Caldera Raises $30M, Files IPO

With the ink still drying from its $30 million private round, Linux software provider Caldera Systems Inc. unveiled plans to test the public market through a $57.5 million IPO this spring. While the same-day private placement/public filing is not unprecedented, the timing highlights the added regulatory complexities of filing for a public offering.

“Just look at the press release [for the private placement], it really lacked teeth. Some of the better quotes were left on the cutting room floor,” said one venture capitalist who participated in the company’s latest placement. “Because Caldera was trying to close a financing and a registration statement at the same time, everything had to be done very carefully.”

Making sure Caldera remained in compliance was just one hurdle management had to overcome. Caldera CEO Ransom Love also had to balance control of the company’s operations between parent The Canopy Group Inc. and its latest investors Sun Microsystems Inc., Citrix Systems Inc., Novell Inc. and SCO.

“I think this deal was circled about a month ago,” the VC said. “What used to be done as a handshake really had to be codified because of the registration statement.”

In a move expected to solidify Caldera’s focus on high-end, Linux-based e-commerce platforms, Caldera expanded its board of directors by four members. The board now includes Ed Iacobucci, chief technology officer at Citrix, a developer of application-server software, and John Egan, former executive vice president at EMC Corp., a provider of enterprise storage solutions, and current partner of Egan-Managed Capital. Executives from Sun Microsystems and Novell are expected to fill the remaining board seats, according to sources.

Nevertheless, Caldera remains firmly under the control of former Novell executive Ray Noorda. Through the Canopy Group, MTI Technology Corp. and the Noorda Family Trust, Noorda controls 84% of Caldera Systems’ stock.

In addition to usual cautionary notes about expected operating losses, Caldera management highlighted the risks of such a concentrated ownership structure.

“For example, Mr. Noorda could elect all of our directors, delay or prevent a transaction in which stockholders might receive a premium over the prevailing market price for their shares and control changes in management,” the company said in its registration statement.

The management shakeup should, however, mitigate questions surrounding Noorda’s large stock position as the company transitions towards its goal of concentrating on e-business customers in a suddenly crowded Linux market.

Caldera, which has generated the majority of revenue to date from retail sales of OpenLinux, designed to assist the first-time Linux users, plans both server and client software products tailored for specific uses.

By June 30, Caldera expects to release its eBuilder package that will enable clients to deploy e-commerce software that runs on a central server. Caldera will bundle the software with its own Linux server software, which is called eServer.

The exact timing of Caldera’s IPO has not been determined, according to lead manager Robertson Stephens. However, Bear, Stearns & Co., Wit Capital Corp. and First Security Van Kasper round out the underwriting syndicate.