August 10, 2001 2:55 PM PDT

Linux company looking to be bought?

Mission Critical Linux has laid off much of its marketing staff and says it's developing business partnerships that will take care of publicizing its high-end Linux software. But some think the moves herald an acquisition by Linux leader Red Hat.

The July 31 job cuts brought the company's expenses into better balance with its revenue, Chief Executive Robert Tumanic told CNET News.com on Friday. He said they weren't an indication that Mission Critical Linux is being packaged for sale to a company that already has a marketing staff.

"We're not fattening the company up for sale," Tumanic said. "Given the way these partnerships are evolving for us, it lessens the amount of money we need to spend in marketing. The board asked me to better align revenues to costs.

"We think we can partner with several big players that will be a big help to bring (our products) to market," he said. "We've got one, two, three, four active channel partnerships that are in the works now."

But sources say Red Hat, which passed a crucial threshold in June, reaching positive cash flow, is in discussions to acquire Mission Critical Linux.

Red Hat spokeswoman Melissa London declined to comment on the matter.

With the marketing staff cut, "I see it more as an acquisition target than a partner," said Giga Information Group analyst Stacey Quandt. A marketing staff is required, she said, even if larger companies are selling a smaller company's products.

About 17 Mission Critical Linux employees were laid off, less than 20 percent of the hundred or so total employees on staff, said Moiz Kohari, the company's co-founder and vice chairman, who handed the CEO title to Tumanic in June. Among those who lost a job: Brigitte Casemyr, the company's top-ranking marketing executive.

One source familiar

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with the layoffs said members of the group charged with selling products to the government were also handed their walking papers--including the group's president, Kay Howell. The company hired Howell in March; previously she had been director of the federal government's National Coordination Office for Computing, Information and Communications.

Difficult economic times call for drastic measures for large and small companies alike. Linux companies have been consolidating and laying of employees in the last year since investor enthusiasm for Linux and technology in general has evaporated.

The company has sufficient cash available, Tumanic said, though he declined to say how much or at what rate the company was spending it. "We're quite satisfied with the cash we have on hand," he said.

The Lowell, Mass., company, founded in August 1999, sells "failover clustering" software, which lets computing operations move to a new server if one crashes. The company hired several Compaq Computer employees who had worked on that company's clustering software.

Mission Critical Linux's chief competitor is SteelEye Technology. SteelEye, which has partnerships with Compaq and IBM and received $20 million in venture funding in July, focuses more on products, as opposed to Mission Critical Linux's emphasis on services.

Tumanic said that through Mission Critical Linux's coming partnerships, the company will be increasing its emphasis on products.

 

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