Practical Technology

for practical people.

Surprise Desktop Linux Move: Xandros Buys Linspire


Practical Technology has learned from several sources that Linspire, the San Diego, Calif-based Linux distributor is being bought out by Xandros, the Canadian desktop Linux vendor.

In an announcement that was sent out today, June 30, to Linspire stockholders, CEO Larry Kettler wrote that the stockholders had decided to sell all of Linspire’s assets. This deal specifically includes Linspire, Freespire, and the company’s distribution agnostic CNR (Click ‘N Run) desktop installation platform.

This move is not being greeted with enthusiasm by all of Linspire stockholders’. Kevin Carmony, former CEO of Linspire, wrote on his blog, “In classic Michael Robertson [Linspire’s founder and chief owner] form, he has once again completely disregarded the 100 some-odd shareholders of Linspire by pulling off this deal without a shareholder meeting. Most states require shareholder approval of any merger or reorganization of a corporation, or the sale or transfer of all or substantially all of the corporation’s assets. Even if a company only has 1 minority shareholder, there should be a shareholder meeting and the acquisition explained to all shareholders. What do Linspire shareholders get in place of a shareholder meeting? This completely worthless notice in the mail.”

Carmony, who has since switched to Ubuntu for his Linux needs, went on, “This will end up being a completely insignificant event for Linspire shareholders, and the end for Linspire customers. I predict this was done to: 1) help Robertson drain the company of its cash and resources. When I left Linspire, we had a very profitable year and the company had millions in the bank. I predict Robertson has moved this money to himself, family, and his other companies, leaving Linspire’s minority shareholders with nothing. 2) help Robertson save face by issuing a “Linspire Acquired by Xandros!” press release, instead of living with the public humiliation that Linspire failed under his leadership. Such a press release will of course be meaningless, unless the acquisition was substantial. As a shareholder, I will eventually find out. 3) Give Xandros (also seemingly on life support) a press release, and perhaps some way for them to spin this to investors to raise money.

Since Carmony left the firm in the summer of 2007, Linspire was successful in getting the long delayed CNR out the door. In addition, Linspire made a deal with Canonical, Ubuntu’s parent company, and Mint, to offer their users easily installed software through the CNR system. However, the company’s CNR development has proceeded at a very slow pace and users were complaining about the lack of availability of up-to-date Linux software from the service.

Xandros, with its distribution’s tracing its roots back to 1999’s Corel Linux, can claim to be the oldest desktop Linux distributor. More to the point, with its deal with Asus to pre-install Xandros Linux on Asus’ amazingly popular Linux-powered Eee computer line, Xandros has become a very popular Linux distribution. Sources at Xandros have also told Practical Technology that while the company is not making money hand over fist it has been realizing “a very nice revenue stream from its Asus systems.

Neither company, at this time, has confirmed either the deal or the amount that exchanged hands to make it happen. According to a source close to the acquisition, the approximately $1-million loan that Linspire had made to Xandros several years ago did not play a role in this transaction. That loan, the source said, had been settled for pennies on the dollar.

Carmony, however, doesn’t see any real value coming out of the Xandros deal for Linspire stockholders. Carmony told me, “?Before Linspire and Xandros try to spin this into something actually positive, I’d like to offer my Linspire shares to either Michael [Robertson] or Andy Typaldos (Xandros’ CEO) for $.10 a share. That’s 80% less than what it was worth just ten months ago. If this transaction happened at a good valuation, then I’m sure Michael or Andy will be all over my offer, right?”

The former CEO has been hostile towards the company’s leadership for some time. In April, Carmony complained publicly about Linspire not holding a stockholder’s meeting. He then wrote, “We had a top-notch finance team that made sure we always stayed on top of our accounting, audits, financial statements, and compliance to shareholders with properly scheduled and documented board meetings and annual shareholder meetings. Since leaving Linspire, this practice seems to have ended.”

As for today’s deal, Carmony wrote, “So, Michael, now that all the assets have been sold, what’s my stock worth (again, no worthless Xandros stock please), and what will happen with Linspire’s customers? Something tells me it will take a lawsuit to find out.”

As this story went to print, neither Xandros nor Linspire had any official comments on the deal. A Xandros representative, however, did confirm that the deal was happening.