Gizmo5 / SIPphone Shareholders--Beware of Michael Robertson's History

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There have been rumors reported in the press that Gizmo5 (SIPphone) could be sold soon (now confirmed here). In a previous blog, I cautioned any prospective buyers to be sure and do full due diligence. I encouraged them to not just take Robertson at his word (something no one should ever do with someone like Michael Robertson), but be sure and take a full accounting of any code, data centers, and speak personally with each and every employee.

Today, I want to caution any Gizmo5/SIPphone shareholders. They should look at how Michael Robertson dealt with the 100-some-odd Shareholders at Linspire when he sold that company's assets.

Here is what happened at Linspire:

1. Robertson sold Linspire without any input or notice from the majority of individual Shareholders. Even large shareholders, such as myself, were kept completely in the dark.

2. Millions in cash is still missing and unaccounted for to Linspire shareholders.

3. Robertson sold all the Linspire assets in a secret, backroom deal that to this day the terms of which have never been disclosed to the Linspire shareholders. Linspire's assets were sold well over a year ago and Robertson hasn't given ANY report or accounting to the Linspire shareholders. As I predicted, it would require a lawsuit to get Robertson to tell shareholders what happened, and even after that, we still have no answers.

4. The only accounting that was made, was Robertson talking to the press, where he basically said he and his father-in-law, as preferred shareholders, would be the only ones to see anything from the sale.

5. To date, every Linspire common shareholder has lost 100% of their investment, without any notice from Robertson, who remains in hiding from Linspire shareholders. (Actually, ONE common shareholder, Tina Stahlke-Donaldson, was able to sell some of her shares back to the company at a nice profit, after Robertson forced the CFO to accommodate that transaction. Why the special treatment for this one female employee? More on that in a future blog.)

Because VC's are involved at Gizmo5/SIPphone, they may force Robertson to behave more ethically there than he did at Linspire. However, my advice to any Gizmo5 shareholder would be to not sign anything without a full accounting BEFOREHAND. My instincts tell me that you, just like the Linspire common shareholders, could also walk away with nothing, even if Robertson does. Michael will want big numbers to be splashed around in the press so he can pretend to have had a success, but in the end, how much did individual shareholders make? (Thousands of shareholders lost millions at MP3.com, and Linspire shareholders lost all their investment and STILL don't even know what Linspire sold for.) If you are in fact going to get the shaft, you better have Michael explain himself BEFORE the deal is done. If Gizmo5 sells to a big company, that company may never disclose the actual purchase price, and if Robertson treats you the way he did Linspire shareholders, HE will never tell you either.

I'm not sure why anyone would pay more than a few million for Gizmo5, but even if Robertson were to sell it for a big number, I predict the common shareholders still see little to nothing. The VCs will likely have 3x or more liquidation preferences, and knowing Robertson as I do, I wouldn't be at all surprised if he will somehow get the same treatment with his shares. Even if someone was crazy enough to value Gizmo5 for tens of millions, watch how quickly Robertson can "creatively" make sure that as much as possible drops to his pockets, not the common shareholder's.

Why would Robertson suddenly get generous with employees and common shareholders? He is the greediest person I know. Remember, this is the same person who tried to have several former employees arrested for "embezzlement" in a failed attempt to try and take back their severance payments. When those attempts were flatly rejected by the San Diego police department, he then sued these employees to get his greedy little hands on THEIR severance. All that failed energy, work, and harassment over a couple hundred thousand dollars?!? Why would any expect Robertson to suddenly grow a conscience?

Ask questions BEFORE any deal is done, otherwise, you could end up just like the Linspire shareholders, with shares of stock worth less than toilet paper and no answers.

I hope I'm wrong, and the Gizmo5/SIPphone shareholders actually see a return on their investment. I'll be sure and report if they do. At the end of the day, Robertson's real worth will not be determined by how much money he lines his own pockets with (like he did at MP3.com), but how much do ALL the investors make? THAT is the number that REALLY matters.

Kevin

Michael Robertson, the greediest man I know.

Michael Robertson Continues His Shell Game with Linspire's Missing Cash

As I mentioned last month, Michael Robertson and Larry Kettler were sued for mismanagement of the now defunct Linspire. Although I am not a party in that lawsuit, it was my hope that it would help shed some light on what happened with the millions of dollars in missing cash and other Linspire assets.

Robertson and Kettler finally responded to the suit, and I got a copy of their response. From what I could see, what they produced did not provide any meaningful data on the missing cash. It appears that Robertson simply dumped on the plaintiff over 200 pages of misc. bank statements (not even covering the full periods from Aug. 1, 2007 to present). They failed to produce any meaningful financial statements, Income Statements, Balance Sheets, closing documents on the Xandros deal, etc. From the mishmash of evidence that was provided, it IS CLEAR there were in fact millions of dollars in cash when Robertson took over as sole Board member just over a year ago, BUT it is still very UNCLEAR where that cash ended up.

Michael Robertson - What is he hiding?

The lack of meaningful financial documents in Robertson's response didn't surprise me in the least. After having worked with Robertson for over six years, I witnessed first hand all of his legal maneuvers and tricks. One of his favorites was to overload opposing counsel with meaningless discovery documents, forcing them to sift through piles of papers to find the needle in the haystack, rather than just producing the documents which clearly show he is in the right. (This is a tactic people often use when they're NOT in the right.)

If Robertson and Kettler had nothing to hide, why wouldn't they provide HELPFUL documents that show EXACTLY what happened with the cash? If there is a good explanation, why wouldn't they simply provide that evidence? What is Robertson hiding?

According to one of the documents, the new Linspire Board was made up of Michael Robertson, his wife Leslie, and Larry Kettler (Robertson's consummate "Yes Man"). Not exactly what you'd call an "independent" board. Also, I'm not sure how Leslie and Larry could be on the board, considering the shareholders were never notified of these changes. The shareholders WERE properly notified when Michael fired all the other board members over a year ago, but have not been notified of any changes since. Again, why hide this?

So, my questions for Michael Robertson are:

1. If the only financial documents you plan on providing in the derivative lawsuit are bank statements, why not provide ALL the bank statements for the periods of August 1, 2007 through the present? (I would suggest to the plaintiff's lawyers that they subpoena the bank statements for the missing periods and START looking there. If Robertson is going to force you to look for the needle in the haystack, at least make sure all the haystack is there.)

2. Why haven't you held a shareholders meeting since taking over exclusive control of the Linspire Board over a year ago?

3. Why after months of you having sold Linspire to Xandros haven't you shared any details of that transaction with the 100-some-odd shareholders?

4. Why haven't you produced any meaningful financial statements, such as Income Statements or Balance Sheets to shareholders or to the plaintiff and lawyers in the derivative lawsuit?

5. Why are you trying to dissolve the corporation so quickly without explaining anything to the shareholders?

6. What happened to all the cash? Did you funnel it to yourself and/or your father-in-law? Did you squander it all in one short year through incompetent management of Linspire?

7. And lastly... When we had to let some very good, committed, long-term employees go at Linspire, you said you wanted to only give them two weeks of severance. I disagreed, and as CEO, I made the decision to give them more reasonable severance packages. You were so greedy and upset with the CEO's decision, that you filed a bogus police report and called them all embezzlers! Your argument for giving these good employees such piddly severance payments was that you wanted to keep as much money in the company as possible, claiming this would be better in the long run for those employees, the shareholders and the Linspire customers. So, my final question for you Michael: How'd your brilliant plan work out for everyone?

Kevin

Michael Robertson Sued Over Linspire's Missing Cash

To this day, Michael Robertson has yet to explain to the 100 some-odd shareholders what happened with the millions of dollars in cash and assets that were owned by Linspire just a few short months ago. The assets seem to have completely vanished, leaving shareholders with no return on their investment or even so much as an explanation as to what happened.

In June, Robertson sold Linspire to Xandros in a back-room deal without any shareholder input or detailed notification. Even though Robertson sold Linspire three months ago, shareholders still remain completely in the dark as to the financial details of the transaction. How does that pass any smell test for investors?

Michael Robertson - Greedy, crook or just incompetent?

At the time the deal was announced, I predicted it would take a lawsuit to ever get Robertson to go public with the details, as it was my belief Robertson's motive for this transaction was likely to hide unauthorized transactions which he may have made using Linspire's assets as his personal piggy bank to reward himself and his father-in-law as well as fund his other companies. It appears I was right in my prediction as a lawsuit has now been filed against Michael Robertson and Linspire's then-CEO Larry Kettler in an effort to force Robertson and Kettler to finally explain to shareholders what happened.

Click here for a copy of the suit with all the details of the allegations.

The lawsuit is a "derivative suit" which is a lawsuit instigated by a shareholder of a corporation, not on the shareholder's own behalf, but on behalf of the corporation. The shareholder brings an action in the name of the corporation against the parties (in this case Robertson and Kettler) who allegedly caused harm to the corporation. Such derivative suits are often brought against officers or directors of a corporation for violations of fiduciary duties owed to the shareholders vis-a-vis the corporation. The derivative suit against Robertson and Kettler was instigated by Kevin LaRue, the one-time VP of Marketing for Linspire and a current shareholder, but any proceeds of a successful action are awarded to the corporation, benefiting all shareholders, not just LaRue.


Because Michael Robertson was the Chairman of Linspire's board and apparently their only board member (shareholders have never been given notice of anyone else having been added to the board since Robertson fired all the other board members over a year ago), it would be improper for him to make deals that would only benefit him as the majority shareholder. The lawsuit alleges Robertson did not fulfill his fiduciary responsibility to not only act in his best interest but in the interest of all shareholders.

Regardless of the ultimate outcome of this suit, if nothing else, it will hopefully, once and for all, bring to light what happened to Linspire. The minority shareholders have a right to know, and it's unfortunate it has taken this lawsuit to get any information form Robertson.

If my suspicions as to Robertson's actions and motives were unfounded, why wouldn't Robertson have come forward with all the books and details long before now? What is he hiding? Why is it taking a lawsuit to bring things to light? Robertson's behavior simply enforces my belief that he was in fact taking advantage of Linspire shareholders and is doing everything he can to cover up his actions.

A year ago, Michael and I disagreed over what was best for the future of Linspire and the shareholders. I resigned and Michael got his way, insisting he knew what was best for the future of the company and that he could return more value to employees and shareholders than the plans I had proposed. So far Robertson has produced nothing of value for the shareholders and the company appears now to be gone. Is Robertson a greedy majority shareholder who navigated things to make sure he got all the assets, a crook who stole the assets, or is he just incompetent, having squandered millions in one short year?

Hopefully this suit will once and for all uncover the truth and the shareholders will finally know what happened with their investment in Linspire and Robertson.

Kevin

PS: "Xandros has done more than any company to put Linux in front of users..." ~ Michael Robertson (More than Ubuntu? Novell? Red Hat? Linspire even??? Robertson said this recently. With statements like this, you can see why I have a hard time believing anything else he says.)

Xandros Remains Out of Touch

Xandros pretends to be moving Freespire to Debian, when in reality, all they are doing is using the Freespire brand as the free version of Xandros. Because Xandros is based on Debian, not Ubuntu, this was the easiest way to do this without using any engineers.

The real news here is that Xandros will finally have a free version of their OS, albeit several days late and several dollars short. If Linspire was too late with our move to a free version with Freespire three years ago, it's WAY too late for the struggling Xandros just doing this now.

Xandros remains irrelevant, out of touch, and I predict will continue to struggle. Ubuntu, Red Hat and Novel will continue to dominate the space.

Kevin

PS: An Anonymous Coward asked me to post a graph with Dating DNA. Happy to. Amazing what I've been able to accomplish with basically a hobby in one year with virtually no money compared to the tens of millions Linspire and Xandros have plowed through. I remember Michael Robertson making fun of a start up company that blew through $10M and had nothing to show for it. I wonder if he still makes those snide remarks today? =)

Xandros + Linspire + Freespire + CNR = Zzzzzzzzz

It's been nearly two months since Michael Robertson sold off Linspire's assets to Xandros in a secret back-room deal, and the 100 some-odd shareholders still remain in the dark about this transaction. But, what about Xandros? What has Xandros done with Linspire, Freespire and CNR.com since this acquisition? At the time, I predicted this acquisition was just a front for the hidden motives of Michael Robertson and Xandros, and that it would in no way benefit Linspire, Freespire or CNR.com users.


So, what has happened since?

I haven't seen any change on the Linspire site since a Q&A with the Xandros CEO from back on July 7th. I also don't see any news on the Freespire site, and it's been over a year since Freespire 2.0 was released and nearly a year from the release date of Linspire 6.0. Even the Xandros website doesn't have anything new to report, other than the same FAQ from early July.

What I have noticed, however, is that Linspire, Freespire and CNR.com all continue to shrink.

Xandros did make this bad move. An attempt, I suppose, by Andy Typaldos to try and show some solidarity from Ubuntu. Has Andy even tried Ubuntu? Is he paying attention to the work they're doing?

I'd be curious to hear from any Linspire, Freespire or CNR.com users (what few of you remain) if I've missed something? Or is it looking like I was right in my prediction?

Kevin

Michael Robertson--Where's the Linspire Cash? (Part II)

Back on July 2nd, I asked Michael Robertson to explain to the 100 some-odd Linspire shareholders what happened with the millions in cash and assets that Linspire had just a year ago?

Today I received the below "Memorandum" in the mail from Michael Robertson, "President & CEO" (and sole board member) for Linspire. (Click image to enlarge.)


It should be pointed out that "The stockholders voted..." and "...the stockholders approved a plan..." really means "Michael Robertson voted..." and "Michael Robertson approved a plan..." since the minority shareholders were not asked to give input. This is the third time, that I'm aware of, that Michael has done things by written consent, without any shareholder meeting or input. The first time was when he fired everyone from the board of directors other than himself, the second time was when he sold Linspire to Xandros, and now this time when he said he'll be dissolving Digital Cornerstone, Inc. Those are all pretty significant events to do on your own, without other board members or shareholder meetings.

According to this latest memorandum, Michael has a plan to "distribute [Linspire's] assets." I wonder what the minority shareholders will be getting? Considering I offered to purchase shares in the company at $.50 per share just one year ago, let's see how good a job Michael Robertson did in running Linspire this past year. Will the minority shareholders see more than $.50 per share? The same? Less?

Also, about a year ago, I presented a plan to Michael to have the company offer to buy back stock from shareholders at $.50 per share. Michael turned down that plan, saying that the company needed to keep all its cash to run the business. He obviously felt by keeping all the cash in the company and running the business himself, that he could make the shares worth more than $.50 per share. So, let's see how Michael performed for the shareholders. Did he turn water into wine, or into toxic waste? (From my vantage point, this is what it appears he's done this past year.)

Lastly, I'm curious how Digital Cornerstone, Inc. could be dissolved when they have ongoing litigation? Just one example is I know they are being sued by a former employee because Linspire did not honor his employment agreement.

I stand by my assessment, that the Xandros deal was all just a big ruse by Robertson to take all the assets and cash for himself, leaving the minority shareholders with nothing. I believe that dissolving Digital Cornerstone, Inc. is simply the next step in his "I-hope-everyone-forgets-about-all-of-this" plan.


Prove me wrong Michael. Anything north of $.50 per share distributed to the minority shareholders and I'll happily eat my words. Anything less than that, however, then in my mind you're either a lousy businessman (who made a bad judgment in not doing the stock buy-back plan), a thief (who took unauthorized funds for yourself, father-in-law, and/or your other businesses when YOU SAID all funds needed to remain in the company for Linspire to succeed), or you simply never intended to "take care of your peeps" all along (and just wanted to see everything go to you).

Stay tuned. I'll be sure and report back what's left for the 100 some-odd minority shareholders.

Kevin

Michael Robertson Speaks--Intentions Revealed

Michael Robertson finally broke his silence about what the 100 Linspire shareholders can expect from the sale to Xandros. No, this didn't happen in a shareholder meeting, but to a reporter. Apparently reporters matter more to Michael than shareholders. He has time to give them a call, but apparently no time for the 100 people who invested money and years of hard work into his ideas.

Michael was quoted this morning in a San Diego Union-Tribune story. The reporter, Mike Freeman, did try to contact me yesterday, but when I called him back a few hours later, it was past the deadline, and his story had already been sent off. I did speak with Mike this morning, however, and discussed with him what I'm sharing below.

I'll comment on a few of the quotes from the story...

Robertson said that in any transaction, preferred shareholders and investors are at the front of the line to get paid.

"Any" transaction? That's certainly not true, but it does show how Michael views minority shareholders.

To further understand Michael's attitude to minority shareholders--when I was at Linspire, Michael said he wanted me to transfer $1,000,000 from Linspire's account to himself because "MP3tunes needs some money." (MP3tunes is another company that Michael owns, unrelated to Linspire, with completely different shareholders.) He also wanted me to transfer $500,000 to his father-in-law. I objected, of course, saying that the cash was a Linspire asset.

Linspire had a very good year, so we had money, and I told him we could certainly make a dividend in these amounts to him and his father-in-law, BUT that we'd also have to give the same per-share dividend to all the other shareholders as well. He said that because he and his father-in-law were "preferred" shareholders, they were "entitled" to this special dividend and that "this is a common practice in companies and happens all the time." I knew, however, that Linspire and Michael's preferred shares were not structured in that way (Linspire had two different law firms confirm that point), so I certainly never made these payments.

I guess Michael still needed the cash, and he didn't want to have any money go to the other shareholders, as he then set about removing everyone that stood between him and the money. Within a matter of days, Michael sanctioned a plan to fire the CFO and Controller. He next, without a shareholder meeting, removed myself and our CFO from the Board of Directors, leaving him as the sole member on the board. It was becoming very clear to me that Michael's plan was to see the Board, CEO, CFO and Controller gone, leaving no one to stop him from turning Linspire's assets into his personal piggy bank.

After I left Linspire, because I was fearful that Michael's intentions were to misappropriate Linspire's funds to himself and his father-in-law, I had my attorney arrange for me to review the Linspire books. Michael refused and his lawyers pushed back my requests. To this day, even though I'm a significant shareholder, I have not been allowed to see the books, nor has Michael held a shareholder meeting.

When Michael realized I was putting up road blocks to prevent him from just reaching in and taking out cash, even after all the officers had been removed from his way (and him going so far as to falsely accuse good people of embezzlement for accepting reasonable severance payments), it appears he set out on a new course of action to get at the cash...liquidation.

Every company has different rights for preferred and common shareholders. At Linspire, the liquidation rights of the preferred shareholders were very weak (see S1), being not much different than those for the common shareholders. The difference in liquidation preferences between common and preferred shareholders at Linspire is very small, and it appears Michael set about structuring everything to navigate all the cash from Linspire to him, through that tiny space of differentiation. (It may apparently take a lawsuit to uncover if he was successful in that operation.)

He said he couldn't get into specifics of the deal or say whether anything will be distributed to minority shareholders.

Not even with the 100 shareholders? By law, he will be forced to "get into specifics" to those of us who have invested and hold shares in Linspire.

“I personally have invested more than $20 million in Linspire,” Robertson said.

Pure nonsense!

An investigation in the public documents filed with the SEC can give anyone insight into what Michael has invested. Michael invested equity into Linspire and, at times, extended it loans. Before I left, Linspire had paid back any and all loans to Michael, and the company still had millions of dollars of retained earnings in the bank. Michael's EQUITY investment into Linspire is nowhere close to $20M! In fact, at no point in time was Michael's equity investment COMBINED WITH HIS LOANS anywhere close to $20M. This would be like me loaning you $10 every day for lunch, you pay me back in full at the end of each week, and then 7 years later I say "I invested $18,200 in you!"

“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."

So, let's get this straight Michael...the tens of thousands in CASH that employees "invested" into Linspire when they purchased their stock doesn't count, but your cash does? You're an "investor," and they're all just peons to be taken advantage of? Do we not even warrant a shareholder meeting? You said you invested $20M--is that the number you're using to cut first in line? What deal did you structure to navigate your weak liquidation preferences through to the cash? Was this a "liquidation, dissolution and/or winding up of the Corporation," or was it an "acquisition of Linspire" as stated in the press release. Will there be a distribution, or will we be writing off our investment in Linspire? Can you blame shareholders for finding you "devious" when you don't hold annual shareholder meetings, refuse to let us review the books, and then liquidate the assets without sharing any information with us about the deal and how it effects us? WHEN WILL YOU HOLD A SHAREHOLDER MEETING AND ANSWER THESE QUESTIONS???

"It's the way it works.”

No, Michael, it's the way YOU work. Hopefully prospective investors in any Michael Robertson ideas are paying close attention.

If you ever find yourself on a boat with Michael, and it starts to sink, don't be surprised if you spot him pushing women and children out of the way as he scrambles for the only life boat, screaming "I'm first in line!"

Kevin

PS: On a minor point, Hoovers was wrong in their quote of $3M in revenue and 18 employees. Revenue is 2007, the year I left, was substantially higher than that, and departing employees have said that Linspire has around 8 employees left today.

Also, Xandros claims to be the 3rd largest Linux company and largest privately held one. Well, you'd have to ignore IBM, Intel, Nokia, etc. who probably employ more Linux engineers than Linspire, Xandros, Canonical, Mandriva, etc. combined and limit it just to Linux distro companies. I'm quite sure Canonical (Ubuntu) is larger than Xandros in terms of employees, users, and I'd imagine revenue as well. As for impact on the space, that's not even close.

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.

Kevin

Xandros / Linspire - Here Comes the Spin

In my blog yesterday, I shared how Michael Robertson had sold Linspire to Xandros without a shareholder meeting or any input from the 100 some-odd shareholders.

Today, Xandros' CEO, Andy Typaldos, did a Q & A (spin) about this deal.

I thought I'd add some additional "color" to some of his answers.

Q: What are the financial terms of the deal?
A: Like many private commercial transactions, the financial terms of the agreement are not being disclosed.

Not even to the 100 Linspire shareholders? Robertson, all by himself, sells the assets of the company and doesn't have the courtesy (let alone corporate governance) to communicate with the shareholders? If this deal was good for Linspire shareholders, Robertson wouldn't be hiding, he'd be proudly explaining to customers and shareholders how great this is for everyone. I have a feeling it will take a lawsuit to sort all this out. Where is all the cash Robertson? Did you take it, squander it, or use some legal maneuver to get it and leave the shareholders with nothing? None of these speak very highly of you. Please, prove me wrong, and let the shareholders know where they go to cash in their shares (hopefully for at least $.50 per share, the price I offered you ten months ago).

Q: How many Linspire employees are coming to Xandros?
A: All of the engineering, support, and key sales staff have been retained, apart from a small number of administrative and related resources, given redundancy with Xandros in a number of such areas.

Linspire had a round of layoffs recently. I spoke with one of the employees who was laid off, and he told me that Linspire was down to eight employees total. Anyone can do the math to see that's not a lot of engineering talent Xandros will be gaining. All the best talent has already left Linspire.

Q: Will Linspire CEO Larry Kettler and other Linspire managers be joining the Xandros management team?
A: Yes, Larry Kettler will be joining our executive management team as VP of Business Development.

Of all the hundreds of employees involved with Linspire over the years, there are only two I'd never do business with again...Michael Robertson and Larry Kettler. Larry was the weakest executive at Linspire, a total "yes man" (which worked out ideally for Robertson these past ten months).

Q: How many employees are on the combined payroll?
A: Xandros has been on a fast growth path for the last couple of years; has an aggressive headcount and revenue growth plan at this time; and is currently in heavy hiring mode. We believe that at this point Xandros is already the third largest Linux Company in the world, and that we may already be the largest private Linux Company in the world.

Spin speak for "not many." As I said, Linspire was apparently down to eight employees, and I know Andy likes to outsource to India. It's unlikely he will ever answer this question directly.

Q: Will Freespire continue to be maintained as an open source project?
A: Yes.

Check back on this in six months. Xandros has never had a free, community distro.

Q: Will Xandros maintain separate Xandros and Linspire/Freespire lines of desktop products?
A: Pending further planning, at this point both product lines will be maintained.

Check back on this in six months.

Q: What will happen to existing Linspire/Freespire users?
A: No changes are planned

Check back on this in six months.

Q: What, if any, desktop technologies from the two companies will be combined?
A: No plans are developed yet in that regard.

Further strengthening my belief that this was a cash grab for Robertson and a press release move for Xandros to raise money.

Q: What are the total sales and profits for the combined company?
A: Since Xandros is privately held, these figures are not publicly disclosed.

Click here for an idea as to the answer to this question.

Q: What are the benefits to Xandros from this deal?
A: It provides Xandros with advanced CNR technologies and Linux expertise. It also enlarges the Xandros customer base and support network.

Linspire has shrunk to relatively no customer base (see link in last question) and gone from nearly 100 employees at one time, to apparently now, just eight.

Q: How does this acquisition affect existing Linspire and Freespire customers and brands?
A: We believe that it will help them, by making them part of a larger community of Xandros users, and by providing them with the support of a large, global, full-product Linux solutions company, with larger product and technology footprint, and greater development, support, and financial resources.

"Larger Xandros community?" Linspire/Freespire probably have more users than Xandros, but that's not saying much. (Note: If an Eee PC user is a "Xandros user," then I'm sure Microsoft would be interested in that. Andy, are the Eee PC users covered under the patent agreement between Xandros and Microsoft?)

Kevin

Xandros Acquires Linspire Assets in Secret Back-room Deal

Today, as a Linspire shareholder, I received the below "memorandum" from Linspire. I have confirmed with several other Linspire shareholders that they too received this same notice.

In classic Michael Robertson form, he has once again completely disregarded the 100 some-odd shareholders of Linspire by pulling off this deal without a shareholder meeting. Most states require shareholder approval of any merger or reorganization of a corporation, or the sale or transfer of all or substantially all of the corporation's assets. Regardless of state laws, common decency would dictate that even if a company only has 1 minority shareholder, there should be a shareholder meeting and the acquisition explained to all shareholders. What do Linspire shareholders get in place of a shareholder meeting? This completely worthless notice in the mail.

Why would Linspire pull off a midnight, back-room sell-off without a shareholders meeting? I'd ask them myself, but they haven't returned emails from me in the last ten months, and since they didn't hold a shareholders meeting in this matter, one is only left to speculate. So, here's my speculation...

This will end up being a completely insignificant event for Linspire shareholders and the end for Linspire customers. I predict this was done to: 1) help Robertson drain the company of its cash and resources. When I left Linspire, we had a very profitable year and the company had millions in the bank. I predict Robertson has moved this money to himself, family, and his other companies, leaving Linspire's minority shareholders with nothing. 2) help Robertson save face by issuing a "Linspire Acquired by Xandros!" press release, instead of living with the public humiliation that Linspire failed under his leadership. (Although, being out lasted by Xandros isn't much less embarrassing.) Such a press release will of course be meaningless unless the acquisition was substantial. As a shareholder, I will eventually find out. 3) Give Xandros a press release and perhaps some way for them to spin this to investors to raise money.

Just watch...this will not be good for Linspire's customers, partners or minority shareholders. I'd love nothing more than to be proven wrong! We'll know as soon as I hear what my stock is now worth.

Ten months ago, I offered Michael to purchase stock in the company for around $.50 a share (in cash). When we find out how much my stock is now worth, after this "acquisition," we'll see just how brilliant of a businessman Michael Robertson was. Let's see how much the value of that stock has changed in the short ten months since my departure. If I get more than $.50 for my shares (in cash, not some bogus, inflated valuation based on Xandros stock), then I'll be very happy and I'll be pleased with what Robertson and Kettler have done with the company. If it's worth a lot less than that, then I'll be very unhappy and it will show just how incompetent (or plane dishonest) Robertson and Kettler are.

To me, this looks like Michael, the "captain" of the Linspire ship, sees the boat sinking, so he casually tells the passengers on the ship that he's just going on a quick supply run, jumps on the only life boat with any cash and valuables he finds, paddles off to safety, and leaves everyone else behind to sink. Pathetic. I left Linspire with millions in their bank account and a plan, but Robertson and Kettler seem to have destroyed it all in ten months.

So, Michael, now that all the assets have been sold, what's my stock worth (again, no worthless Xandros stock please**), and what will happen with Linspire's customers?

Something tells me it will take a lawsuit to find out.

Kevin

**PS: Before Linspire and Xandros try to spin this into something actually positive, I'd like to offer my Linspire shares to either Michael or Andy Typaldos (Xandros' CEO) for $.10 a share. That's 80% less than what it was worth just ten months ago. If this transaction happened at a good valuation, then I'm sure Michael and/or Andy will be all over my offer, right? I'll post here when they accept my offer. Don't hold your breath.