[fdn-ann] Merc stories/press briefing stategy

In addition to the NYT and CNet stories I forwarded earlier, here are 2 
stories from the Merc that mentions GNOME.

I know that some of you are starting to receive calls from their beat 
reporters to schedule interviews and get more details. As of now, we are 
holding giving out more info till Tuesday for the trades. If someone from 
the business press wants to do a story, we can work with them today. 
Please, contact Barb and myself if you get any requests from press people. 
You can reach us on my cell phone at 415-244-6897.
Thanks and best regards,

2 San Jose Mercury News Story


VA Linux to unveil build-to-order software model
Effort would put company in position to carve new role


Among the many product announcements at LinuxWorld in San Jose this week, 
one that stands out is a move by VA Linux Systems Inc. to differentiate 
itself from the bigger guns in the computer hardware business.

VA plans to announce that it will offer software on a build-to-order model 
when it sells its computer systems that are optimized to run Linux.

``We will do for software what Dell has done for hardware,'' Larry 
Augustin, chief executive of VA, said in an interview at its offices, where 
stuffed, plastic and crystal penguins, the Linux mascot, adorn many an 
engineer's cubicle along with yellow crime-scene tape declaring the area a 
``Windows-Free Zone.''

Augustin said that 90 percent of VA's customers re-install and re-configure 
the different open source software and Linux options on their servers. With 
VA's build-to-order software, customers can choose from over 700 optional 
software packages, installed at the factory, and two choices of Linux, Red 
Hat or Debian, at no extra charge.

``In some ways, we think it saves money, and it's easier for us to 
support,'' Augustin said.

While still unprofitable, VA is exploding in size and is bursting at the 
seams of its Sunnyvale offices, where some people are now working in 
conference rooms until the company moves to bigger offices in Fremont. The 
company has grown to over 400 employees since its purchase of Andover.Net.

``There has been this question on how is VA going to compete against Dell, 
because Dell is a volume provider,'' said Stacey Quandt, an analyst at Giga 
Information Group. ``This solution is the way they are addressing that 
issue. Because it's open source there is a high degree of customization 
that is possible that is impossible with a proprietary operating system.''

Other companies will unveil products to show how Linux is getting more and 
more powerful on the server side, with so-called clustering hardware and 
software, to make Linux more reliable for transaction servers, where the 
system must not crash. TurboLinux Inc., Mission Critical Linux and Red Hat 
Inc. will be demonstrating products, such as Red Hat's High Availability 

But as Linux makes progress on the server side, its penetration is scarcely 
noticeable on the desktop, apart from the hardcore Linux devotees who can 
work with the unwieldy operating system, which is still user un-friendly.

Some companies and open source projects, however, are hoping to change 
that. Mountain View-based Eazel Inc., which includes three members of the 
original Macintosh development team among its top managers, wants to make 
Linux easy enough for average computer users.

Eazel is working on a file manager that integrates file management, Web 
browsing and system management with the GNOME desktop, a big open source 
project that has created a point-and-click interface for Linux. Eazel will 
be showing its file manager, called Nautilus, at Linux World, which will be 
the default file manager for GNOME 2.0 and available in the fourth quarter.

``I'd like to see my mom using Linux in a year or less from now,'' said 
Eazel Chief Executive Mike Boich. Eazel plans to make money, he said, by 
selling maintenance, installation, remote file storage and file sharing 

Another company, Helix Code Inc., founded last November by the leader of 
the GNOME project, Mexican programmer Miguel de Icaza and Nat Friedman, is 
working on desktop applications, such as the Gnumeric spreadsheet and 
Evolution, which it calls an ``Outlook killer,'' referring to Microsoft's 
popular e-mail and calendar program. International Business Machines Corp. 
will announce Tuesday that it will offer Helix Gnome, a special 
distribution of GNOME, on its laptops.

The GNOME Project is also announcing a big initiative with major companies 
like Compaq Computer Corp., IBM, Sun Microsystems Inc., and Linux firms 
like Red Hat, VA, Eazel and Helix Code, to establish GNOME as a framework 
for next-generation Internet access devices and to add the applications 
such as Star Office into the GNOME Office project.

Linux continues to pop up in other unexpected places, such as handheld 
devices to access the Internet, because of the big support Linux has among 
many open source developers. IBM, for example, will demonstrate a prototype 
Linux smart watch, which can communicate wirelessly with PCs, cell phones 
and other wireless devices.

One bold start-up company is even developing a video game console around 
Linux. Indrema Corp. is working on a console that will run Linux, targeted 
for launch sometime next year. It's a risky venture, as it will be fighting 
for attention with the Sony Corp.'s new PlayStation2 and eventually 
Microsoft Corp.'s X-Box and Nintendo Co.'s new system, code-named the Dolphin.

``It's a huge thing for the Linux community,'' said John Gildred, chief 
executive and founder of Alameda-based Indrema. ``We are providing a gaming 
console that leverages all the advantages of open source development.'' 
Gildred said he has no aspirations right now of directly competing with the 
giants in video gaming. The Indrema Entertainment System's software can be 
upgraded over the Internet, as open source developers and gamers make 

The next step for Linux
Can it move out of the back room and onto the desktop?


A young high-tech company goes public and instantly makes its employees 
multi-millionaires. Then, just as quickly, those fortunes turn to dust as 
skittish investors turn their backs on the company and others like it. 
Sound familiar?

The story -- all too common for dot-coms -- illustrates the painful 
roller-coaster ride also felt by one of the most hyped technologies of the 
last 12 months: Linux software.

At this week's LinuxWorld Conference & Expo at the San Jose McEnery 
Convention Center, Linux executives and analysts will preach that the open 
source operating system is still alive and kicking, even if the hype is 
settling down.

``Linux is cropping up in so many places, and the end user never really 
knows it,'' said Dan Kusnetzky, a vice president at research firm 
International Data Corp. in Framingham, Mass.

Still, Linux faces big obstacles. The niche software program needs to move 
from the back rooms of corporations -- where it runs on Web and e-mail 
servers -- to desktop computers, a market dominated by Microsoft Corp.'s 
various Windows operating systems.

With a clumsy user interface and few applications for the desktop, Linux is 
fighting an uphill battle to get onto the personal computers in homes and 
offices, analysts say.

And with investor patience running thin, the biggest challenge is for the 
companies that sprouted up around the free operating system to start making 

Linus Torvalds created the core, or kernel, of Linux as a University of 
Helsinki student in Finland in 1991. Torvalds envisioned the operating 
system as a simpler variant of the popular Unix operating system that runs 
on high-end servers and scientific workstations.

Available for free

Torvalds made the source code available for free over the Internet, and a 
grassroots community gradually developed around the software, as users 
shared their updates and improvements with everyone else.

The model, known as ``open source,'' has been hugely popular with 
programmers. Developers tout Linux for its low cost, reliability and 
flexibility -- it can be stripped down for the smallest devices, such as 
mobile phones, or expanded to run powerful servers. And because the code is 
open to anyone, developers can easily customize the software.

The most optimistic Linux proponents see the software as one day displacing 
Microsoft from its perch on PCs and low-end servers. Enthusiastic investors 
sent stocks of Linux-related companies to the stratosphere last year.

Then the reality set in: the open source model makes it difficult for Linux 
companies to make money off the software, even as it is rising in 
popularity among technicians at Fortune 500 firms.

Kusnetzky said that companies marketing Linux don't make money directly 
selling the software, which can be downloaded for free from the Internet.

Instead, the Linux vendors sell services, hardware and applications that 
take advantage of Linux's features.

``You can think of it like how Gillette sells razors. They give the handles 
away for free and charge for the razor blades,'' said Kusnetzky.

``The business has gone away from Linux itself . . . to what applications 
are running on Linux,'' added Bill Claybrook, an analyst at the Aberdeen 
Group in Boston.

Last year, euphoria reigned at LinuxWorld in San Jose amid the Wall Street 
debut of Red Hat Inc., the largest distributor of the Linux operating 
system. Most of the booth exhibitors -- some wearing T-shirts with Linux's 
official mascot, Tux the penguin -- had stock quotes up on their screens as 
they watched Red Hat's shares surge 286 percent on their first day of trading.

And six months ago in New York, VA Linux Systems Inc. was the convention 
darling as it used its super-charged stock price to buy Andover.Net, the 
operator of Linux-related Web sites.

Like dot-coms, Linux companies were seen as the Next Big Thing, a 
technology that could take down mighty Microsoft.

But what a difference a year makes. Dragged down by the overall selloff in 
technology stocks and investors' impatience with unprofitable Linux 
companies, Red Hat's stock has fallen 86 percent to $20.06 from its 52-week 
high of $143.13. VA Linux, which climbed 708 percent from its $30 IPO price 
on its first day of trading, has dropped 83 percent from that peak to $40.

Shares of Caldera Systems Inc., Cobalt Networks Inc. and other 
Linux-related stocks are also far below their astronomical highs. Linuxcare 
Inc., a provider of Linux services, shelved its plans to go public, after 
abruptly firing its chief executive, Fernand Sarrat. Linuxcare and 
TurboLinux Inc. have recently laid off workers as they try to rein in their 
hyperactive growth.

Industry executives said that the initial stock valuations were, like the 
dot-com stocks, an indication that a major change was taking place in the 
computer industry.

Value unknown

``The initial enormous valuations showed that people knew this was going to 
be important, but they didn't know how to value it,'' said Mike Boich, 
chief executive of Eazel Inc., a Mountain View start-up that is trying to 
make Linux easier to use on desktop computers.

This week's conference will focus less on stocks and business models and 
more on new products. From wristwatches to supercomputers, companies will 
show the 17,000 attendees the products they've only talked about in the 
last year.

Eazel, which is working on a better user interface, is one of several 
start-ups trying to push Linux onto the desktop. Helix Code, co-founded by 
Mexican programmer Miguel de Icaza, is working on desktop applications such 
as an e-mail program. De Icaza is known for founding the GNOME Project, 
which created a point-and-click interface for Linux.

Linux hasn't reached desktops in homes and offices because it is still too 
hard for average people to use and there aren't many applications written 
for the software platform.

Troubled Ottawa-based Corel Corp. has made an enormous bet on Linux, 
marketing its WordPerfect office suite for the platform. America Online 
Inc.'s Netscape unit has made a Linux version of its browser, and Sun 
Microsystems Inc. has a Linux version of its Star Office suite of word 
processing, spreadsheet and presentation applications.

Showcase applications

At this week's conference, companies will showcase more applications for 
desktop users, but the number of applications still fall far short of the 
applications for Windows.

Linux is also getting some powerful support from computer makers. 
International Business Machines Corp., Dell Computer Corp. and Compaq 
Computer Corp. have endorsed Linux or offer it as an option on their systems.

Even rival Microsoft underscored the potential importance of Linux in its 
antitrust trial, arguing that Linux was a viable threat to its Windows 

Analysts say that on Web and e-mail servers, Linux is growing faster than 

``Customers are demanding it,'' said Robert LaBlanc, head of IBM's software 

Indeed, sales of servers running Linux shot past Novell Inc.'s NetWare in 
1999 to become the No. 2 server operating system, behind Microsoft's 
Windows NT, according to IDC. Over the next four years, the research firm 
expects Linux shipments to grow 28 percent annually, to 4.7 million units 
in 2004, up from 1.3 million in 1999.

That growth means opportunities for hardware companies like IBM. ``Linux 
will create a groundswell for hardware, software and services, and we have 
an opportunity to make money in that space,'' LaBlanc said.

Following in IBM's footsteps, Hewlett-Packard Co. plans to announce this 
week a big push to promote Linux, making it one of HP's strategic operating 
systems for its customers, along with Windows 2000 and HP's version of Unix.

``It's not a small thing,'' said David Sifry, co-founder and chief 
technology officer of Linuxcare, which is working with HP, and many other 
hardware companies. ``I would equate this on a similar magnitude to what 
IBM is doing.'' Linuxcare, based in San Francisco, recently closed a $30 
million third round of venture funding after scrapping its IPO plans.

Pushing ahead

Other Linux companies continue to push ahead, despite stock losses. More 
start-ups continue to be formed and more customers are converting to Linux.

Larry Augustin, founder and chief executive of system and software 
developer VA Linux, said Linux itself has not been hurt by a general 
downturn in the stock market.

``There is still tremendous acceptance of Linux. There are still a 
tremendous number of users,'' he said.

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