Big Blue rescues struggling SuSE

A German newspaper report has claimed that the open source software-maker SuSE Linux has narrowly avoided insolvency after...

A German newspaper report has claimed that the open source software-maker SuSE Linux has narrowly avoided insolvency after investors agreed to a new round of financing.

Citing unnamed industry sources, the report said backers would provide the struggling company with more than £30m in fresh funding.

"With the new round of funding, IBM will apparently get on board," the paper said, mentioning Big Blue's recent support for the Linux operating system. Other SuSE investors include Intel and the venture capital firm Apax Partners & Co.

Christian Egle, a SuSE spokesman, confirmed that the company was in negotiations with potential investors but failed to fully back up the paper's claims. "I can tell you in good conscience that a not insubstantial part of the information in the newspaper is incorrect," he said.

The company has been in turmoil in recent days, with its president and CEO, Dirk Hohndel, announcing his resignation on Tuesday, just a month after the previous CEO, Roland Dyroff, was replaced.

Intel and Apax provided SuSE with first-round financing totaling £7.5m in late 1999. Intel mentioned its plans to promote the open source operating system for its processors in Europe at the same time.

Egle sounded an optimistic note about the company's future. "Linux is well on the way to overtaking Windows NT or 2000 in the server market," he said. "Already in recent years it's been established as number two."

He cited the engagement of big players such as IBM and Compaq as key factors towards continued growth.

However, Charles Homs, a senior analyst at Forrester Research in Amsterdam, struck a more cautious note. "There is a market for Linux, but it's not going to grow as much as people thought about a year ago," he said.

"It's always been a fairly small, stable user group that's interested in it, and I don't think that will change."

Large companies such as IBM supported Linux at a time when Microsoft was under intense scrutiny by the US Department of Justice, he added.

"People were looking at potential alternatives," he said. "Now that we know that Microsoft is not going to be split up, or at least that's extremely unlikely, that means less interest in Linux."

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