04.23.07
Posted in English, Mandriva at 2:58 pm by François Bancilhon
Last week was an exciting one: we announced we were going to raise some cash, we shipped our new version of the distro, Mandriva 2007 Spring and we held our international distributor meeting in Paris.
Let me focus on the cash raise:
Because we are publicly traded, raising cash follows a rather slow process: we need a board meeting, then a shareholder meeting to put the decision up for a vote and this takes some weeks to organize. So the actual cash infusion will happen only after the May 25, if/when our shareholders approve it.
I have spent the last 5 months working on this and I am very happy we found a solution. We needed the investment and it’s been a tough race. Those who’ve done this know what I am talking about. I have looked at all possibilities (yes, all) and talked to everyone (yes, everyone) who could be potentially interested in such a deal, given the time constraints. I can now again allocate all my time and energy to running the business and I look forward to it.
The lead investor in the round of financing is Occam. Occam is a European VC fund. It’s fairly new (we are their second investment), but managed by seasoned professionals with a strong track record. They spent a lot of time understanding the market and the opportunity. We met for the first time in December and have worked with them since then. They will have two representatives on our board. They plan to be actively involved in the company and are interested in its long term prospect. I am sure they will contribute with their expertise and relationships.
We spent a lot of time on the structure of the deal. Requirements were that:
- We needed to get Occam in reasonably quickly.
- It was important that some of our existing shareholders showed their commitment to the company by participating.
- We all (Occam included) thought essential to allow all shareholders to get in at the same conditions as Occam and the others
So the deal is in two rounds, the first one is 1.65M€, reserved to Occam. The second one is open to all shareholders and is guaranteed by Occam and the existing shareholders: the rule is that to do such a round, you need to find investors ready to commit to fund 75% of the deal. Several of our existing shareholders are participating: Millennium Partner, currently our largest shareholder, Windhurst Capital and BBS Finance. Jacques Le Marois and yours truly are joining also. Then any shareholder who wants to participate can do so, in proportion to what he/she owns.
There is no special treatment to any one in this deal: those who participate get the exact same conditions I get, and I get the exact same conditions as Occam.
In summary, the round will be about 3M€. Occam will put about 2M€. We will get about half a million euros from the committed shareholders and we expect to get about another half from the other existing shareholders.
The subscription price is set a 0.34€ a share, which means pre-money valuation of the company is 2M€. How was the price set? the same way price is set in any financial transaction: at the level where the seller finds a buyer. Would I have liked to get the price higher? you bet, I’m a shareholder. Am I happy we closed this deal? you bet, I’m a shareholder.
We, of course, discussed the set up and its announcement with the AMF (French equivalent of SEC), listened to their suggestions and took them into account.
Besides rebuilding our cash situation, we will use the funds for two purposes:
Get out of Chapter 11.
Technically, we are still currently in a Chapter 11 process (“redressement judiciaire” in French), since February 2003. So we still have some creditors to repay. And we’re executing a plan by which we replay about 100k€ per year. The plan could go on until 2013, but it is actually a handicap in many ways: some public bids are forbidden to companies in our situation, both at the French and European level, and even when they are not, it’s a bad image. Our listing in a better market than Marché Libre is also virtually prohibited by this situation: Chapt 11 companies are put in a special compartment for “sick companies”, not a very attractive proposition. So, we will repay entirely our remaining debt (about 700K€) and we will become clean again.
Acquire Linbox.
We have been talking to Linbox for a very long time (some people would say too long). Last year, we signed an agreement with them, for an acquisition, which was a paper only deal (exchange our shares against their shares), which valued them at about 1.3M€ in shares. But, as we were ready to execute, things went south: our numbers went bad, our stock tanked, and this was of course considered “substantial changes in the situation of the company”. So we put the deal on hold, till we could get back the company to stable situation. In the meanwhile, we started working with the Linbox people, and their Paris employees moved into our offices. As we worked together on some business deals, we became more and more convinced that putting the companies together made a lot of sense. So, as we reached agreement with Occam, we renegotiated the conditions. We’re now acquiring Linbox for 280K€ in cash and 200K€ in stock. This will be presented to shareholder vote at the May 25 meeting. I look forward to working with the Linbox team and grow the business together.
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04.06.07
Posted in English, Mandriva at 4:37 pm by François Bancilhon
I am often asked about the Mandriva business model. So here is a quick summary of the key points:
- we’re open source
- we’re a product company
- we’re publicly traded
- we address both the consumer market and the corporate market
- we address the consumer market through multiple channels
- we have a network of partner/distributors
- we address the corporate market through direct sales
- we are international
Being open source means:
- Every software product we develop and distribute is under GPL (including Pulse for instance).
- We receive contributions and we deeply appreciate the help of all of those who help us develop the distro.
- We provide two free (as in free beer) versions of Mandriva Linux together with their free maintenance: Mandriva Free, which does not include any proprietary components, and Mandriva One, which includes some proprietary drivers. These ship at the same time as the commercial versions of the product and are available for download from public mirrors.
We devote an important part of our expenses (about 30%) to the development of products. These include Linux distributions and tools to manage them. We also invest in advanced r&d projects to develop technology, some of which is integrated in our products.
We are listed on the Euronext Marché Libre. This means we publish quarterly results and we have to follow the rules and regulations from the AMF (French equivalent of the SEC).
We address both the consumer market and the corporate market. Today, we do roughly 55% of our revenue in corporate and 45% in consumer. We believe this double focus makes sense because there are both marketing and engineering synergies between those two segments.
- Marketing, because our image in the consumer world helps us when we address a corporate customer.
- Engineering, because the core of the product is common to both consumer and corporate products.
This does not mean that one funds the other: we believe each business should be profitable by itself.
We address the consumer market through three channels (in order of importance)
- e-commerce channel includes our web store, Mandriva Store, which sells essentially boxes and downloads, and the Mandriva Club which operates by subscriptions
- OEM agreements are established with hardware vendors such as HP or Positivo who ship and sell PCs with Mandriva pre-loaded in various geographies
- Retail stores resell our boxes
Our consumer products are Mandriva Free, One, Discovery, Powerpack, Powerpack+ and Flash. As a service, we provide web support through our MandrivaExpert platform.
Our network of franchisees has about 25 members. Some of them have been with us for quite a while (such as our Czech and Polish friends), but we have recently grown this network aggressively. These distributors execute a strategy adapted to their local situation: they customize products, chose specific channels, and provide associated services.
We address the corporate market through direct sales and in partnership with service companies. Our key products are Corporate Server, Corporate Desktop and Pulse, our tele-distribution tool. Our services are consulting, support, maintenance and training, and we have teams dedicated to each one of these tasks. Work for a large organization typically consists in customizing a distro, helping the customer deploy it, providing tools to manage it and maintaining it and supporting it over time.
We operate worldwide: our consumer business spans 150 countries, our corporate business is more focused on France and Brazil, with some activities in other countries such as the US.
We keep questioning that model. It has evolved over time as we’ve questionned it and we’ve listened to suggestions. It will keep evolving. Except for our core value of being an open source product company.
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04.03.07
Posted in Uncategorized at 2:45 pm by François Bancilhon
Being a commercial Linux distribution editor is tough.
There are a few commercial Linux distribution editors in the world: Red Hat, Novell/Suse, Turbolinux, Mandriva, Ubuntu/Canonical, Linspire, Xandros, Red Flag, CS2C and Sun Wah to name the key ones.
Yes, yes, I do put Ubuntu/Canonical in the list (what a blasphemy) and will elaborate in a further post on why I do so. Of course, I do not put Debian in there, which is a true community based non commercial distribution.
To my knowledge, the only companies in that list which actually publish their financial numbers are Red Hat, Turbolinux and Mandriva.
- Red Hat is publicly traded on the Nasdaq in New York
- Turbolinux is publicly traded on the Hercules market in Tokyo
- Mandriva is publicly traded on the Euronext Marché Libre in Paris.
So for those three, we know. For the others, we guess or we accept to believe what they say (if they say something).One could make the point that Novell/Suse is also listed, but their activity in the Linux/Open Source space is within a division of a much larger company. So, they are free to define what goes in there and what does not and I will remain skeptical of their actual numbers.
Further to my knowledge, the only company making money is Red Hat.
Of course, it is possible that Novell/Suse will become profitable thanks to the bounty of $320M provided by Microsoft, but it is my conjecture, and the grapevine tells me, that without this they are not profitable.
Both Turbolinux and Mandriva have shown losses in their last financial reporting. They both cover a large part of their expenses with their revenue, but not enough to be profitable.
I understand that all the others are actually losing money. I will be happy to be proved wrong by the publication of audited results.
- As far as I know, the three Chinese players keep their cards close to their chest, but are losing money.
- The last time I had information about Linspire, it was bleeding cash.
- Not sure for Xandros, but I would guess they are losing money (unless Andy tells me differently).
- And there again, in the absence of published results and based on my understanding, I would conjecture that Ubuntu/Canonical is the winner in terms of losses, since it has virtually no revenue and hefty expenses.
Where does this leave us: everybody is losing cash, so it’s a difficult business and no one, besides Red Hat, can claim to have the solution and the ideal business model.
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04.02.07
Posted in Français, Mandriva at 4:36 pm by François Bancilhon
L’histoire étant franco-française, je continue le blog en Français pour le moment.
Je suis content de l’avalanche de réactions. Elle prouve que le sujet intéresse, que les gens se passionnent, que le sujet est passionnant et je suis d’accord avec tous ceux qui se passionnent.
Je suis aussi content que toutes les réactions ne nous traînent pas systématiquement dans la boue (bien qu’un certain nombre le fassent manifestement avec un certain plaisir).
Il y en a même qui nous soutiennent. Je peux leur dire sincérement que ça me va droit au coeur et ça va droit au coeur des employés de Mandriva et de ses contributeurs qui bossent dur pour réussir.
Je continuerais à me battre pour Mandriva en utilisant l’argument de la proximité. Tous les pays le font et il serait ridicule de faire de l’angélisme en la matière. Surtout, mon objectif est simple, je veux faire réussir Mandriva, pour le bienfait de ses clients, de ses utilisateurs, de ses actionnaires et de ses employés.
Avant de publier la lettre ouverte, j’ai parlé à beaucoup de gens, j’ai consulté mes amis. J’ai d’abord pensé que d’autres que moi devaient être les portes-parole et pourraient sonner le tocsin pour Mandriva. Donc j’ai demandé à mes amis de faire un document public de soutien à Mandriva et d’interpeller l’Assemblée. Tout le monde voulait aider. Mais quand il s’est s’agi de passer à l’acte, tous avaient une bonne raison de ne pas le faire : des principes qui leur interdisaient de dire ceci ou cela. Ils m’ont tous dit « on est vraiment avec toi, on veut vraiment t’aider, mais on ne peut rien faire ». Je ne leur en veux pas.
Alors j’ai décidé d’y aller seul et de sortir mon document. Je l’ai fait circuler auprès d’un certain nombre de personnes. On m’a tout de suite dit il ne faut pas dire ceci, ni cela, ni critiquer ceci, ni critiquer cela. J’ai rapidement arrêté la circulation et fini le document tranquillement.
Je reste impressionné par le contraste entre la retenue de mes amis et la violence de certaines des réactions au blog, Il semble clairement que d’autres n’ont pas eu de problème à parler haut et clair.
Cela doit faire partie de la culture. Récemment, un « ami » à nous, qui bosse dans les locaux de Mandriva, se fend de plusieurs pages sur son blog pour expliquer en quoi (je résume) Mandriva c’est nul et Ubuntu c’est génial. Son document est assez long et assez fouillé, donc ça a du lui prendre du temps. Je lis ça, et ma première réaction est de me demander pourquoi il a pondu un truc pareil. Je descends donc un étage et je lui demande et il me répond avec un grand sourire qu’il a fait ça pour nous aider. Je crois un moment qu’il dit ça ironiquement, mais non, il est complètement au premier degré : il a vraiment fait ça pour nous rendre service. Ça m’a rappelé le dicton « with friends like you, who needs ennemies? »
La lecture des commentaires m’a donné envie de clarifier quelques points. Dans les prochains jours, je voudrais expliciter quelques points, notamment le modèle économique de Mandriva, n’étant pas convaincu que ceux qui le critiquent le connaisse vraiment, et les autres acteurs économiques comparables et quelques faits concrets sur eux.
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