Wednesday, July 2, 2008

Michael Robertson--Where's the Cash?

Linspire Shareholders,

When I left Linspire there were lots of assets in the company (computers, furniture, servers, trademarks, employees, and millions in cash), and virtually no liablities. What happened to these assets and cash?

I have been contacted by several Linspire employees and shareholders, asking me what the Linspire asset sale to Xandros means. I put together this short video using "buckets" to try and explain what happened in very simple terms, based on what information was provided in the 3-paragraph "memorandum."

Since Larry and the other employees now work for Xandros, Michael appears to be the only remaining employee of Digital Cornerstone, Inc., the company we now all own shares in.

So, Michael, the shareholders want to know...

1. What assets remain in the company?

When I left, there was a lot of cash in the account. I assume this has grown, since you sold off the other assets to Xandros.

2. What is the value of our shares?

When I left, I offered $.50 a share to buy stock in the company. The shareholders are all curious what their stock is worth today, ten months later. Have you grown or shrunk the company since then? You always told us to trust that you would take care of the employees and shareholders. Time for you to honor that trust.

3. Since all the assets have now been sold, how do we cash in our shares?

Perhaps Michael is hoping we'll all just forget about "Digital Cornerstone, Inc." and he can keep all the assets for himself? Perhaps he'll use some clever legal maneuver to make sure the 100 shareholders never see anything for their investment in Linspire? Perhaps instead of cash, we now all own Xandros stock or shares of Michael's other companies (both worthless in my opinion).

Without Linspire ever holding shareholder meetings, we remain in the dark, and left to speculate.

Here are just some of the many employees who worked for Linspire over the years (as found on the Linspire website from a Linspire Letter), many of which paid cash to exercise stock options and are now shareholders. Michael asked them all to "trust him."

I have no intention of forgetting, as I'm sure is the case with many other shareholders. I would suggest that Michael Robertson hold a shareholder meeting ASAP to answer these questions.



Anonymous said...

I'd certainly like the answers to some of these questions, but at this point, I think it's unlikely we'll get them - I'm already preparing to write off my investment in Linspire as a total loss, because the cost of getting these answers may exceed any return.

With due respect, I think the rest of us are being caught up indirectly in the personal battle between you and MR. I probably won't get answers because if I get them, so do you, and MR doesn't want you to get them.

The huge irony in this, should your allegations be true, is that MR has built a career on the idea of a crusade of the "little folk" against the predations of the rich and powerful - vs the record industry, Lindows vs Microsoft, SIPPhone vs the telephone industry, MP3tunes, vs the record industry, etc. etc.

But history repeatedly tells us that the more publicly righteous someone is, the more likely they are to become the very thing they hate - TV evangelists get caught with hookers, priests get caught molesting young boys, politicians running on "no corruption" platforms get caught with their hands in the cookie jar.

Somehow these folks talk themselves into thinking that what *they're* doing is OK - it's the *other* rich and powerful folks that can't be trusted and are immoral and unethical.

It's not completely out of the question that MR may have succumbed to that trap - I can see how he might have rationalized it given the ugly reality of the state of Linspire as a ongoing business relative to his substantial personal investment.

Failure of a business is a very tough thing to accept, and people will go to great lengths to pretend it isn't happening - I know, I've been there myself. Even if MR is doing what you say he's doing, he may honestly think that everything he's doing is ethical and moral.

I had the very unpleasant task of shutting down a company - I had the ability to completely rip off my investors and other shareholders, and people the company owed money to, but I chose not to do so. Actually it wasn't really a choice, because it would have been wrong to do anything else. I managed to get at least *some* of the money back to these folks, even though it was far less than they invested. I hid nothing from them, even the embarrassing stuff that I thought reflected poorly on my business judgement.

Much to my shock, these folks wanted to invest in me *again*, despite the fact I'd lost most of their money.

As I mentioned in a previous post, the business community in San Diego is small and very tight-knit. My personal Rolodex runs very deep in this town - many of the folks that work for and have worked for MR companies came directly or indirectly through my personal contacts, and that network works both ways.

So, I truly and honestly hope you're wrong about Michael - it would be a truly tragic thing if he has turned into the very thing he's been fighting against.

Kevin Carmony said...

Well put Duane.

For me, however, I have seen Michael's behavior enough over the years that I no longer afford him the benefit of the doubt. When he filed a police report and accused some exceptionally good people of embezzlement, all in an effort to unwind severance payments, that was it for me. Even I was surprised by that new low. You'd understand the feeling Duane, had your name been listed with the other "criminal conspirators."

Michael's public persona is very different from the one I, any many who have worked closely with him, know first hand.

Good for you Duane for taking care of those who have trusted you, and not taking the low road and easy way out.


Anonymous said...

good points duane...
we really did have a good team while i was there.
only time will really tell what happens with the minority share holders. I think i only struck my firs block of stock so I don't really have that many shares.
I was going to post on my blogger account however it is in a death loop trying to export over to google. I guess i have not posted in too long.
I do however have some dribble over at

Anonymous said...

I feel like I am in a Seinfeld episode... I now own a small piece of a company "about nothing".... ;)

Former Linspire Employee and Shareholder

Anonymous said...

I'm in the photograph that Kevin posted. But, I want everyone know that I don't support what he is saying and that I completely disagree with him. I'm not a member of his 'band of the disgruntled'.

For the record: I never exercised any of my shares from Linspire and I quit while Kevin was the CEO. The reason I left (and didn't exercise my options) is that I had zero confidence in Kevin Carmony as a leader.

He is trying make Michael look bad. But, Kevin was at the helm when things started going down hill. After years of bad decisions, Kevin conveniently points the finger at Michael and tries to pin all the blame on him. Kevin should be looking in the mirror and pointing the finger at himself instead.

I encourage everyone to question what they read here. Consider the source. These rants are coming from a disgruntled ex-CEO who is (desperately) trying to remain relevant.

You are not a victim Kevin: you just play one on the Internet.

Kevin Carmony said...

Kendall, where is your boss to answer these questions? I assume you agree he was right to sell Linspire without a second thought to anyone but himself?

I'll point out that Kendall is one of the few people who remain under Michael's employment.

Kendall, I couldn't care less about remaining "relevant," but I do care when Michael falsely accuses good people of being thieves and embezzlers. You can side with Michael and his unethical conduct. That's your choice.

As for my performance as CEO, all I know is I took over Linspire with losses in the millions, and left it profitable and with millions in the bank. I think the shareholders have a right to know where the assets have gone.


Anonymous said...

Kendall was the resident fanboy at Linspire, paid to always say good things about the company in their forums. I see now he's the paid fanboy at Robertson, Inc. Go team Michael!

Anonymous said...

Since he's the only one who knows, guess we'll have to wait for Michael to fill in the specifics of the deal here. ;)

Anonymous said...

I still don't know where i fit in all of this stuff... I am a shareholder and former worker at linspire. and I hope that all does go well with the buyout. I fully understood the risks when i struck my options. Although I do not have any knowledge of the number of shares that KC holds in linspire he does have more capital tied up in those shares. Look i don't even thik KC needs to go in to that amount of detail... I do think that there may have been think that there may be more that all us could have done to improve the potential success of Linspire. I dont think the blame does lie with any one person.

I Will agree with KC in the fact that I don't necessarily like the fact that there was not meeting for the miniorty shareholders to either say yea or nay to the buyout. I am optimistic that this should be good for the minority shareholders.

Anonymous said...

Thank you Kevin. The video was very helpful in understanding what happened. It does look pretty suspicious that Michael is left all alone with the assets and no oversight.

You would think that Michael would be required by law to tell the shareholders what happened. Not very professional of him.

Brett Zamora said...

Kevin... I enjoy reading your blog. I don't remember how I stumbled onto it, but it's very interesting to read, especially since there was a time when I desperately wanted to work for, what was at the time Lindows. It seems that I may have dodged a bullet, since I never was contacted for an interview.

Reading about some of the transitions that have taken place at Linspire leaves me thinking that the company could have held an even brighter future if you had remained in charge. Sadly, it appears that this will never happen.



Anonymous said...

Kevin, I think you are quite brave to have taken such a public stand.
I also think that it is cool that you are standing up for the other shareholders.

It's clear to me that the general public still hasn't figured out what is a very simple thing: MR is not very good at running companies.

In fact, he's more or less one of the worst CEO's in history, if one carefully evaluates his track record.

He purchased the URL and was smart enough to build a decent independent music site around it. Then he got lucky again, the site became very popular, and his timing was perfect, and he was able to pull off a stunning IPO.

But his success with was essentially built upon the smart move of buying the domain name from a hapless owner.

All he essentially had to do was "stay out of the way" and let the suits take care of the rest and he became worth more than a billion dollars.

Everything was great until he had to actually start running as a business.

After having made some terrible decisions, he managed to reduce a multi-billion dollar business to a valuation less than four hundred million. If it wasn't for a wacky Frenchman running a major company, might have simply gone under...instead MR was able to cash out and walk away with more than a 100 million dollars. The wacky Frenchman ended up going to jail...

Linspire had a good start and a promising future until it was Michael Robertsoned to death and limped along to a rather sad ending. You personally took on Microsoft and prevailed to the tune of 24 million dollars. To what end? Only to ulimately see Linspire become sold off to another very weak business at what was no doubt a pennies on the dollar deal.

Litigation seems to constantly buzz around MR like flies at an open cesspool.

What profits have his investors ever made in his businesses?

Why would people invest in a litigation magnet?

What future does he have now? With a major lawsuit aimed at his personal finances, he may be cleaned out completely. He boo hoos about how unfair how that the plaintiff in the latest lawsuit is going after her personal fortune, but piercing the corporate veil is supported by the law in certain circumstances. It isn't a particularly unusual approach in a lawsuit where corporate assets are minimal and the request to go after personal assets is often granted.

I imagine he's under quite a bit of stress right now.

In short order his personal wealth may end up being pretty much equal with that of the average barista at your local Starbucks. Probably more like a barista who just found out her Starbucks was closed.

It's a pity for the family that he mentions in his latest blog on his personal site. I'd hate to be a kid growing up who has to explain how his father used to be a billionare but ended up working at Best Buy selling laptops.

MR: "Buy the PC or the MAC, not the cheaper Linux machine, I need the commission!"

Who would invest in his next company? With all his companies post showing no real gain for investors?

I feel sorry for all the Linspire employees who were waiting for years for the big IPO that never came.

The treatment shown to Linspire investors has been alarmingly capricious.

I understand your ire, since as an investor, I am sure you would like to recoup your investment and maybe even enjoy a reasonable profit.

But instead, it appears you are watching the King of the Disabled Kingdom load up the palace treasury into his van as he prepares to motor off into the sunset while the Lawyers of Litigation, not unlike the Vandals of old, attempt to storm the gates and secure their share of the booty. Which would be, I think, all of the booty. Copyright infringement damages are insanely high. That's why got into so much trouble.

I suspect he has always closely surrounded himself with Yes-Men, rather than the hard core, truely talented advisors that he could have hired. Pity. He can't be a completely terrible person, didn't he set up a charity of some note? Too bad he didn't have really good advisors after you left. I suspect most of the time he didn't want to listen to your advice, did he?

All he ever had to do was take his money, buy a villa in France, and watch HBO for the rest of his life, enjoying the company of his wife and children.

Instead he foolishly threw everything away (if he gets the book thrown at him in the current lawsuit, that is.)

As a very wise man once said, "we are always our own worst enemy."

"MR" used to have a very politically incorrect meaning, I think it still does.

This must be a difficult time for you and please do keep us informed and the best of luck to you.

Kevin Carmony said...

Thanks Brett.

When I left I tried to buy control back (at $.50 a share), but Robertson never even responded to my offers. Hopefully all the shareholders will be pleased with what he has done with the company in the last 10 months and that their shares are worth at least that. Hopefully it will not take a lawsuit to find out. All most shareholders want is the answer to the three questions I asked above.


Anonymous said...

Speaking of "unethical conduct".... what does it feel like to screw over an entire community and sell out to Microsoft?

Anonymous said...


That is NOT what I said at all. You are just making stuff up at this point. I'd be happy to refresh your memory about how our conversation in your office went.

It still doesn't change the fact that you screwed over an entire community who believed in you. Now, you are trying to dupe that same community into believing that you're the victim here.

Anonymous said...

For the record: I did NOT say - "I'm not really in a position to turn money down, so no, I'd take the money." In that meeting Kevin did offer me more money to stay but, I quit and left the company.

Kevin Carmony said...


By "sell out," do you mean, enter into basically the same agreement with Microsoft that Xandros entered into BEFORE Linspire did? So, I can assume you feel that Michael has sold out Linspire as well, when he chose to sell the assets to evil, Microsoft-lovin' Xandros?

You also know that Michael approved the MS deal, right? In fact, he, more than anyone, has financially reaped the benefits from that deal. So, he must be evil as well, no?

And, last but not least, what about YOU Kendall? Let's set the record straight. I remember very well you sitting in my office before we did the Microsoft deal. You were expressing concern, and I explained to you that it made sense for Linspire.

Here is basically how the conversation went:

Kevin: "So, Kendall, by doing this deal with Microsoft, if it helps Linspire become more successful, and we were able to pay you more money, would you turn that down? Would you feel the payment was tainted and reject it?"

Kendall: "Well, I'm not really in a position to turn money down, so no, I'd take the money."

Hmmm, so Kendall, YOU must be evil too? Or, I guess it's ok to do deals with Microsoft if YOU benefit financially. Got it.


Kevin Carmony said...

Now you're just plain lying Kendall. Several of the executives know what you said, as we talked about it often; how you were so self righteous but then said you would not turn down more money if it was offered to you because of the MS deal.

I understand why you don't care Kendall. 1) You were not falsely reported to the San Diego police department as a "conspirator" to a crime, 2) since you aren't a shareholder, you don't care how Michael treats them, and 3) you're on Michael's payroll.


Anonymous said...

Kevin has taken a snippet of conversation that we had and taken it out of context. Let's set the story straight for everyone:

You asked me: "If you were the CEO what would you do?"

I answered: "If I were the CEO I would probably take the money."

And thus the accusation of ME taking the money. But, I was NOT the CEO. I did not take any money. If I were the CEO we never would have to make that choice in the first place. We would have listened to our community and asked them first.

I was against the Microsoft deal from the start (and I still am).

I stuck by my beliefs and turned down the offer for more money. Then, I left the company (purposely choosing not to exercise my stock options).

Anonymous said...

It's sad to see Linspire's demise.
Thanks guys for all your work over the years.

I hope Michael settles with you folks. You deserve that much.

Anonymous said...

I've been following and supporting MR since the pre-release Lindows days, am a lifetime insider and I can't say I'm surprised by any of this. MR is the vaporware and BS king. All he's done for the FLOSS community is to take their hard work, re-brand it, and sell it as an innovative idea to make a buck, and he has failed miserably. It's time he came up with an original idea, instead of profiting off the hard work of other.

I'm glad to see your taking a stand Kevin, and best of luck to you and all the people MR is screwing over.

Kevin Carmony said...

Yes, I asked that too Kendal (if you were the CEO), but I also asked would YOU turn down a bonus or raise offered to you if the Microsoft money made us more profits. You said you would take the money.


Unknown said...

I will actually post with my google id this time.
I actually see both sides of the MS issue.
From an open systems standpoint it totally sucks.
However, as a support professional I see the need for transparent interactivity for the end user. That was one of the goals of Linspire from the start do as much as we can to make the transition to an open platform easy for the end user.
There is more that is necessary than just having the correct CODES in place so they can watch movies and listen to WMA files. My understanding of the MS deal and KC can correct that here on in a separate post was not only CODEC licensing but also protection against paten clams by MS.
This is not the correct thread to go in to more detail about the ethos of software patents so I will not say more about that portion.
I will say that even in a privet corporation the CEO still has a duty to act in the best interest of the shareholders. Sadly this goal is not always in line with what users and community members may want and I do feel that the MS deal is one of those times. It is easy to be an armchair quarterback and say tell MS to sod off. I will say that even if no money was involved I would have had a hard time if I were the one in the corner glass office knowing what choice to make.

Chad said...

Kendall how pathetic you’ve become. You’ve sold your integrity for your bi-monthly MR paycheck. Many of us were privy to the conversation that you had with KC and you DID say that Linspire should take the MS money if it got you a raise or secured your job. To deny that now is a flat out lie. Yes, you initially said you opposed the deal until it affected your compensation, then you supported the deal in going through. You may try and spin that now, but there are many of us that know what you said. I guess this makes you a hypocrite and a liar!

Anonymous said...

After this post I'm done. I didn't stop by to have a debate. I stopped by to let people know that not all those in the photograph are supporters of Kevin's ideas. Some of us were not happy that he posted our photos.

To address your comment Kevin:

I don't remember saying that. You may be paraphrasing from something we talked about during our 1.5 hr meeting? You know that I have always been against Microsoft. That is why I started using Lindows in the first place. I was trying to get away from Microsoft.

I was thrilled to have the opportunity to come and help further the cause of desktop Linux. I was trying to help bring competition to the marketplace. In the early days you were against Microsoft too. You said you were trying to get away from Windows and you talked about the advantages of Linux. I never stopped believing. Somewhere along the line you changed. You stopped believing. You starting doing the opposite of what you originally told us. (That still confuses me.) When I was in that meeting in your office my principles did not change. I was against Microsoft in the beginning and was against them on that on day too.

The community was active at one time and we had a lot of believers. I didn't change and, the community didn't change. We still believe in the potential of Linux. But, I was sad to see that hope disappear during your tenure. You brought about the decline by not listening and not caring about the people who supported us most. You lost sight of the vision. The Linux community is still out there and is still learning and growing. Someday there will be true competition thanks to the hard work of millions of fans and supporters.

My general feeling on the whole matter is: money doesn't make it right. Wrong is wrong no matter how you spin it. Microsoft's patent claims are pure FUD. They actively prevent competition in the computer marketplace. They have been legally accused of being a monopoly (multiple times). Helping their cause and advancing their agenda is being a willing participant in their plan. I chose to NOT particpate.

So, you can do what you want and, say what you want. The fact are:

* I stand by my principles
* They haven't changed.

Anonymous said...

Are you guys serious in trying to beat up on Kendall?!? Give me a break! He backed up his moral objections to the MS deal my resigning from Linspire! Also, Kendall is a regular employee and very hard working and diligent. You guys probably make 15x his salary. Lay off of him about whether he would take the deal if it meant putting food on his own table. Unbelievable!

Anonymous said...

Chad: to set the record straight:

1. You weren't there. Kevin and Randy were present. Unless Kevin was recording my conversation without my knowledge (or he they told you second hand) you wouldn't know.

2. I turned in my resignation and 2 week notice to Randy (my boss) on 3/15/07. We didn't have that meeting until like the 22nd or 23rd of March (the following week). My notice of resignation was still in effect. I was leaving on a particular date. In the meeting Kevin tried to offer me more money to get me to change my mind. I refused and stood firm to my last day. So, bonuses or pay raises were irrelevant at that point. I was already counting down to my last day.

Unknown said...

It is sad to see so many at linspire act this way towards each other, the truth is everyone knew lindows changing to linspire. That it would not work out money wise, why well because the the very people linspire was for that is why.

Linux user hated a easy desktop linux, and by default made sure linpsire would fail right from the start.

They wanted a geeks OS and free system and nothing else matter to them but that, and they would not support linspire because it was a easy OS, and because linspire dare to try and make a profit from it.

I had got a free copy of the first linspire, nice but I disliked only limited usage of CNR till I paid for a year of CNR.

And after that year I would not renew, the OS was fine but paying for CNR yearly was not. It only had the programs every other one had free, and nothing really standed out that much from any other OS.

Had lindows went ahead with what they claimed, giving people a real choice as a desktop. That would run all our MS programs as well, well we would of all jump on board with it.

What matters to most of us desktop users, our MS programs like photoshop, spoonfeeder, games. All made for MS OS, we really wanted a OS that could run linux programs and MS programs.

What did we get win4lin a program, not a OS that run dual programed software. The best we could do is daul boot, start counting all the daul boot systems, a real daul system OS would of got most of them.

And others would of also wanted it as well, that was some thing no one else had but many wanted. Then lindows settled with MS, and then linspire drop the real dream of a dual OS. A OS that could run linux and windows, in fact most felt done right linux could run MS programs better then MS OS.

Unknown said...

wow. it's like a family reunion here.

we did some incredible work with CNR and self-repairing software, and sometimes i really miss you guys.

in the end, though, i'm really happy that it only cost me a few hundred bucks to get out when i did. i'll never see that money again, but i wouldn't trade the experience for anything.


Unknown said...

I've been reading about the current Linspire soap opera with some interest and noticed that my photo ended up in the montage in this post. I just wanted to point out that while I was an employee for 2 1/2 years and vested a decent amount of stock, I am not now, or ever was a shareholder (thank goodness).

PS: there are also a couple of repeated photos in there, if you look closely. =P

Kevin Carmony said...

The photo came from a Linspire letter on Linspire's web site.


Anonymous said...

Kendall (Fanboy #1), didn't you say you were leaving? Don't you have some posts to censor somewhere?

JML said...

Wow, this is like a family reunion! The circumstances are unfortunate, but it is really awesome to see some of the original crew again.

Similar to what Doug(ster) said, I would gladly sacrifice my investment into the company for the time I had at Lindows/Linspire.

I hope you guys choose to keep in touch once the dust settles...


Anonymous said...

Kevin Carmony.

I'd really like to meet up (not in real life, sorry) with you some time. Is there any way I can contact you?

If anyone would like to contact me (I'm always interested in ex-Linspire employees), pls. email me at

No reason, I'd just like to get to know the people that made/contributed to a good operating system. :)


Anonymous said...

"piercing the corporate veil... proving that a corporation exists merely as a completely controlled front (alter ego) for an individual or management group, so that in a lawsuit the individual defendants can be held responsible (liable) for damages for actions of the corporation. If a corporation has issued stock and held regular meetings of shareholders and directors, it is unlikely a judge will "pierce" the veil and limit the liability to the corporation, unless there is proof that the corporation was created to accomplish a fraud on those dealing with it."

Can shareholder meetings be held retroactively? Anyone got a time machine?

Anonymous said...

Ken - according to the San Diego Union Tribune article at, MR says:

Robertson said that in any transaction, preferred shareholders and investors are at the front of the line to get paid. He said he couldn't get into specifics of the deal or say whether anything will be distributed to minority shareholders.

“I personally have invested more than $20 million in Linspire,” Robertson said. “It's important to know that when there are distributions, the investors always get their money back first, and if there's nothing left over it's not a devious plan to screw shareholders. It's the way it works.”

I was unaware that Linspire had preferred shareholders - I had understood that it was all common stock with the same liquidation preferences.

Can you provide any information about the equity structure of the company?

Anonymous said...

Sorry, not sure why that last post said "Ken" - of course, I meant "Kevin".

To follow up, though, if Linspire indeed has preferred shareholders and the remaining cash equity after paying off debts falls below the total investment by those shareholders, then MR is correct, and those of us with common stock are left holding worthless paper, a tax write-off, and some life experience.

The thing I find interesting in the quote is that he mentions both preferred shareholders *and* investors getting ahead of the rest of us, as though there are investors that are *not* preferred shareholders that he feels should get liquidation preferences anyway.

If so, that would indeed be very troubling, since I fail to see how *my* investment, which involved giving actual dollars to the company in exchange for equity, has any less standing than somebody who put in more money under exactly the same terms.

Kevin Carmony said...

I just read the San Diego Tribune article. Mike, the reporter, left me a message on my cell phone and I called him back, but I got his voice mail. I never heard back again, I presume he was past his deadline. (I had a call with him this morning to give him the true data.)

I am drafting my response to this story. Blog coming soon.

In the meantime, feel free to Google Linspire's S1 documents of when we were going public. It will show you the truth about Michael's investment. $20M is a total lie.

Stay tuned...


Unknown said...

I thought MR recoverd most of his investment form the setelment mentioned in initial SEC filing.
or am I incorrect?

Kevin Carmony said...

Correct. When I left Linspire, all loans made by Robertson to Linspire had been paid. His true equity investment was $8.5M, I believe, give or take $1M, nowhere close to the $20M number Michael used.


Anonymous said...

I'd totally forgotten about the S-1 - thanks for reminding me, it's interesting reading.

According to that document, MR actually invested $5M, and provided a revolving line of credit for an additional $10M, with an annual interest rate of 10%. It appears that Linspire used that credit and accumulated an interest debt of $416K.

According to the document, Linspire received a settlement of $20M from Microsoft in the "Lindows" trademark litigation, which was apparently going to be used to pay off the revolving line of credit - in other words, MR very likely got his $10M back, with interest, leaving Linspire with the remaining $10M in cash and no debt, as of 2004.

There are indeed two classes of stock - a Series A preferred, with 52,750,000 of 80,000,000 shares outstanding, and a par value of $5,275. The documents do not indicate what the liquidation preferences are for these shares, and there's some implication that the preferred shares would have converted to common at a less than 1-1 rate had the offering gone through.

There were another 1,895,532 shares of common stock issued, primarily in exchange for options and other non-monetary compensation - probably more since these filings, although it appears most employees chose not to exercise.

Now, my understanding (through the grapevine - again, SD is a small town) is that Linspire subsequently burned through that cash, and was teetering on the edge when it received another substantial cash infusion from Microsoft as part of signing onto the patent indemnification agreement.

So... did MR put in any actual money subsequent to the $5M initial investment, and if so, under what terms? Did Linspire draw down any more debt from the line of credit, and did it pay it off? Who holds the preferred stock? What exactly are the liquidation preferences on those shares? Is the liquidation price at something other than par value? Are there any other outside investors, besides MR and the folks that exercised their options, that have equity in Linspire, and what kind of equity is it?

Kevin Carmony said...

Duane, I answered some of your questions in my post just prior to yours.

As for liquidation preferences, Michael and the preferred shareholders had very poor rights here, virtually the same as common shareholders.

More to come...


Unknown said...

The really sad part is this happens every day, but most incs make it look like a BK but it's all setup that way.

The banks setup sweet heart deal so SEO's, get big money to drive the biz BK, the banks and their friends get all stock holds holdings.

Check out the old ticker of flagtelecom, I was one that lost everything I had in their stock. They claimed it was worthless but the court would not hear any thing, from the attn we got and we got nothing.

Funny though after they renamed it and sold new stock, that stock was worth way more then the worthless stock we had before the BK.

The same story over and over gain, funny how they made it harder for normal people to file for BK, and have the money wrote off you will owe it forever in most case now.

I have always thought of kevin as the real man behind linspire, his feelings come through everything while he was there. And that alone got people onboard with linspire, and happy to help make it work out.

Kevin I wish you the best of luck, and I'm hopeful you alone will do great things for linux as a whole. You should start a new system, but this time around do it all your way.

Linux is ripe right now, and it's a good time start out fresh and get some core users behind you. I think if anyone can do it it's you, but give power desktop users what they really want this time.

If you give people what they want, then they will open their wallets to you, or anyone that gives them want they want. MS is very good at finding out what people want, even before they know they want it that why they are so big.

ocrete said...

This all seems very fishy.. The only question I have is: why haven't sued yet? At least, that would probably allow you to freeze some assets and use discovery to know what's going on.

Anonymous said...

If this is a publicly traded company just file a complaint with the SEC and they will halt or reverse the buyout until the matter is resolved. If all the shareholders don't like what is happening then ban together get a lawyer and file.

Kevin Carmony said...

Here's my reaction to the San Diego UT article.


Unknown said...

Kevin what we did with flagtelecom as stock holders, was to all put up some money for a attn fund for court. When we pooled our money, most of us only need to put $5 to $20 towards the fund.

What we did manage to do was, keep the CEO from getting his fat bonus for doing the BK. Everyone was happy to make sure he didn't get the bonus, and was well worth the money we all put towards attn for that.

Maybe you stock holders can do the same thing, that way you may well force MR to stop stealing it all from stock holders.

This all don't seem lawful, and just may be MR would get worried about going to jail. It' worked for us with flagtelecom, the CEO got worried and agreed not to take that big bonus.

I would start getting it together right away, and let MR know about it before he has the deal done. So he knows and has to worry, that it may very well all come out in the open. :)

Kevin Carmony said...


We already have a lawyer on this. All shareholders will be notified soon.


Unknown said...

Kevin it's great to hear, you can't let MR to pull stuff, so off the wall like he is trying to do. :)

Anonymous said...

Some of you feel sorry for all the Linspire employees who were waiting for years for the big IPO that never came. It seems like that was part of the problem. Everybody expected the work to be someone else's problem. Too many people just waiting around. This is not to say that everybody was that way- I didn't know everybody who worked at Linspire over the years.

to an anonymous poster who writes: I suspect he has always closely surrounded himself with Yes-Men, rather than the hard core, truly talented advisors that he could have hired.

I think you are right. I saw the fear. I'd be afraid to be his advisor no matter how sure of myself I was.

Kevin: I have to wonder what exactly do you consider an asset today in Linspire?

The companies name has no value whatsoever due to the significantly tarnished reputation that has continued over the years. In the eyes of those who have heard of the company it was never forgiven. I saw the potential and beyond the dumb mistakes. Few of those who have even heard of the company (technical users) though ever saw past the bad publicity. This may be a more important crowd than we realize even if it isn't the primary focus of the distribution. These might be people who reduce the cost of maintaing the distribution for instance. Having updated versions of things like wine that are tested really does make a difference-even if you as a company don't want to put money into supporting it for instance.

As for the code it is all open source now anyway thanks to you. I wouldn't even consider using most of it though. The things that made Linspire stand out amongst distributions was its ease of use. Part of this was integration (automount of devices like the CD-ROM/DVD-ROM at one time & kernel patches that made win4lin 9x work- although some versions we lost this- which was a really risky given the circumstances). Unfortunately this largely had to do with the non-free codecs, commercial DVD software, & some of the non-free applications in CNR. The CNR service (allot of commercial applications didn't work from version to version-win4lin 9x) wasn't great even though it had allot of potential with the concepts behind it (browser click to install). Some of the problems I saw (and easily fixed) were that it displayed libraries and other confusing information, not to mention users had a hard time transitioning because they couldn't figure out what was worth trying or what was 'equivalent'. I have fixed these issues by duplicating the CNR service (never public). The code that I would say really made Linspire better than Microsoft Windows, Mac, and other operating systems had now been moved upstream. These are things like spellcheck in Firefox & Pidgin. At the end of the day it seems that it might make more sense to reinvest with the same goals in a different set of people (at least for some of the core areas like engineering, web developers, and at least some management). I think what happened is the company had too many typical employees and not enough passionate people. If you aren't investing in some major way in the company (underpaid, unpaid, personally picking up significant stock) you probably aren't very passionate about it (exceptions of course exist).

So beyond the obvious things such as equipment, cash, and such things what do you consider an asset? Do you think the engineers, packagers, web developers, and other core teams were really good enough? Or maybe was some other problem problem causing quality control issues? I thought for instance that the decision to move to the Ubuntu core should have occurred before the start of Linspire 6/Freespire 2 development. I realize that business issues were involved although I have to wonder if this still couldn't have been avoided (I've switched from debian etch (4) bases to ubuntu 7.10 / 8.04 bases with other unreleased derivatives). Or was it a little from a and a little from b maybe? I'm sure you recognize good management is often not making the decisions yourself when you don't clearly understand the implications.

tim: Regarding the comment about Linux ensuring that Linspire failed is non-sense. The company made some bad decisions regarding how non-free software was distributed, basic traditional security know-how of the community, and the MS deal. It is no surprise that RMS was a staunch opponent of non-free software and making Linux easy to use at the expense of allowing in non-free software. His belief is that it brake up the community. By breaking up the community we loose control to demand that companies release software with certain freedoms. He does make good points even if you don't agree with him. Very few people actually agree with him in the larger community. To say the community wouldn't let an easy to use distribution come about is a misunderstanding of the situation. We have a few different communities with similar- but different goals and methods to achieve those goals. This is why Linspire needed to be very careful. Unlike many other commercial entities the company did support many of the same values as the community. Most people never got a firm understanding of the ever changing secretive strategy. When things were said they were said by people who weren't careful or fully understanding of the situation. That being the case thing never got interpreted in a way that people weren't offended by the companies actions. Everybody saw these actions as counter to the communities well-being. In comparison to companies like Xandros and Apple Linspire did an excellent job long term with supporting open source. By the time the company died everything was open sourced under a free license (YES-> THE RMS LICENSE!). Companies like Xandros and Apple have no interest in freedom or open source beyond its benefit to them.

The other problem tim is you haven't a good grasp of what Linspire contributed to the open source world. The distribution likely did benefit you. Things like spellcheck eventually ended up in Firefox for instance. So it did add value. Other features probably didn't benefit you as a technical user or as a home user. Those things would benefit corporate entities, educators, and others though. CNR provided ease of use and software titles like commercial DVD players that you couldn't otherwise install in a corporate setting. Thus blocking the operating systems introduction to new users.

Dougster: Yea, definitely a family reunion. The difference this family and mine is it wouldn't be airing its troubles on a public forum.

Sean & others: Yea, not everybody in that photo even worked for Linspire. :) I'm sure at least a handful of people can pick em out. It doesn't really devalue Kevin's point in that people deserve an explanation though.

Tim: The comment about giving power users what they want is accurate if by that you mean the current Linux users (so long as it doesn't harm the new target transitioning users crowd). If you meant the MS Windows/Mac power user crowd it'll never happen in the short term. The amount of non-free software that has to be ported is insane for that crowd to be willing to make the switch. I've worked with at least a handful of the MS Windows/Mac power users and knowing what they expect it just isn't happening. Even though you can do most things in Linux that power users desire we have too many compatibility issues and limitations for the typical non-die hard Linux users.

Unknown said...

( Tim: The comment about giving power users what they want is accurate if by that you mean the current Linux users (so long as it doesn't harm the new target transitioning users crowd). )

That is what I do mean, the thing is linux is a power user dream system come true. And that they are linux core users that any linux OS needs, and even the power users want easy as well.

But also be able to make full use of the power of linux, at times when they need it so both are indeed a great thing and works hand and hand together.

Anonymous said...

someone needs to start a facebook "Friends of linspire" group so we can all keep in touch, this is great.

I was the insider that won the laptop at the first Desktop conference, and I loved my experience with Lindows / Linspire.

It's unfortunate that this is all happening. I'm seeing so many familiar names, it's great.

I stopped using Linspire after the last summit, and the 'merger' with ubuntu, I just thought it wasn't the same after that. LOS was trying to be too commercial. I've since switched to a mac, but would love to see Freespire make it.

Keep up the good words everyone, and someebody start that FB group!

Kevin Carmony said...

I like the idea of a FB group. A lot of the ex employees still hang out together. In fact, we're having a pool party and BBQ at my house next on Aug. 30th. If any "Insiders" are interested in coming by, email me.

I agree, someone should go start that group.


Anonymous said...

Why dont you and all the shareholders team up and just sue him? These attacks over the internet arent working. And i think a lot of people will donate $ for the legal cost(i would).

Kevin Carmony said...

All options are being considered.


david said...

Kevin, I noticed both yours and Michael's websites both state you are involved with Sadie's the chain of children's photography studios.

What's the story here? Are you two still involved in Sadie's together? If so, why?

Kevin Carmony said...

We are both non-executive, non-operational investors in that business.


david said...

Other than the Sadie's involvement "with" mr, I can't think of anything bad about you. Also the silcence from mr is deafening and very telling. Hope you drag the truth out into the light.

Anonymous said...

Hi all. My name is Peter Hompe and I'm from the Netherlands. I picked up on Lindows in the early days, from before there was even a final first release. I downloaded a “sneak preview” as soon as there was one available. I loved the idea and the promise of running windows software on a Linux platform was very appealing. I donated a $99 for something and later on donated another $100 for legally fighting Micro$oft in France. For that I was rewarded with a lifetime CNR subscriber. CNR was another brilliant idea, for I have tried Linux distro's before. The thing is, it's hell to get something installed on Linux. Now I now my stuff about windows, but Linux is something to either spend a lot of time on to get the hang of things, or wait for a distro that is só easy, that the average windows user could use it without any problems. I chose the latter and was rewarded with Lindows. Cheers for that! I've been using it with pleasure. CNR could be very much up-to-date, though.

I don't know enough about the dispute that is going on right now, but I've read this page and some articles about it. I think it's a shame that this company is stopped in this way. It seems fair to back Kevin in his struggle and I really hope you will get results!

Another thing that would be really cool, is that you guys put another team together and start a new company. I am willing to spend another $100 to start supporting you. Have a look around what is available now, ask some Linux guys, get some of Wine, use the resources from Reactos and put together a new and the best Linux version there is. I am ready to buy. I'm sure there are many more like me.

Hope you all fare well....

Peter Hompe