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Mandrakesoft Buys Brazilian Linux Distro

Linux distributor Mandrakesoft has bought Brazilian-based Linux vendor Conectiva for $2.3 million, officials said Thursday.

The definitive merger agreement announcement comes nearly a year after Mandrakesoft emerged from the French bankruptcy courts. The company's Conectiva acquisition is the continuation of its strategy to grow its Linux product, Mandrakelinux, through both internal development and external purchases.

"Combining the two businesses enables us to extend the scope of our offering and address more businesses by compounding development and commercial assets, resulting in strong synergies," Francois Bancilhon, Mandrakesoft CEO, said in a statement.

While it also sells a consumer version of its Linux operating system in retail stores in Brazil, Conectiva has extensive practice deploying its software in the government sector -- the Brazilian army, navy and air force -- and in the financial industry -- with ATMs and bank tellers.

Mandrakesoft has been making a worldwide push to get companies interested in its Mandrakelinux software. In January, the company launched a partner program to capture market share in the small- to medium-sized (SMB) market at leading U.S. distributors Red Hat and Novell .

"Mandrakesoft's goal has always been to become a major worldwide Linux actor," said Gael Duval, Mandrakelinux creator and co-founder of Mandrakesoft. "But we know that there is still a lot of work to achieve this goal."

Indeed, Conectiva's customers seem to be one of the big factors in its favor for acquisition by Mandrakesoft. The Brazilian company, besides its contracts with the military, has customers like IBM , HP , Siemens, White Martins-Praxair and Brazilian banker HSBC.

Duval said there are some redundancies in the two companies' product lines. But while it will take some work to merge the technology from both sides, what he calls the cultural link between them will help smooth the transition process.

"It means that people in both companies are on very similar ways of thinking," he said. "Both companies are releasing Linux products with quite similar approaches, are experts in Linux technologies, and furthermore are very implicated in open source."

This buyout is another notch in the Mandrakesoft belt to create a more robust operating system tailored to business-class customers.

Known more as an end user operating system, Mandrakesoft last year purchased Edge-IT, a Parisian Linux services and support company, for roughly $500,000. Edge-IT's expertise came a half year before Mandrakesoft's update to its Corporate Server, the first time in two years, based on the Linux 2.6 kernel, and launch of Corporate Desktop.

Latin America is considered a desirable market for Linux software vendors, with a 64 percent adoption rate among companies, according to a statement issued by the Brazilian CIAB 2004 Technology conference last year. IBM, which launched an Open Software Client Services blueprint for Brazilian customers in June 2004, said it was seeing double-digit growth in emerging markets like Brazil.

Both companies are founding members of the Linux Core Consortium (LCC), and officials expect to build their next corporate release on top of the implementation of the Linux Standard Base (LSB) created by that organization. Earlier this month, Mandrakesoft announced Corporate Server 3.0 was LSB 2.0 certified.

Duval said that while Conectiva will keep its offices in Curitiba, Sao Paulo and Manaus, Brazil, the corporate reorganization of its 60 employees would take a few months to determine.

A press conference to discuss details of the acquisition is slated for this afternoon.



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