Earlier this week it was announced that corporate Linux distributor Xandros had acquired upstart San Diego based Linux distributor Linspire. For those of you not familiar with Linspire, they are the company that irked Microsoft by announcing a Linux product called Lindows. It was aimed at the low end PC market as a direct replacement for Windows. The litigious Microsoft legal department were quick to react. and headed off to court, this was one battle though that Microsoft could not win, and resulted in a fairly large out of court settlement. While many details of the settlement remain confidential it would seem that one of the conditions was to drop the Lindows monika.
As a Linspire user myself I have to admit that I am less than enthusiastic about the Xandros deal. In my mind it signals the death of a very interesting and easy to use distribution of Linux. In fact there are a number of people that are upset, not least of which are the minority shareholders of Linspire. They feel that this sale is a clear case of asset stripping by owner Michael Robertson that will effectively leave them with worthless stock.
One of the most vocal opponents is ex CEO Kevin Carmony. I caught up with Kevin and had the opportunity to talk with him.
You were with Linspire for 6 years? And for part of the time you were the CEO. From what I can see the company was pretty vibrant. I know that you got under Microsoft’s skin with Lindows, and I know there was an out of court settlement, I laughed, it seemed to me Micro$oft has little firm ground to whine, and opted to take a different road. When I interviewed Mr. Robertson a few months ago I was told to avoid any mention of Microsoft. Do you have any comments?
Yes, I was with Linspire for around six years. I was the very first full-time employee at Linspire. I was even there before Michael Robertson, as he was still at MP3.com finishing up the sale to Vivendi. I was the President and COO for the first four years, and then President and CEO for the last two years.
Today, the main terms of the settlement with Microsoft are quite public. They were disclosed a few years back as part of the public documents filed with the SEC when Linspire almost went public. The settlement had a total value of around $24M.
Linspire is registered in Delaware, and as such the sale was able to occur without any consent of even discussion with the minority shareholders. Delaware is the home of many companies because of its lax regulations. Would it be good legislation to make companies physically be located in the state they register in, as in have a real office with real people?
Actually, Delaware is known for being an easy state to register in, but they do enforce laws dealing with corporations. They don’t want to become known as a “rouge” place for wayward corporations, as in the long run, that would hurt their prospects of companies incorporating there. I think they try to walk the fine line between being corporation friendly and enforcing corporate governance requirements. Their attorney general will not hesitate to prosecute fraud, etc. I’m rarely for more regulations. I’m not looking to change laws to protect shareholders from unscrupulous controlling shareholders, but just have majority shareholders treat minority shareholders in a proper manner. There are a lot of people I know who follow the letter of the law that I would never do business with. I’m not looking for laws, just common courtesy with the existing ones. Not keeping minority shareholders informed is SOMETIMES illegal, but ALWAYS bad form.
It did not take much Googling to see that you are a very entrepreneurial king of a guy. What are you working on now?
When I left Linspire I started working full time on an idea I’d had for sometime, called Dating DNA (www.datingdna.com). My hope is for Dating DNA to become the Internet’s central nervous system for online dating, allowing users to integrate all their dating information across the web’s social graph with one 9-digit ID number. Dating DNA provides free and open Web Services which bring 1-click compatibility scoring and other sophisticated dating features to Social Networking sites such as Facebook , MySpace, YouTube, Craigslist, etc., as well as to Internet devices such as Apple’s iPhone/iPod Touch and the Chumby web appliance. Online dating continues to move dramatically away from traditional dating sites such as Match.com and eHarmony. Every day, more and more people are using Social Networking sites as a means of meeting new people to date. Utilizing these sites is free, and provides a more natural way of meeting people than traditional dating sites of the past. Dating DNA is the first company to capitalize on this trend, by bringing the convenience of matching tools from traditional dating sites to these new Social Networking avenues and across Internet devices.
Clearly there is not much love lost between yourself and Michael. If you were to sum it up in a few words, what is the root of the disagreement?
Michael and I had lots of disagreements over the years. On a scale of 1 to 10 (representing the level of how upset I became), these were usually only around a 3 or 4, typical stuff you face when executives battle out ideas.
When I became CEO, Michael agreed to stay out of the way and let me run the company, which he did for two years. These were great years for me at Linspire. I don’t think we hit more than a 1 or 2 during this time. However, when we had a very profitable year in 2007, Michael suddenly wanted to be more involved and we had big disagreements on what to do next with the company. These disagreements were about a 6 for me (again, on that 1 to 10 scale of how upset it made me).
When Michael told me he thought it was appropriate for him to transfer money from Linspire to himself and his father-in-law because they were preferred shareholders (something two law firms disagreed with him on), and also wanted me to lay off a lot of good people with only 2 weeks severance, this was an 8. (I let the employees go with more reasonable severance, based on their position, tenure, etc.).
These elevating factors are what caused me to resign. I resigned without taking any severance, and I still had high hopes for Linspire, so much so, that I even offered to buy control of the company. However, after I left, Michael filed a false report with the San Diego police department accusing these very good former employees of having embezzled their severance payments! That was an 11 for me! Even I wouldn’t have suspected Michael could sink so low. Even though this report was kicked out of the San Diego system as unfounded (as the CEO under employment contract, I had full authority to make these severance payments), Michael and Linspire continued to use this false document with other employees, the IRS, their bank, the unemployment office, etc. This took me to a 12 and was unforgivable.
I thought Michaels comments were interesting. Linux on the desktop is a failure, the future lays in embedded devices. I personally think that is a croc. What do you think?
I actually did an entire blog on this just hours ago: http://kevincarmony.blogspot.com/2008/07/michael-robertsons-ego-refuses-to.html
You are a minority shareholder in Linspire, and as I understand it there are something like 100 in total. I have no doubt that all of you are pretty mad. Is there a game plan?
I have to say that from my outsider viewpoint. If the stories are true, the company now consists of less than 10 employees, there would seem to be few assets to sell. I am sure that Xandros have their own computers, and I am sure that their commitment to Linspire will be approximately zero. About the only asset I see is CNR. Your thoughts?
When I left there were computers, servers, etc., but the main asset was millions in cash, the brands, the CNR technology, the user base, etc. The minority shareholders just want to know what what happened to all these assets.
What else would you like to share with us?
Honestly, having Michael Robertson out of the open source Linux space will be good for Linux. He was never a true community player. Ubuntu, Novell, Red Hat and others are doing great work here. They don’t need the drama of someone like Robertson. I’ve been a Ubuntu user for some time now, and I’m constantly impressed with the good work coming from this distro. Mark Shuttleworth has really impressed me.
Thanks for talking with us, good luck with Dating DNA, and I hope that you and the other minority shareholders in Linspire get an equitable settlement.