Tux Redux

Posted by: Steve Hamm on December 6, 2005

The last time I tuned into Mandrake Software, the founder of the France-based Linux company was begging Mandrake Linux users to send in contributions to keep the company afloat. Then, silence. Well, it turns out Mandrake survived—just barely. Now it has a new name, a new strategy, and a new lease on life.

Francois Bancilhon, who has led the turnaround as CEO, dropped by today to put Mandriva—the new name—back on BusinessWeek’s radar. He’s charmingly self-effacing. (“I got the job because nobody else wanted it,” he quips) But he also has a plan that could turn Mandriva into a viable alternative to the Red Hat and Novell distributions of Linux, mainly in the BRIC countries. That’s Brazil, Russia, India, and China—where a lot of the growth in tech over the next years is expected to happen.

Mandrake got off to a jump start in 1998 when Linux was first emerging as a tech-industry phenom. It grew fast, became profitable in its first year, and quickly raised $20 million in venture capital. It was too much of a good thing. New management quickly cranked up spending, bringing the staf level to 160 and sending the company deep into the red. At its nadir, the company was losing $1 million a month. In 2003, it appealed for help--and received $600,000 in contributions from fans. But that wasn't enough to keep it out of bankruptcy court.

Bancilhon, a French software entrepreneur, had just returned to the mother country from a stint in Denver. He saw an opportunity to revive a company with a strong fan base and easy-to-use technology, and decided to give it a whirl. The turnaround started off rough, with deep staff cuts and a long trip through bankruptcy court that left the company with very little cash and a promise to pay off creditors over a nine-year period.

Bancillon gradually brought the company back to life. He raised $2 million from VCs and refocused on the emerging markets. As always, Mandriva targets desktop PCs primarily, but it's now aiming for corporations and government rather than consumers. A key move came early this year when it bought Connectiva, of Brazil, the leading Linux distributor in South America. Bancilhlon signed a deal recently with HP to distribute Mandriva Linux on PCs in Europe and South American. And he has an alliance with Intel to push Intel a package of Intel motherboards and Mandriva software through Intel's 160,000 resellers. He's hoping that will get business kindled in places like India. One key advantage: Some governments in emerging markets are reluctant to buy from American companies, so Mandriva has an edge over Novell and Red Hat.

Mandriva is still a peanut. Revenues for the year ending in September were just $5.5 million. But it's profitable. And it boasts some substantial customers, including HSBC, France Telecom, NASA, and Verizon.

Does the world need a third major Linux distributor? Probably not. But it wouldn't hurt.

(By the way, here's an amusing journal of a computer fan who replaced Windows with Mandriva)

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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