After three months of operating as a single company, Turbolinux and Linuxcare have called off their merger because of difficulties joining the companies' finances and operations.
Facing a chilly investor environment regarding the Linux operating system, the two companies announced their intent to merge in January and closed the deal on 21 February. The justification was that Linuxcare's specialisation on services complemented Turbolinux's product emphasis, but now it appears the two different businesses didn't dovetail so smoothly after all.
"I think the goals of the two companies were different," and the economic climate made things worse, Linuxcare Chief Executive Art Tyde said in an interview Tuesday. "There were certainly financial details involved--everything from valuation to cash in the bank and assets."
"It just didn't make financial sense to put the thing together," but the companies will still jointly work with customers, Turbolinux chief executive Paul Thomas said. The economic climate has changed since the two companies began talks five or six months ago, he added.
On the Linuxcare side of the house, the company has enough cash to last two years, Tyde said. Turbolinux has "more than enough cash to take us to profitability," he said, though he declined to state when that day would arrive.
But for the funds to last that long, the company will make more major changes. Tyde said that after the merger cancellation details are worked out, Linuxcare likely will lay off more staff, in addition to staff cuts announced in February. And the company will abandon the technical support business plan that had been at its heart since the company started promoting itself in February 1999.
Collapsing Internet businesses, curtailed technology spending and dry venture capital wells have hammered the Linux business landscape, leaving layoffs, restructured business plans and closed companies.
It's a stark change from the Linux heyday, when Linuxcare announced a US$32.5 million infusion in December 1999 and Turbolinux trumpeted the US$57 million it raised just a month later--the most venture financing any Linux company raised in one fell swoop. Both companies had filed to hold initial public offerings but withdrew the plans.
When the merger was announced, Turbolinux was delighted to be able to call upon Linuxcare to offer services it lacked. Now, with the merger undone, Turbolinux will rely on its own smaller staff and partnerships with other parties to provide the service and consulting work, Thomas said.
