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10 March, 2005

Looking at the Top Tier of Linux Distributions

Impact of the Mandrake-Conectiva Acquisition on the Linux Landscape

Part 2: Digging into Mandrake, Novell, and Red Hat Demographics and Financials

Mike Angelo -- 10 March 2005 (C)

Article Index
To learn why Linux is so much a better choice than is Microsoft Windows, please see our article Gaël Duval Tells Why Mandrake Linux Is Better Than MS Windows

To learn how to run MS Windows-based software and accessories in GNU-Linux, please see our article Crossover Office 2.1 Runs MS Windows Software on GNU-Linux Systems

About Linux Distributions

For more about GNU-Linux distributions and how they are put together, please see Anatomy of a Linux Distribution in our article SCO Clears Linux Kernel but Implicates Red Hat and SuSE.

Under the terms of the GNU General Public License (GPL), the GNU-Linux operating system is free and open source software (FOSS) and no one can charge for it. However, Linux companies such as MandrakeSoft, Conectiva, Novell, Red Hat, SUSE, and others that add to the basic GNU-Linux OS may charge for the added value and for distributing the GNU-Linux OS. They also can charge for services such as product support, documentation, and so forth.

Gimp Note: Gimp 2.0 is a great improvement over Gimp 1.2.x. MozillaQuest Magazine recommends that you upgrade to Gimp 2.0. It comes with Mandrake 10.1.

For more about Gimp 2.0, please see our articles The GIMP 2.0 for Microsoft Windows - First Look and The GIMP 2.0 Released - a free photograph and digital-image editing program.

The Gimp 1.3.x developer versions were a good preview of Gimp 2.0. We have an overview of the Gimp article and three Gimp tutorials based on Gimp 1.3. These Gimp articles should give you a pretty good feel of the Gimp 2.0.


Mandrakesoft (stock symbol MDKFF) plans to acquire Conectiva. Both Mandrakesoft and Conectiva develop, publish, maintain, and distribute the GNU-Linux operating system in packages called Linux distributions. Along with Novell-SUSE (NOVL) Linux and Red Hat (RHAT) Linux, Mandrake-Conectiva is in the top-tier of Linux distribution providers.

In Part 1 of this series of articles, we compared how Mandrake-Conectiva, Novell-SUSE, and Red Hat stack up against each other on several fundamental fiscal measures -- revenues, market values, revenue to market value ratios, price-earning (P/E) ratios, and employee productivity.

We noted in Part 1 of this series of articles that Mandrake-Conectiva is smaller on the money measures than are Novell-SUSE and Red Hat. However, Mandrakesoft Linux is a very good GNU-Linux distribution and is very popular. And Mandrakesoft estimates a Mandrake Linux installed-base of from 6-million to 8-million.

Today, in Part 2 of this series of articles, we look further into the financials and demographics of Mandrake-Conectiva, Novell, and Red Hat. We also look at the problems of trying to compare Linux distribution providers. And we look at where Mandrake-Conectiva, Novell, and Red Hat stand in the consumer, SMB, and enterprise arenas.

Mandrake's acquisition of Conectiva strengthens Mandrake's position among the top-tier Linux distribution providers. But, just what impact will the Conectiva acquisition have on the Linux landscape, and on Mandrakesoft's prominence on that Linux Landscape?

For more about the nuts and bolts of Mandrakesoft's acquisition of Conectiva please see our article, Mandrakesoft To Acquire Conectiva -- Overview of the Mandrake-Conectiva Acquisition.

To see much of the data discussed here in Part 2 laid out nicely in tables, please see Part 1 of this Impact of the Mandrake-Conectiva Acquisition on the Linux Landscape series.

Mandrake-Conectiva Demographics and Financials

Conectiva was founded in 1995. It employs 60 people and has offices in Curitiba, São Paulo and Manaus, Brazil. Conectiva had revenues of $2.2-million US ($1.7-million EUR) in its latest fiscal year.

Mandrakesoft was founded in 1998. It employs 65-70 people and has offices in the United States and France. In its latest fiscal year, Mandrakesoft revenues reached $6.7-million US ($5.18-million EUR) yielding a net income of $1.8-million US ($1.39-million EUR). Mandrakelinux founder, Gaël Duval, told MozillaQuest Magazine that Mandrake has a user base of 6-million to 8-million users.

Adding the gross revenues of both companies together using simple math would make Mandrakesoft's anticipated, annual gross revenues around $8.9-million US -- after completion of the Conectiva acquisition. Of course that could change substantially as Mandrake-Conectiva starts to market the Mandrake-Conectiva products that will replace the current, individual products of the before-acquisition companies.

Novell Demographics and Financials

Novell was incorporated in 1983 and its principle office now is in Waltham, MA. It employs about 5,734 people. Novel acquired SUSE Linux more than a year ago in January 2004 for $210-million US.

At the time of the acquisition, SUSE employed nearly 400 people. SUSE Linux GmbH came to life in 1992.

  • Installed Base

In an e-mail discussion, Novell spokesperson Jasmin Ul-Haque told MozillaQuest Magazine that SUSE Linux Professional is installed by approximately 2-million to 3-million users each year. However, it's likely there are more SUSE Linux installations than that.

For example, there are lots of older editions of SUSE Linux Professional still in use and/or not registered. Remember, under the GNU GPL, one does not need to register the GNU-Linux operating system.

Jasmin Ul-Haque: We can monitor new customers who register to use our online update facility and this gives us the ability to track our installed base to some extent. But there may be many more customers that have installed SUSE LINUX Professional but have not registered this, and customers who maintain older versions for many years, and therefore it is difficult for us to get accurate figures.

As with other GNU-Linux distributions, SUSE's basic GNU-Linux distro can be downloaded at no cost to the user. That adds even more to the difficulty of determining the installed base of SUSE Linux.

Jasmin Ul-Haque: We do offer free downloads (via FTP of the ISO images) - for the consumer product that is sold through the retail channel. The download is made available soon after the product is available in retail outlets. We also offer our business products, SUSE LINUX Enterprise Server, as a free download for customers to evaluate, and they are then able to purchase the maintenance and support licenses thereafter.

After-acquisition plans and doings make an interesting comparison between Mandrakesoft and Novell. Rather than monkey around with the very successful SUSE Linux after it acquired SUSE, Novell continued to develop and distribute SUSE Linux.

Plus, Novell has introduced its own branded GNU-Linux, Novell Linux Desktop, which is based upon SUSE Linux but has its own personality -- thus providing some nice choices for Linux users without Novell risking the loss of its SUSE Linux customer base. Additionally, Novell will be releasing another Novell-branded Linux distrubuition, Novell Open Enterprise Server, which also is based upon SUSE Linux.

With its nearly $2-billion US market cap, $1.16-billion US annual revenues, and 5,734 employees, Novell-SUSE has the financial depth to develop, publish, and market two, differently branded, GNU-Linux distributions.

On the other hand, it appears that Mandrake-Conectiva will merge the current Mandrake Linux and Conectiva Linux into a blended product. That could be a risky move resulting in losing both Mandrake Linux users and Conectiva Linux users if they do not like the blended Mandrake-Conectiva product.

To provide a product selection comparable to Novell's dual-distribution lines of SUSE Linux and Novell Linux, Mandrake-Conectiva would have to continue developing and distributing both Mandrake Linux and Conectiva Linux -- and then add a blended Mandrake and Conectiva Linux as a third, product offering. However, with only 170 employees, $8.9-million US annual revenues, and a $55-million US market value, Mandrake-Conectiva might not have the financial depth to develop, publish, and market three, different, GNU-Linux distributions.

  • Novell's Linux Business

We discussed Novell and its Linux business with Novell Director of Public Relations, Bruce Lowry, via e-mail Friday, 25 February 2005 and Tuesday, 1 March 2005. He explained how the Linux distribution business fits into Novell.

Bruce Lowry: . . . sales of SUSE LINUX are still a small part of our business . . . One of the things we always like to emphasize is that we are more than just a Linux distribution, unlike Red Hat, Mandrake, and others. We sell a range of products that run on top of Linux and deliver management, integration and security for Linux environments. So it's hard to do an apples to apples comparison with other distributions in terms of the overall impact of Linux on the business.

The Linux business (SUSE) for Novell's fiscal year ending 31 October 2004 was about $36-million US -- a very small but important part of Novell's business revenue-wise. That Novel Linux business easily could grow to more than $50-million US in Novell's current fiscal year.

Throughout this article we look at Novell's Linux business pretty much as its SUSE Linux business. However, Novell recently released a Novell-branded Linux distribution, Novell Linux Desktop. Moreover, Novell will be releasing another Novell-branded Linux product, Novell Open Enterprise Server. That could add substantially to Novell's overall Linux business during the current Novell fiscal year.

Bruce Lowry: Our Linux revenue - all SUSE LINUX - was $36-million in our Fiscal 2004. This wasn't a full year, since we acquired SUSE late in our Q1 and only booked $2-million revenue that quarter. First quarter SUSE LINUX revenue this year (Fiscal 2005) was $15-million. We can't extrapolate full year revenues out from this number, but there is growth in that segment of our business.

At first we thought it likely that Bruce Lowry could not make that extrapolation due to all sorts of legal and SEC regulations reasons.

MozillaQuest Magazine: I am guessing the reason you cannot make the revenue extrapolations has to do with SEC and/or some other regulations governing publicly traded companies?

Bruce Lowry: We don't currently provide overall financial forecasts as a company, and will not do so in specific business areas either.

Thus left to our own devices, we can make that extrapolation and we do make it. On the basis of the $15-million US, first quarter, Novell Linux business we will make the obvious extrapolation of $60-million US for Novell's current fiscal year Linux business.However, this is not a scientific extrapolation nor is it anything anyone ought to base anything upon -- other than it's purpose of providing a ballpark estimate of Novell's Linux business in order to compare Novell's Linux business in a general sense to Mandrake-Conectiva and Red Hat, size-wise.

  • See Moving Novell Users to Linux on Page 2 ----->

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