May 22, 2001

Mandrake refocuses on Linux business

Author: JT Smith

- by Robin "Roblimo" Miller
Here's a NewsForge exclusive email interview with MandrakeSoft CEO Jacques Le Marois about what has been going on in the company recently, and where Mandrake hopes to go in the future. The
format is loose; Jacques wrote his own answers without help from
PR people. He is speaking straight from the heart here, with the passion
and honesty you'd expect from someone who once helped throw a nationwide "Linux Party" for thousands of people in 35 cities.

NF: Is Mandrake going to strictly focus on the desktop again?

JACQUES: In fact we are currently increasing our presence in the server side with
MandrakeSecurity (firewall product) and [a] couple of other new
projects. We are doing the same stuff to improve the ease of use of Linux that we did for the desktop, but for the server side, and we are working with major players like IBM, HP and Compaq on certification and OEM deals.

NF: It looks like MandrakeCampus and MandrakeExpert have disappeared from
the main Linux-Mandrake Web site. Are you going to keep these services as MandrakeSoft moves back to its original Linux distribution focus?

JACQUES: MandrakeCampus and MandrakeExpert have not disappeared at all: All the
links are still there, both on linux-mandrake.com and mandrakesoft.com.

[Recently departed CEO] Henri Poole's vision was to focus the company towards the development
of e-services (e-learning, e-support). In Henri's vision, the idea
was to build e-services with no specificity about Linux. Founders and
shareholders disagreed with this strategy and prefer to refocus the
company around the original vision, which consists of building a solid
business around Linux-Mandrake.

We continue to develop MandrakeCampus as a training service for our
users, not as a business target for the company. Concerning
MandrakeExpert: It continues to be developed as a support platform for
the Linux-Mandrake users, not as a general e-support platform. An
optional tipping and paying subscription system will shortly be
introduced to enable users to get high-quality support very quickly.

We are going back to what has made us successful: providing easy-to-use
Linux systems and many services around them which include e-learning and
e-support. The new thing on that side is that now we also strongly
target server users, not only home users. A solid heart with a sexy
face. That's what Mandrake OS is about.

NF: Do you believe MandrakeSoft -- or anyone else -- can turn a profit
purely from selling and supporting a Linux distribution?

JACQUES: Few people are aware of the following fact: that the first Mandrakesoft
exercise was profitable. At the time, we were reproached [for] that fact!

The truth is that Mandrakesoft is currently profitable on the Linux
distribution business itself. Our revenues pay the team that does the
Linux distribution. The rest of the company is not yet profitable but
it's the future of our revenues.

Also, we haven't even started monetizing our growing community of users,
and will shortly be doing so with Expert/Campus. So there is plenty of room for growth.

NF: We've heard the "Mandrake has 33.8% of the retail U.S. Linux market"
line repeated all over the place. Can we get a little more specific? How many actual boxed sets and CDs has Mandrake sold so far in 2001? How many 8.0 packages do you expect to sell by the end of the year? Does Mandrake
make money from the retail packages?

JACQUES: This is the PC DATA number for the first quarter 2001. PC DATA provides trusted numbers from the U.S. retail sales. This was before the launch of our new release 8.0. So the number should be much higher now :-)

Concerning our sales, we expect to sell 400,000 boxes/year. The U.S. retail
is less than it was in the past. In compensation we are currently
increasing our sales in various European countries a lot.

Also, we've already presold more 8.0 to business partners in Europe than any release ever before at this stage of the product cycle.

NF: Who's in charge of the company these days?

JACQUES: I've taken back the CEO position instead of Henri and I work closely with a team of managers. Most of them were here before Henri's arrival.

NF: We heard that CTO Jean-Loup Gailly left Mandrake, unannounced, over a
month ago? Why did he leave? Was it his choice or the company's?

JACQUES: It was Jean-Loup's choice because of a disagreement with the past
management of the company.

NF: Have you cut the number of developers working on Mandrake?

JACQUES: We did not cut any people working on Linux-Mandrake. In our refocus, the Linux-Mandrake distribution is the heart of all our business.

NF: Have you cut support staff?

JACQUES: We increased the support staff.

The staff cut was mostly among people working on the e-services strategy. There are currently 125 employees working at Mandrakesoft, which is the
same number as at the begining of the year.

NF: Who made the decisions about the recent changes?

JACQUES: They were made by the board of MandrakeSoft in agreement with Henri Poole.

NF: We hear rumors that Mandrake is desperate for a cash infusion and may
go out of business if you can't find millions of Francs by the end of the year. Is this true?

JACQUES: Please speak in USD :-).

The truth is that we have cash in the bank, that first 8.0 sales are
looking fantastic, and we are backed by our investors.

Mandrakesoft is close to profitability. Unlike many other Linux
companies we did not do a big lay-off of employees that would have made
us profitable now.
We decided that our refocus in strategy has to bring a high
growth, which needs all the employees in place.

Mandrakesoft has built in only three years with small expenses an
incredible position in the Linux arena. We are now the most sold Linux
distro on the retail market. Mandrake has a good image. We have a huge
users base and a strong position on the desktop side. More and more
companies are using Mandrake on the server side. According to Netcraft
stats
, Mandrake's Apache
version, called Advanced Extranet Server, is the #15 most used Web server on the Net, just after Lotus Domino!

The challenge now is to transform this position into a strong business. We
are currently launching several new products for business use, like
MandrakeSecurity which is a easy to setup easy to use a Firewall/Gateway.
Our service offers (training, support and consulting) are starting to deliver deals in the U.S. and Europe. Direct sales via our e-commerce platform have just been launched successfully -- last week -- and we will soon open a Web site that includes all our new offerings.

Also, in addition to all the good news, we are currently working on an
IPO process. I can't tell you more at this time but will tell you more in due course.

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