RealTime IT News

Amid Legal Battles, Lindows Eyes IPO

Lindows, a Linux software maker and Microsoft antagonist, hopes to raise up to $57.5 million in a public offering of its stock, according to paperwork filed with the Securities and Exchange Commission.

If the IPO is completed, the San Diego company would join Red Hat and VA Software among the few publicly traded Linux distributors.

The company's proposed ticker symbol is "LINE" on the Nasdaq market. It's uncertain when the Lindows' stock will begin trading. The registration form it filed is little more than an announcement of intent.

While the $57.5 million figure provides an rough idea of what the company believes it can raise, a firmer number will emerge in the coming weeks as Wall Street bankers assess Lindows' business prospects and value its shares.

San Francisco-based WM Hambrecht & Co. is lead manager for the offering, with Roth Capital Partners acting as co-manager. Matt Ragas, editor and principal at FindProfit.com, said the two managers are reputable second-tier companies that nonetheless may have trouble getting a premium price for Lindows.

"We're beginning to see what I call more speculative, Net-related offerings again," Ragas told internetnews.com. "[Lindows CEO] Michael Robertson's a smart guy -- he's an opportunist -- he knows when to strike when the iron's hot and that's what he's doing here. He's definitely looking to get a good valuation for the business, which anyone you talk to will, I think, clearly say, 'Hey, it's got a lot of obstacles ahead of it.' "

The IPO is the latest in a string of events that will be scrutinized by potential investors. Last week, the company changed its software name and branding efforts to Linspire after losing an appeals decision to Microsoft . Microsoft had sued Lindows in an Amsterdam court for trademark infringement.

Another Microsoft-led court case awaits appeal in the United States, and the Redmond, Wash., giant has litigation started in Canada, Finland, Sweden and France.

Lindows has run afoul of Microsoft before. In January, a San Francisco court ordered Lindows to shut down its MSfreePC.com Web site, which let people eligible for a rebate in the wake of Microsoft's settlement with the State of California use the money to purchase Lindows OS.

Ragas said Lindows' ongoing spats with Microsoft will lead to trouble when its IPO goes live. He said companies have a lot of difficulty on Wall Street when they try to set themselves against Microsoft.

"It's a real problem; you can take a look at the performance of a stock like Real Networks or anyone that competes head to head with Microsoft, or is perceived to compete against them, and it's something Wall Street is going to take a look at, and is going to slap a discount on these guys, regardless of how well they execute," Ragas said.

Despite its legal troubles, Lindows has enjoyed some success in the desktop space, and surprisingly enough, in an enterprise space that is dominated by Windows or other commercial Linux vendors.

Joe Wilcox, an analyst at Jupiter Research (this Web site and Jupiter Research are owned by Jupitermedia Corp.), said that of the 20 percent of companies with more than $50 million in annual revenues using Linux on the desktop, 4 percent used Lindows. In the small to medium business market, it makes up 3 percent. In companies with 10 employees or less, the number jumps to 19 percent.

He said he was surprised by the numbers that showed bigger companies, who also use other Linux OS' on their network in most cases, had a higher percentage than SMBs, who are generally more flexible and amenable to lower-price alternatives to Microsoft software.

Another surprise for Wilcox was the goodwill Lindows has generated in the software reseller (value added resellers) industry with its low price OS and subscription to a software library.

"I was talking to a VAR that I know a week ago and he was just raving about Lindows," he said. "He said for a lot of his SMB customers, it's just the right choice because they get all the software they need, and many of them don't have Office. For him, he said there was just less administrative hassle."