TurboLinux layoffs another sign of cooling market

A second Linux company has put the brakes on expansion and laid off staff, a further indication that investors no longer are as gung-ho on the comparatively new operating system.

TurboLinux laid off an undisclosed number of employees today, citing demand by investors for more revenue and earlier profitability, president Paul Thomas said in an interview. He said the layoffs weren't as deep as those at troubled Linuxcare, which eliminated the jobs of about 70 employees in early May in the midst of a derailed initial public offering process.

"The rules have changed in the technology market. It used to be you could go public and it didn't matter whether you were profitable or what your revenues were," Thomas said. "What we saw was this is not the case any more."

Linux, a clone of the Unix operating system and competitor to Microsoft Windows, took the computing industry by storm last year, winning a place in the product lines of the biggest computing companies. That excitement fueled several stellar IPOs, including those of Red Hat, Cobalt Networks, Andover.Net and VA Linux Systems.

While Linux has far from vanished, it's no longer assumed to be a guaranteed road to riches. Shares in Andover.Net and Caldera Systems are trading below their IPO prices.

The TurboLinux layoffs affected the whole company but were deepest among administrative staff and marketing and lightest in development and services, Thomas said.

The layoffs were a pre-emptive measure that will ensure TurboLinux has room to maneuver and force it to focus on achieving profitability sooner, Thomas said. "It's best to do it when you don't need to do it. We have the market presence around the world, and we have the cash."

The company still has most of the $60 million it raised last year from Dell Computer and a host of other backers, and it lifted a hiring freeze that had been in effect for the last three weeks, Thomas said. No other actions were taken or are planned, he said.

The hiring freeze and layoffs will reduce by half the expenses that the company would have incurred by the end of this quarter had its expansion plans continued unchanged, Thomas said.

Thomas wouldn't comment about how today's layoffs affect TurboLinux's IPO plans but said, "This action today does not impact our strategy or plans in any way."