bank now.
The company plans to make money by selling the Linux operating system and related products. It emphasizes enterprise-level computing, clustering, and its new "EnFuzion" system which allowed it to put the term "peer-to-peer" into the filing no less than 14 times. Much of the clustering and EnFuzion code is proprietary, sitting on top of the open source Linux base. Another area of strength for the company is in its localization capabilities - especially with regard to Asian languages.
Turbolinux has service offerings, but they do not play a prominent role in the IPO filing. Turbolinux really does see itself as a software company, and isn't looking for other ways to bring in the cash.
A number of 1999 customers were listed, including (in the US): the American Red Cross, Birkenstock, Corvis, JP Morgan, National Weather Service, Procter and Gamble, the University of Chicago and Yale University and, (in the Asia Pacific region): AMP Henderson Global Investors, DeoDeo, Fujisoft ABC, Huadi Computer, Info-carry, Nippon Timeshare and Twin Communication.
Turbolinux currently has 253 full-time employees: 95 in sales and marketing, 89 in software engineering, 28 in customer service, and 41 in administration.
The scary "risk factors" include, along with the usual stuff:
The risk factors also talk about the possibility of losing key personnel, and state: "In that regard, in July 2000 Irving Miller, our Chairman, co-founder and former Chief Executive Officer, and Iris Miller, President of our Asia Pacific division and co-founder, were terminated without cause." To do so, the company paid the Millers $850,000 in separation fees, and also bought back $7.5 million in stock (at $3.65 per share). And they may not be done paying the Millers yet.
Turbolinux also laid off 52 employees in May. The S-1 filing takes pains to not make connections between the large layoff and the large payment to the Millers, but it jumps out at the reader anyway. Over $8 million in cash went to the company's founders - a big hit for such a small company. Clearly the employees had to be let go to free up the money for this payoff. Ouch.
They have been denied the right to register the Turbolinux name in Korea - somebody else beat them to it.
Who owns the company:
Thus, the Millers still own a large piece of the company even after having sold about 1/3 of their holding as part of their separation agreement.
There will be a directed share program that targets open source developers and "other members of the open source software community that we believe have contributed to the success of this community and our growth." They have not yet filled in the blank saying how many shares will be made available.
Turbolinux is interesting in that it is not afraid to embrace Linux
completely. It really is a Linux software company - not a service company,
a web portal company, or a "Linux compatible" proprietary software vendor.
It is also forthright in asking patience of its investors - there are not
even vague promises of profitability in the near future. It will be
interesting to see how it goes.
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