eSoft Opens Linux ‘Gateway’

eSoft, Inc. (Nasdaq: ESFT), the developer of the TEAM Internet Linux software suite, announced a strategic alliance Wednesday with Gateway, Inc. (NYSE: GTW) to advance Linux-based Internet software and services to small and mid-sized businesses.

Under the terms of the agreement, Gateway will pick up $25 million (US$) in eSoft common stock, investing in joint company developments. eSoft will collaborate with the Gateway business division to help its customers migrate critical business operations to a Linux-based online environment.

eSoft’s application and management software will be added to Gateway’s server appliances and Internet access solutions. Gateway, which is also set to receive warrants to purchase 600,000 shares of eSoft common stock, will assist its small to medium-sized business clients in gaining an online presence.

The company will also provide secure networked operations with infrastructure applications and Internet management systems, including firewall protection, Web hosting, virtual private networks (VPNs) and network management services.

“Gateway is committed to providing customer-focused solutions that positively impact how small and medium businesses work” stated Van M. Andrews, senior vice president for Gateway Business. “Our relationship with eSoft will enable us to offer these solutions at a great value to our customers”

The Redphish Element

eSoft also announced a software licensing and services agreement involving its redphish service provider program. Under the agreement, Gateway will tap into the program to provide turnkey Internet access solutions to smaller business clients.

“Gateway’s investment and licensing agreement supports eSoft’s redphish program,” said eSoft CEO Jeff Finn. “Our redphish value-added service provider program delivers subscription based managed Internet software and service solutions that enhance the life-of-customer relationship.”

Linux Momentum

The agreement between the companies comes on the heels of a lukewarm reception of the recent launch of Microsoft’s Windows 2000. Analysts and industry insiders have continued to predict slow adoption of the business OS product.

Dell Computer Corp. (Nasdaq: Dell) CEO Michael Dell recently stated that few of his company’s corporate clients were ordering hardware upgrades for the Windows 2000 release, and that Linux is gaining significant ground on Microsoft. Shares of the Redmond, Washington-based software titan dropped significantly following Dell’s remarks.

As early as August 1999, International Data Corp. (IDC) released a study indicating that businesses would be slow to adopt Windows 2000.

“Organizations of all types and sizes indicated they plan to wait anywhere from 6 to 18 months before beginning wide-scale implementation of the new Microsoft enterprise operating system,” said an IDC statement. “Technical stabilization,” according to the IT research firm, was cited by survey respondents as the primary reason.

The study also noted a marked increase in Linux usage by organizations. Although only 13 percent of the respondents reported using Linux, it was a significant increase over a two-year period, according to IDC.

Conducting a similar study in 1997, the firm found that Linux was used by such a statistically small percentage of survey respondents that a report could not be issued.