Eazel launches Nautilus software then lays off 40 workers

After releasing the first version of its new Nautilus open-source desktop software with much fanfare Monday, Eazel Inc. bit the bullet just a day later and laid off more than half of its 70-member staff.

Greg Wood, a spokesman for the Mountain View, Calif.-based software vendor, said the company laid off 40 workers because the it has been unsuccessful in securing a second round of funding in a tight technology market.

Early Monday, the Nautilus 1.0 file manager for the Gnome desktop environment was placed on the company's Web site for free download, and a celebration was held, Wood said. But the good mood didn't last for long.

By 7 p.m. Eastern time Tuesday, Eazel CEO Michael Boich called the staff together again, this time to announce the layoffs, the bulk of which hit the sales and marketing teams.

"It actually caught us by surprise," Wood said.

The company's core software engineers and developers are being retained because the company will continue to focus on developing Nautilus and Eazel services.

Founded in 1999 by a group of industry veterans who were part of the original Apple Macintosh team, Eazel began developing Nautilus to make the Linux desktop easier to use. The Nautilus shell integrates file management, Web browsing and system management.

The layoffs didn't come entirely out of the blue, Wood said. He noted that financial opportunities have tightened considerably for Linux and open-source companies recently."Basically, what it means is that the environment for companies working in the Linux space is much different than it was two years ago," he said.

Eazel's business model calls for the company to continue offering Nautilus for free and marketing related services to clients to bring in revenue, he said.

The company has had several notable marketing successes, including an agreement with Sun Microsystems Inc. last December to incorporate the Eazel desktop into Sun's Solaris Unix operating system (see story).

Another deal was made in December with Round Rock, Texas-based Dell Computer Corp. to load Nautilus onto all of Dell's Linux-equipped desktop and laptop PCs. Dell also invested an undisclosed amount of money in Eazel (see story).

Bill Claybrook, an analyst at Aberdeen Group Inc. in Boston, said that although Eazel's products are good, "the market is not really there yet for what they're doing. But it will be."

The problem, he said, is that Eazel is aiming Nautilus at Linux corporate desktop users, which is a "basically nonexistent [market] at this point," since corporations don't use Linux for desktop machines. Eazel's layoffs reflect that difficulty, he said, as the company seeks to reduce expenses to make itself look more favorable to venture capital sources.

"The unfortunate part is that they're going to lay off their marketing and salespeople," who will be needed to help get the company's sales and income going as it moves toward earning revenue from services. Claybrook noted, however, that the 40 people in sales and marketing were probably excessive for a company as small as Eazel.

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