Linux distributor Lindows has filed with the Securities and Exchange Commission to raise $57.5m from an initial public offering, despite being in existence for less than three years. Its short lifespan makes it harder for investors to judge its position, but some hurdles to future growth are already apparent.
Lindows has not yet named a date for the potential IPO, but intends to list on the Nasdaq National with the symbol LINE.
The California-based desktop Linux specialist was founded in July 2001 and shipped its first product in January 2002, making it difficult for potential investors to perform analysis of its financial figures filed with the SEC.
The company had revenue of $2.1m in 2003, up from just $63,131 in 2002 and managed to reduce its net loss to $4.1m for the full year ended 31 December, 2003, from $6.7m in 2002.
While it is heading in the right direction those are not the sort of figures that will inspire short-term confidence and the company admits it might have to raise additional capital in the future to guarantee long-term growth. It estimates that net proceeds from the offering, together with current cash and cash equivalents, will be sufficient to fund its operations for at least the next 24 months.
The company also warned that its distribution relationship with Japanese vendor Livedoor could also be placed in danger by Livedoor's recent acquisition of Japanese Linux distributor Turbolinux. The agreement with Livedoor brought in 11 per cent of Lindows' net revenue in 2003 and is only scheduled to remain in effect until August 2005.
A bigger challenge to the company's long-term growth could be its ongoing trademark battle with Microsoft. The company recently changed its international presence and product name to Linspire in response to claims by Microsoft that it was infringing its Windows trademark.
While it has successfully argued against an injunction in the US, Lindows has been less successful in Europe, prompting the change of name. The US case is currently postponed while Microsoft prepares to appeal the judge's ruling that the jury should consider whether the word "windows" is generic, based on the period between 1983 and 1985 before Microsoft released its products.
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