After Caldera’s four-to-one stock buy back, it looked like the company was
out of its financial woods. That hasn’t proven to be the case, but CEO Ransom Love remains optimistic about sales of the company’s Linux and Unix systems, even though Utah company now reports that its revenue will only be in the range of $15.1 million to $15.5 million for the second quarter instead of $16 million to $18 million it originally expected.
Because of this, Caldera has announced more layoffs. Caldera will lose about 73 employees across the board and around the world. The company will be left with about 400 employees and a cost savings of approximately $7
million a year. While all locations will be hit, Caldera will be
closing its Chelmsford, Massachusetts, and Erlangen, Germany, offices.
Its other two German offices will remain open.
The company doesn’t plan to cut back on any services or product lines; instead, it’ll make do with fewer people.
Additionally, CTO Drew Spencer and chief legal counsel Harrison
Colter are leaving the company. Both men will continue to consult
for Caldera on a part-time basis. Opinder Bawa, Caldera’s IT v.p., will
take over the bulk of Spencer’s duties, while Colter will continue to
manage Caldera’s legal work as an outside counsel.
While unhappy to be losing people, Love remains upbeat.
“It hurts, but the worldwide IT market, especially in Europe, made
this a necessary step to protect shareholder value in Caldera.” That said, Love continues, “People are continuing to deploy business systems with both Unix and Linux.”
But Alan Gillen, IDC’s research manager for systems software, counters: “The Unix-on-Intel market, which makes up 90% of Caldera’s
business, has been a shrinking market. It’s a tough
place to be, we don’t expect a robust recovery in the Unix market
anytime soon.”
On the other hand, Gillen believes that Unix on Intel has
reached “a new waterline in the industry, so that, while there will
be market share consolidation — what we got now is what we will have
for the next year.” For Caldera, the real danger he sees is that
the company is strongest with small- to medium-sized businesses and
those kinds of companies are “very susceptible to Linux.”
Love disagrees, saying that “Linux companies are also showing
declining sells. Everyone’s customers are having to cut back.”
As for Linux, Love points to Caldera’s Volution Exchange replacement
program and cross-platform network management program, its
bringing together of Linux and Unix, and training and support services for most commercial varieties of Linux to show that
Caldera is adding strength in both network and Linux services.
Financially, Love says as painful as the layoffs are, they will bring the company to within $2 million to $3 million of profitability, and Caldera has more than enough cash to
continue operations. Unlike its former sibling company, Lineo, Love is certain that Caldera won’t need any kind of emergency
management or financial help from primary backer Canopy.
While Gillen believes that Caldera must do more to turn the corner into
profitability than reducing costs, he also notes that Caldera’s
Unix installed base creates business for the company. “It’s not that people are going to rip out old Unix, when something works they hang on to it forever. Even if
Caldera doesn’t sell another box, there will be maintenance and
support work for Caldera Unix for the next 15 years.”
Looking ahead, though, “like Novell, they need to move new operating system licenses
to get independent software vendors interested,” he adds. Otherwise, “they’re in a Catch-22, with no license growth, there will be no new software products, and it will
be very hard to turn the downward cycle around.”
Can price-cutting, self-made applications like the Volution line,
customer and channel loyalty, and its combination of Unix and Linux
offerings bring Caldera out of the woods? The stock market, which
slammed Caldera with a 25% price drop today, doesn’t see it. But
it will be the small-business market that determines whether Caldera shrinks to
a service and support company for its installed base or rises up to
become a profitable service and operating system company for Unix and
Linux business users.
