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Lineo's IPO filing
The masochistic among us can plow through the S-1 registration statement for this IPO. But it's 2.3MB of legalese, not for the faint of heart. We would never have started LWN if we weren't a bit on the masochistic side, so we're perfect for this job. Here, thus, is our quick summary of what Lineo is up to. Lineo is, of course, positioning itself at the center of the embedded systems arena. They see the potential for a lot of growth there, and they want a piece of it. Their primary customers are OEM manufacturers; they list ast, Inc., CIS Technology, Inc., DaiShin Information & Communications Co. and MiTAC International Corp. They also mention "strategic relationships" with itachi, Ltd., Motorola Computer Group and Samsung Electro-Mechanics Co., Ltd. This is a very different mix of customers than we have seen with other Linux companies that have gone public; the embedded systems market is a different place. Products. The products they list include:
The S-1 talks much about the two add-on products, and rather less about the embedded operating system itself. Lineo perhaps sees Embedix Linux as the loss-leader that gets them in the door; the add-ons and services then are to bring in the real cash. Lineo is not really positioning itself as a services company. While services are a part of its mix, the embedded products appear to be their primary area of operation. Money. Revenue has grown from $945,000 in 1997 to $2.8 million in 1999 - $4.6 million if all the firms acquired by Lineo are also counted. If you look at Lineo itself, it lost "only" $1 million in 1999; by the time you deal with all the acquisitions that number jumps up to just under $10 million. Lineo currently (as of April 30) has $30 million in the bank. Risks. The very first item in the obligatory list of scary "risk factors" is that Lineo has been focussed on Linux only since the beginning of 1999; previously its main revenue source was DR DOS - its embedded DOS clone. Thus, they say, "we believe that our financial history to date is not indicative of our future performance." In the six months ending April 30, 2000, 69% of Lineo's revenue came from Linux-based products. They had "no material service revenue" during that time. Other risk factors include:
Acquisitions. Lineo has acquired six business so far: Zentropic, USE, Fireplug, Inup, Moreton Bay and RT-Control. They managed to do them all by issuing just over 4.5 million shares of stock and $1.3 million in cash. They also issued options for 673,000 more shares.
Employment. As of May 15, Lineo employed 200 people. 119 of those are in engineering, 43 in sales and marketing, and 38 in general and administrative. 128 people are in the U.S., 15 in Australia, 14 in Canada, 7 in France, 25 in Japan, 6 in Taiwan, and 5 in the U.K. Ownership. The largest owner of Lineo stock is the Canopy Group - it has 44.4% of the company. Then comes Caldera Systems, which has 13.1%. The "real ownership" behind those shares could be seen to be Raymond Noorda and Ralph Yarrow, who control Canopy, though they "disclaim beneficial ownership." Dry Canyon Holdings has 8.2% - Bryan Sparks, Lineo's CEO, has an interest in Dry Canyon. Egan-Managed Capital has 6.1%. There does not appear to be any mention of a directed share program in the filing. This does not mean that no such offering will take place, just that they have not mentioned it at this point.
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