February 24, 2005

Musings on the Mandrakesoft-Conectiva merger

Author: Joe Barr

Commentary: As you've probably read,
Mandrakesoft and Conectiva announced their merger today. The combined firms will be well-positioned to go after emerging markets not only in South America but around the globe. MandrakeSoft derives 40 percent of its revenue from North America, 40 percent from Europe, and the remainder from elsewhere around the world. Conectiva derives 95 percent of its revenue from Brazil, but its distribution is spread by partners in Columbia and Peru as well.

During a teleconference today, Fran├žois Bancilhon, CEO of Mandrakesoft, said that the name of the newly-merged firm has not yet been decided upon, but that it should be announced within the next 30 days. Planning and work on the first joint release has already begun, with a goal of having it to market by the end of the year.

The headquarters will remain in Paris, but executives in Brazil will be participating in corporate guidance and management rather than being relegated to the status of simply being remote employees.

In terms of geography, the match is a perfect fit, with almost zero overlap of markets. Perhaps the key part of the merger is that the merged firm will be ideally positioned to capture the emerging technical market in South America. Jaques Rosenzvaig, CEO of Conectiva,
made a point of differentiating the South American market from that in Europe and North Amercia.

Growth in South America, he noted, will come from initial installations of technology, not from convincing existing customers on other platforms to switch to Linux. He added that what is learned in building a market in South America can then easily be applied in other parts of the world.

In my opinion, this merger is a good one, a natural. SuSE and Red Hat are going head-to-head over the largest enterprise customers around the world. Mandrake-Conectiva seem to be aiming at less affluent customers from areas of the globe where neither of the heavyweights has a large presence. Specifically, the socio-economic conditions in South America make it a very attractive locale for a business- and technically-savvy distribution to be located, and Brazil has been the region's leader in shrugging off the tyranny of a foreign monopoly in favor of GPLed software like Linux. We'll see....

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