MandrakeSoft Files for Bankruptcy Protection

An anonymous reader writes "It's official: MandrakeSoft has filed a 'declaration de cessation des paiements' - the French equivalent of a U.S. Chapter 11 bankruptcy filing. From a statement issued by the company: 'This reorganization of liabilities enables MandrakeSoft to continue its current operations, which are showing increases in revenue and significant decreases in expenses. MandrakeSoft's strategic partners are supporting the company in this process and the MandrakeSoft team is focused on continuing to deliver high quality services and products to its customers.' Best wishes to MandrakeSoft as they work through this process."

Story in The Register

[Guiri]

Here is a link to the story in The Register [212.100.234.54]

This is bad news...

Cheers

"Rumors are just that"

[sfraggle]

This is kind of ironic conisdering the recent newsforge article, "Mandrake: Rumors of our imminent demise are just that [newsforge.com]".

click now, credit cards accepted

[2ms]

It's as easy as could be: Mandrake donations page [linux-mandrake.com]

Chapter 11 Bankruptcy does not equal dead

[sireasoning]

People are reading too much into this. Chapter 11 will just allow them to restructure their debt. Mandrakesoft is approaching profitability and are expecting to reach that this year. Once that barrier has been crossed, then they begin to eat away at the debt accumulated mostly from their American CEO that was brought in to make Mandrakesoft look attractive for an IPO.

Re:Here is your chance!

[Khalid]

In fact Mandrake Did ! attract investors, but they have hired very bad (at that time they called it experienced management) which has adopted an inceredible cash burn rate, they suddenly doubled the number of people working for them, then hired a very expensive office, and adopted an e-learning strategy nobody was able to say what it was really. That was during the dot come craze. They have been slowly recovering since they have fired their management, but I don't know if this will be enough for them to avoid banckrupcy.

What about HP?

[geekoid]

HP recently announced that it would include, ceritfy and support mandrake on its new PCs.
I submitted that story to /. but it probably won't be accepted. OTOH if it is accepted, you will probably see it twice!

Re:Just what the hell is going on?

[ashpool7]

Glad somebody modded you down. That newsforge article doesn't deny anything except Mandrake's death.

They implicitly included bankruptcy as an option in their statement. There's no honesty problems here; they just didn't know what they wanted to do.

Bankruptcy protection doesn't mean the whole operation shuts down.

Thank you Henry Poole

[Anonymous Coward]

I used to work for Mandrake (well, I am aware that any AC could say that, so you'll have to trust me on that). I joined the company in late 99, when we were only a few underpaid but hypermotivated linux freaks.

Then money was raised and Henry Poole and his bunch of money-driven cow-boys were hired. Theses assh*les spent as much money as they could in the shortest amount of time possible (thousands of $ of expenses, huge flats rented in Paris), hell, they even tried to buy a company owned by some of their friends (ever heard of Coursemetrics ?)!

When they were told to go try to f*cking another company, it was too late : a few months later, the company had to start cutting the expenses to survive, but more important, most of us were disgusted by their conduct, and a lot of people just "lost faith", and started working less.

I know it's not ONLY Poole's fault, but if the company dies, he will be the main responsible to me. In that respect, his overall contribution to free sofware is awful.

Definition of bankruptcy

[cp5i6]

I don't know about French law's but with the cessation of payments it doesn't necessarily sound that bad.

Judging by the readings I think alot of people have a misunderstanding of what bankruptcy really means.

Bankruptcy is not necessarily a bad thing. Alot of times a company will go bankrupted because it made alot of stupid payments, it's staff is overbloated or a bunch of various different reasons.

When a company files for chapter 11 (in the states) That specifically states they are free from all previous date for a protected time period. (ie they dont have to pay for any debts they accumulated) During this time period a company will then restructure it's business, ie. change of CEO, switch over of board of directors so on so forth to hopefully bring the company out of bankruptcy.

Bankruptcy is actually just a protection from the creditors coming in and "cleaning house" ie selling all assets of the firm and completely dissolving the company (that's a bad thing). So it's very well possible that if Mandrake sticks in a better business model that they can pull out of their bankruptcy (however I'm not too fluent with french bankruptcy laws).

For those of you who think .. well bankruptcy is great.. I should just decalre bankruptcy and have all my debts forgiven.. yes well that works to an extent. Companies need to borrow money to operate (unless you're microsoft who is one of the ONLY companies in the world that never runs on debt or Bonds for those of you more financially inclined) if you declare bankruptcy you're bond rating goes below a Triple B rating (moody's rating agency) which puts it below investment grade. (Junk Bonds) That means you'd have to pay a MUCH higher interest on the money you borrow.

Simply stated you need to make sure you have a damn good business plan to pull out of bankruptcy which usually entails cutting alot of "fat" from the company.

Somtimes you have a realyl good business plan in place after bankruptcy and you're very close to pulling out but the deadline approached and yer still not quite there. A company can then file for a chapter 22 or a second bankruptcy. You can even go for a third bankruptcy.. but that doesn't happen too often.


Here's an interesting fact tho... in all of US history I believe there has only been 1 successful company coming out of chapter 11 and I think that's Texaco Chevron. (a little tidbit for those of you who care about stupid facts).

You heard it at Linux World, first

[_|()|\|]

Maybe Joe will get one right [linuxworld.com], this year:

Mandrake will merge with another firm looking for a way to stay alive. Users can help keep the company afloat for only so long. Maybe it will cut expenses by joining United Linux. Maybe it will get together with its Latin language sister firm Connectiva. Or maybe Microsoft will step forward with a smile to offer the struggling distribution much needed cash in order to get in the game.

While I wouldn't miss Mandrake too much, I think it has had a positive influence on other distros, and it certainly gave KDE an early boost.

Re:"Rumors are just that"

[Roblimo]

Yep. Apparently Gael Duval was not entirely truthful with us. See today's NewsForge story about MandrakeSoft [newsforge.com].

- Robin

Re:Here's your chance (not mine).

[sweetooth]

You have to make the source available, there is no requirement to make it free (no cost), though many people believe you should.

See the following for examples.
http://www.gnu.org/philosophy/selling.h tml
http://ftp.gnu.org/pub/gnu/standards/ORDERS
http://ftp.gnu.org/pub/gnu/standards/DISTRIB

Re:Here's your chance (not mine).

[fucksl4shd0t]

Correct me if I'm wrong, doesn't the GPL mean require them to release the source code freely? (As in publicly downloadable?) So a user could compile Mandrake free of charge? I'm not sure about this, but it seems to me that Free-as-in-GNU is a superset of free-as-in-beer. When you have to release your source under the GPL, how do you have to do that? If you CAN release it on a CD, how much can you charge for that? $5? $50? $500? Where does it cross the line?

Now, it wouldn't be free as in freedom if you weren't allowed to charge a fee, now would it?

I couldn't find a link to give you, but I have read documentation written by Richard Stallman about this exact subject. Basically, what it comes down to is that you can:

• Charge for free software (it's free as in speech, not free as in beer)
• Charge for the source (see above), but no more than you charged for the binary. That means that if you charge $50 for the binary, you may charge up to $50 more for the source, for a grand total of $100. Charging more for the source would not be considered giving free access to the source (free as in speech, again).
• Prevent people from acquiring a copy of the software through your own distribution channels until they pay your requested fee. This includes things like holding the box until they pay at the register, or using authenticated servers to prevent them from downloading until your credit card clears.

However, you can *not*:

• Prevent someone who has bought the software from copying it for their friends, provided they make the copy available under the same license (GPL) under which you gave it to them.
• Prevent someone who has acquired the software by copying it from their friends from passing it along as well, including posting it on a website for free (as in beer) download, or even charging a fee themselves!
• Prevent someone who has acquired the software from viewing and/or modifying the source code.
• Prevent someone who has modified the source code from distributing it with their modifications. You may require them to notate that they modified it somehow so as to distinguish it from your "genuine" product.

• This isn't a complete list of cans and can'ts. The important thing to remember is that the purpose of the GPL is protect freedom. It's not about making software available non-gratis, it's about making software available without sacrificing the end-user's rights to protect corporate interests. When a company decides to make/distribute free software, they have to make a serious commitment to protecting their end-users' freedom, or they will fail somehow.

  As far as mandrake is concerned, they have worked damn hard to stick to the GPL, and have had a LOT of problems besides that. I love their distribution, and I'd hate to see it go (although I'm willing to try out something besides just switching to RedHat), and I really want them to pull through. However, I agree with some of these other posters, that if they failed they've failed. We should move on.

  But filing for bankruptcy protection doesn't mean disappearing completely. They may still have a chance and make a comeback, so I'll be watching for that. :)

Re:Unrealistic Reasoning

[mickwd]

"MandrakeSoft is going the way of the dodo because they haven't successfully created a way to make money. End of story."

MandrakeSoft is in the current financial situation because of their former management team (now sacked) who tried to turn them into some sort of e-Education dot.com company - increasing their operating expenses 400% in the process.

They've sorted out the worst of the mess, and they're doing much better now, but they have a big financial hole they can't fill. This is the reason for the Chapter 11-like filing. Without huge debts to service, I believe they can easily be profitable (although they might have to be a little less generous with how much they give away for free).

If you're going to say "End of story", make sure you've read the book, not just the covers.

Re:Here is your chance!

[yog]

Hell, I think Red Hat's stock is about twice the value of Sun's right now.

Heh... Not quite. Stock price is meaningless. It's market cap (price x shares) that counts, when you're comparing valuations. Sun's market cap is $11.77 billion (according to today's WSJ), whereas Redhat's market cap is $1 billion. Sun's total equity as of June 2002 was $9.8 billion. RedHat's total equity was $327 million as of 2-28-02, probably has gone up since then.

Still, a market cap of a billion for a Linux company is pretty impressive.

Re:"Rumors are just that"

[civilizedINTENSITY]

"similar to the U.S. Chapter 11-Reorganization"...

now if they were doing a "similar to Chapter 7" then it could be a "demise" situation. Reorganization under chapter 11 is a way to continue forward avoiding corporate death.

Re:New Business Model

[MeanMF]

Provide MandrakeClub-only rsync and ftp servers...Even further, stop providing free downloads of the latest/greatest version, putting the ISOs on MandrakeClub-only ftp servers

According to the GPL, ANYBODY can freely post any version of the Mandrake ISO's on their ftp server if they want to, and there is nothing Mandrake can do to stop them. There is no real way to make money selling GPL software.

Re:Here is your chance!

[Otter]

Well, you're the one person using the word correctly, in the Marxist sense. Everyone else uses "capitalism" when they mean "free-market" or "laissez-faire" or something like that. I'm sure there's a Ph.D. thesis in the story of how that usage came to predominate outside of Pravda.

Anyway, aren't the Reichmanns broke now?

Re:Here is your chance!

[pstemari]

If I understand that correctly, Sun's market cap is roughly 20% above the book value of the company, while RedHat's is about 3x book value.

That's a pretty impressive display of confidence by the market in RedHat.

An actual explanation!

[Anonymous Coward]

Okay... It's time to explain this to people who are saying Mandrake is going to die, or that it is non-competitive, etc.

Follow the logic, pls:
1. Mandrake at this point is potentially profitable. Sales, consultation and other activities are doing well.
2. In the .com boom days, they had a bad admin staff who bought into the hype.
3. Aforementioned staff got them into a lot of bad contracts in the name of accessing new markets. Very classic case of corporate over-extension.
4. The .com bubble burst leaving them with expensive monthly contracts to pay and no profit returning from.
5. Mandrake at this point has made cut-backs, re-organisations, etc. That make all other parts profitable; except that these contracts weigh them down.
6. The contracts have expensive fees to break them, but Mandrake needs to get rid of them in the long term, otherwise they will never be able to use their current profitability.
7. Contracts are broken, demanding huge sums of cash, right now to pay off the fees. Hence the request for support before Christmas.
8. Options are: a) Raise cash, pay off debt. OR b) File for chapter 11, etc. which effectively gets rid of the liabilities. Not fun to do, but a) didn't quite work, so this is the other option.
9. Once the debt is dropped, Mandrake essentially is left with their current operations when they come out of that protection. At this point, they can turn a happy profit, because their day to day business actually is profitable.

The End.

It's simply a neat tactic to remove debt and improve the situation of the company, which now looks more healthy than ever. It's a good thing; a very good thing!

Don't worry... There will be a 9.1 and 10 and so on... Everaldo is already getting set up to work on the new artwork for 10, in fact.

Re:"Donate?" No, purchase.

[Bruce Perens]

If you pre-ordered and they have not shipped the product, you are now a creditor. I don't think they'll do this, it would be stupid, but they don't really have to ship you the product. They could refund your purchase at cents on the dollar.

So, And no, this is not a way to screw the creditors. It's a way to get the creditors something back.

I recommend that everybody just sit tight until the bankruptcy distribution is done.

Bruce