Lindows Backs Out of IPO

Fresh out of its $20 million settlement with Microsoft, the company says it "won't be forced into a cut-rate IPO by a fickle stock market." Instead, it plans to wait until conditions improve.

Lindows announced Wednesday that it has postponed a previously announced IPO (initial public offering) of its common stock due to adverse market conditions.

Lindows Inc., which is the process of changing its name to Linspire as part of a worldwide settlement reached in its trademark infringement case with Microsoft, is keeping its S-1 registration statement on file with the SEC (Securities and Exchange Commission). Because of this, the company may still proceed with an IPO later.

In its S-1, Lindows had stated that it intended to issue 4.4 million shares at $9 to $11 a share, which could raise as much as $48.4 million.

"Lindows wont be forced into a cut-rate IPO by a fickle stock market. We are fortunate to have cash in the bank, and we owe it to our stockholders to wait until market conditions and public company valuations improve before we proceed with a public offering," Michael Robertson, chairman and CEO of Lindows, said in a statement.

The San Diego-based Linux vendor has had a colorful history. It was the first company to target mass consumers with a combination Linux operating system and PC package. Its $199 Lindows PCs were first sold at Wal-Mart in 2002. Today, Lindows and its hardware partner, Microtel Computer Systems Inc., still offer Lindows PCs at Wal-Mart and other resellers for prices in the high $200s.

The company has drawn praise for its innovative Click-N-Run Warehouse, which enables new Linux users to easily download and install programs from a large catalog of software applications.

In corporate circles, though, the company may be best known for its long legal war with Microsoft over whether its Lindows Linux distribution conflicted with Microsofts Windows trademark. In a fight that took place in the courts of numerous countries, Lindows both lost and won battles.

But in May, the 9th U.S. Circuit Court of Appeals denied Microsofts appeal that the term "windows" be considered only as it is understood by the public today—not as it was when the companys Windows was introduced in 1985—in its trademark litigation against Lindows.

/zimages/3/28571.gifClick here to read more about the ruling.

This was a huge loss for Microsoft, Glenn Peterson, an intellectual property attorney and shareholder with Sacramento, Calif.-based law firm McDonough Holland & Allen PC, said at the time.

"Combined, these statements by the judge make it indelibly clear that if Windows is found by the jury to be generic prior to November 1985, then it cannot be the subject of trademark protection under any circumstances," Peterson said.

"Heres the really daunting aspect for Microsoft: If it is determined in this trial that windows is a generic term, then Microsofts Windows and Windows-related trademarks are invalid—i.e., they cant be enforced under any circumstances," he said.

Because of this threat to the crown jewel of Microsofts trademarks, Peterson predicted that the case wouldnt go to trial, because if it did, "It will become a zero-sum game for the contestants. One side will lose big, and the inevitable appeal that follows will become as familiar to software purveyors as Roe v. Wade is to law students. I will not be surprised at all to hear a settlement announced before Thanksgiving this year."

Peterson was right.

Microsoft and Lindows announced July 19 that they had reached a $20 million settlement in their trademark fight, with Lindows agreeing to changes its name globally to Linspire and Microsoft granting it rights to a limited, four-year license to unspecified Windows Media components, which Lindows intends to include in its newly renamed Linspire operating system.

Microsoft agreed to pay $15 million by Aug. 15 and then make a second payment of $5 million by Feb. 1, 2005, in exchange for Lindows handing over a set of "Lindows" domain names to Microsoft, according to the filing. For now, though, Lindows will work with this money in hand.

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