When TurboLinux opened an Australian office with five employees in February 2000, distributors and resellers were convinced that selling Linux distributions could be a profitable niche. TurboLinux has now closed its doors, owing money to several channel partners and leaving its distributors with stock they cannot sell.
TurboLinux's Australian distributors Tech Pacific, Saratoga Distribution, MPA and Intellitron all confirmed they have stopped stocking TurboLinux products in light of the closure. TurboLinux International sales manager, April Keene told ARN the software vendor closed its German, Argentine, Australian and UK offices to concentrate resources on becoming successful in the US.
"The downturn in the economy made it impossible for us to provide quality service to our customers on so many fronts," she said. "We have also changed the focus of the company quite drastically. We no longer offer our products through channel distribution or the Website."
Former TurboLinux managing director for Australia and New Zealand, Nicole Sztachanski was unable to confirm whether staff had been made redundant, claiming she left to pursue personal interests.
Distributors have been left with boxes of TurboLinux software they are unable to sell. "We got no notification," said Rohan Holt, managing director of Queensland distributor Intellitron. "We purchased some stock, and the next thing you know they've closed up shop."
Ivar Stanelis, managing director of Adelaide's Saratoga Distribution, said he, and most probably TurboLinux's other distributors, are all holding stock he considers impossible to sell. "I can't give it away," he joked. "Do you want a free copy?"
Several resellers have also been affected by the closure, especially those who had been tempted by the vendor to buy direct behind its distributors' back. Anthony Rumble, managing director of Linux reseller EverythingLinux, said TurboLinux had offered direct sales to his store, and he had agreed, but the vendor never sent him a price list. "That's when I knew something was up," he said. "You have got to get things like price lists and invoices right."
Rumble said EverythingLinux used distributors as well, because there was no way he would be prepared to buy large amounts of product direct and be at risk. Rumble has now issued a writ (liquidation request) to TurboLinux, with the vendor owing him money from a co-operative advertising scheme.
The aftermath of the closure highlights the value of the distributor, who takes on the risk on behalf of resellers. "If resellers deal with distributors, we give them flexible terms and resellers buy as they need it," said Stanelis. "It's hard for resellers to get burnt. It's us that gets burnt."
It also suggests that reselling Linux software is not nearly as profitable as first suggested. "We had got good feedback from resellers," said Holt. "They were quite excited about the products, so we got in a good deal of stock."
But even as a specialist Linux reseller, Rumble said he was hard pressed to sell three of four copies of TurboLinux. "I was warning people months before it happened," he said. "There was a big mismatch between how much they were spending on advertising, and how little they were getting in sales. I know they got lots of float money in the States, but the money can't last forever. They were spending a lot of money and getting no returns."
Rumble now believes Caldera is the next Linux vendor on death's door. "I pointed the bone at [Caldera] three months ago," he said. "It's beyond flogging a dead dog. It's flogging the bones of a dead dog."
Rumble suggests developers need something drastically different to make money out of a Linux distribution. "TurboLinux did well in Japan and China, because they had a niche product there," he said. "But they had nothing here the others didn't have. SuSe has value for money, Red Hat has mindshare and branding, Mandrake has the bleeding edge stuff. Turbolinux had the Japan and China niche and they should have stuck to it."
Rumble suggests the demise of TurboLinux in Australia, and the potential for other Linux vendors to follow suit, does not mean the end of the Linux phenomenon. "It's not a Linux problem," he said. "It's not because of the product. It's because of the vendors. No matter what happens in the commercial world, Linux goes on. It's not like a proprietary product, because even if the vendors die, people still use it."