Is an IPO right for Canonical?

An IPO would be a major break from its privately held past, and if handled wrong could knock it off its newfound course

Is an IPO right for Canonical?

Mark Shuttleworth, founder of Ubuntu Linux creator Canonical, mentioned at the OpenStack summit earlier this week that he's considering taking the privately held company public.

An IPO could reward Canonical with even broader acceptance in the markets that company is learning to court effectively -- and provide a bigger purse with which to woo customers. The risks, though, are at least as great.

According to Steven J. Vaughan-Nichols at ZDNet, Shuttleworth stated he won't be able to take Canonical public without first talking it over at the company, though he noted that the idea had been discussed internally for months. The OpenStack division of the company is now profitable, according to Shuttleworth, so an IPO might focus on realigning the company around its centers of profit and strength.

Founded in 2004, Ubuntu has remained consistently unprofitable. Its attempts to sell Linux support have long been oriented around markets where there was little major payoff -- for example, corporate desktops, where Windows still reigns supreme.

As of late, though, the company has found success promoting Ubuntu Linux as an enterprise-architecture building block, with its own container system and OpenStack distribution.

OpenStack in particular is a win for Canonical, and the telecoms that deploy OpenStack are by and large using Ubuntu. Containers, too, have become a significant part of the Ubuntu brand, by way of Canonical's LXD container system, one designed to provide the speed of containers with the versatility of a full VM.

Canonical has a number of other initiatives that it wants to find good markets for -- its Ubuntu Phone system, for instance, where the LXD and Snappy Core upgrade technologies were first birthed, or its burgeoning Internet of things version of Ubuntu.

Shuttleworth has funded Canonical entirely out of his own personal fortune, so the company has been free to take risks that might otherwise have no direct payoff. A publicly traded Canonical would be under pressure to deliver tangible shareholder value, and might have to trade innovation for profit.

Another issue would be differentiation -- specifically, from Red Hat, the one major, publicly traded Linux solutions vendor for enterprises apart from Suse. To some degree, that's already happened: Canonical has flanked Red Hat and carved out a niche for itself in what many long believed to be a field with very little room for multiple players.

The fruits of an IPO could give Canonical more muscle to expand in that market and tackle it in ways it previously couldn't. But it could also force Canonical to generate profit on a scale it isn't prepared for, and knock the company out of the groove it's been settling into.

[Edited to add information about Suse.]


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