Mandriva raising new funds for Linux business

Mandriva, a struggling seller of the Linux operating system, is in the process of raising "a minimum of 3 million euros," or $4.1 million, the French company said Monday. The funds will be used to exit bankruptcy protection and to complete the acquisition of server software company Linbox, a merger the companies agreed upon in September 2006 but have been unable to complete.

The bulk of the money is from OCCAM Capital, a European investment fund that focuses on computing and telecommunications markets, which is donating 2 million euros and getting two seats on Mandriva's board. More funds are from earlier investors, including Millennium Partners, Windhurst Participation, and two executives, Jacques Le Marois and Francois Bancilhon. All shareholders will be eligible to participate on similar terms.

[Maccess]

Wrong business model

With a few exceptions, many Linux OS companies have tried to replicate the commercial OS model: Sell a shrink wrapped product and offer services.

The problem is that Linux is available for free, or nearly free. The most a vendor can charge is for the pretty box, or pre-install service.

Service and support has many players at different levels: From IBM to the friendly neighborhood computer shop.

There has been an explosion of Linux computing in the marketplace, however, it hasn't been in making shrink wrapped OSs.

The boom in Linux has been in creating appliance systems: The systems that run routers, plug and play network boxes, and other devices where the consumer doesn't know or care that Linux runs beneath.

The other boom has been in creating hosted services, where once again the users don't know or care what the underlying Operating System is.

Revenue comes from hardware or service vendors who need a supported and customized Linux variant to create or deliver a complete product.

Revenue does not come from the end-user, who will simply download free Linuxes, if he really wants to use Linux.