As a means of raising cash to boost a struggling software company, it is an unconventional approach. In December 2002, the French Linux software company MandrakeSoft issued a public plea on its web site: It needs to raise $4 million quickly – and is looking to its customers for help. “We have a very big short-term cash issue. If you are concerned about MandrakeSoft’s future, this is the time to mobilise,” the statement urges.
Specifically, MandrakeSoft is asking customers to join its MandrakeClub programme (members get access to a wider range of software, quicker downloads, and special promotions) or to upgrade existing memberships; to buy more products and related support services from the company; and to buy shares in the company.
If customers are unwilling to increase their dependency on MandrakeSoft, however, it is hardly surprising. The company’s market position – notable for an
emphasis on Linux on the desktop – at one time set the company apart from other open source software suppliers. But now it looks increasingly frail.
Over the past two years, MandrakeSoft has poured resources into developing an end-to-end portfolio of server based Linux software for small and medium-sized enterprises, introducing new ‘point products’ such as firewall technology, an enhanced version of the Apache web server, and clustering capabilities. Meanwhile, rivals such as Red Hat and SuSE have moved aggressively into MandrakeSoft’s market – the desktop. Industry giant Sun Microsystems is also targeting the desktop with its StarOffice product, competing with Mandrake’s own productivity tools. Consequently, MandrakeSoft has lost much of its uniqueness and must compete against larger, more established companies.
MandrakeSoft is unlikely to overcome these problems, says Stacey Quandt, an analyst at market research company Giga Group. “The ongoing challenge for MandrakeSoft is less about technical innovation and more about financial stability. [We recommend] users recognise MandrakeSoft’s [weak] position in the Linux distribution market and its persistent financial challenges,” she says.
MandrakeSoft’s situation, she argues, is unlikely to improve. Hardware vendors such as Hewlett-Packard and IBM support Mandrake’s distribution half-heartedly, but actively promote rival versions from Red Hat and UnitedLinux (an alliance of four open source vendors: The SCO Group, SuSE, Conectiva and TurboLinux). And, unlike these vendors, MandrakeSoft has failed to garner support for its server products among influential software suppliers, such as Oracle, BEA Systems and Veritas, she adds.
Even if MandrakeSoft successfully raises the money it claims will enable it to “resolve outstanding debts, cover the expenses needed to become profitable, plus secure an extra amount to satisfy the needs of future growth”, that sum is not likely to enable it to address its long-term challenges.