Ebiz spreads wings with Linux server seller

Ebiz Enterprises announced Monday plans to acquire Jones Business Systems, a Linux server seller, in a deal valued around $6.2 million.

JBSI, based in Houston, sells Unix, Linux and Windows 2000 computers and services. The acquisition bolsters Ebiz's effort to join the ranks of the better-known Linux companies such as Red Hat and VA Linux Systems.

Ebiz said the acquisition, expected to be completed by the end of 2000, will bring its annual revenue to $50 million. Based on Monday's closing price of 75 cents, the deal is worth $6.2 million. In midday trading Tuesday, Ebiz stock dropped 6 cents, or 8 percent, to 69 cents.

Ebiz, based in Scottsdale, Ariz., is in the midst of a transformation to become a more serious Linux company.

Once a manufacturer of generic "white box" computers, the company got its Linux start selling inexpensive machines such as the $379 Pia at the Linux Store. The company then expanded to sell others' products, such as Cobalt servers and Stormix protective firewall software.

Ebiz then acquired LinuxMall.com, whose chief executive, Dave Shaw, now leads the combined operation, and took over Linux seller Caldera Systems' PartnerAxis site, where software companies can find companies that sell and install the software.

Along the way, Ebiz got a $3 million investment from Caldera and a $2.5 million investment from the Canopy Group. The funding has been used in part to more than double the company's sales force.

But the transformation hasn't been painless. In a regulatory filing Tuesday, Ebiz said its revenue dropped from $5.6 million for the three months ended Sept. 30, 1999, to $2.4 million for the same period this year.

The 57 percent revenue drop "was due to the shift of our strategic focus away from brokerage sales and the high-volume sales of low-priced Windows-based systems to mass merchants and price-oriented distributors," the company said. The Linux segment "offers stronger growth and profitability opportunities than the market for low-price, conventional computer systems," it added.

The company had a net loss of $1.3 million, or 14 cents a share, for the most recent quarter, compared with a loss of $1.2 million, or 17 cents a share, for the year-ago quarter.