September 8, 2006

Changing Times for Linux Networx

by Michael Feldman

Linux Networx has enjoyed record revenue growth over the last several quarters. In Q2, the company enjoyed its fifth consecutive record quarter in a row. Over the last six years, Linux Networx has refined its HPC offerings and grown its customer base to the point where it is now considered one of the premier supercomputer vendors. But some changes are afoot.
In the past few weeks HPCwire learned that the company had started to do some internal realignment. There were rumors that as many as 60 workers had been laid off. At the same time, they were looking to expand other parts of the workforce. Subsequently we learned that a rather large amount of venture capital money was heading its way. In an exclusive interview, Linux Networx CEO Robert “Bo” Ewald tells HPCwire what prompted these changes and what it means for the future of the company.

HPCwire: Can you talk about some of the changes we have been hearing about at Linux Networx?

Ewald: We've continued to evolve our strategy to help our customers solve important computing problems with our leading Linux supercomputing systems, software and services. The first phase of that strategy started in Q4 of 2005 when we delivered our LS Series of Linux Supercomputers, our family of standard, validated supercomputing configurations. The second phase focused on providing additional products and services to enhance the core compute capabilities of our LS Series. We initiated this phase earlier this year with the delivery of our storage products — in Q1 — and visualization solutions — in Q2 — as performance-integrated components of a complete supercomputing system. We are now moving into the third phase of our strategic roadmap. We will be emphasizing software designed to bring clustered Linux supercomputers to production quality levels historically provided by proprietary and Unix based systems.

As we move through these phases, we have continually aligned the company with both our long and short term objectives. Since we've moved to a standard system approach, we no longer design each and every system as a unique effort. As a result we need fewer hardware engineers and manufacturing people in the company. We will need, however, more software engineers to execute the next phases of our strategy. In addition, we are expanding our sales force and service organizations to better cover the expanding industrial customers who use our systems.

In recognition of the traction that we are getting as a business, and in anticipation of our ability to continue to grow the company, we are also pleased that we have just closed a $37 million financing deal for the company.

This financing was composed of both our current investors, principally Oak Investment Partners and Tudor Ventures, and new investors including Lehman Brothers and Canaccord Adams.
HPCwire: After the record growth you have achieved over the past year and a half, why did you decide to make these changes at this point?
Ewald: Actually we are seeking to accelerate our growth in both the traditional supercomputing market as well as the growing industrial base. Given the company's heritage of building custom systems, we probably have more experience with different hardware and software combinations than any other company in the market. So, we've watched the trends, the product roadmaps — what works well and what doesn't — and developed our LS Series of systems. We are now accelerating our development efforts to do take a similar approach on the Linux Supercomputing software side, namely we will complement our hardware products with Linux based software to attack the key problems that we hear over and over from our customers. These customers need Linux to have the production ready characteristics that were developed over the last 25 years, initially for proprietary operating systems and then later for proprietary Unix systems.

HPCwire: Would you characterize these changes as evolutionary or revolutionary for the company?

Ewald: Clearly evolutionary since we are building on the base of supercomputing knowledge already within the company, as well as insights gained from our customers and partners. Clustered systems can provide great price/performance advantages, but we need to evolve the software environment, the diagnostic tools and the service tools so that they match up to the quality and sophistication required by the industrial/production customers.
HPCwire: Will these changes result in any new products or services this year? Next year?

Ewald: Yes, as we move through the next year, you'll see us refresh the LS Series as new technologies are available from our partners and suppliers. And on the software side, you'll see new software introduced from us in three major areas:

  1. Performance and utilization tools for both individual applications and system level.
  2. System usability and management to enable Linux supercomputing clusters to be used and managed more easily.
  3. Reliability, availability and serviceability to bring tools like remote diagnosis, patch management, high availability, etc. to Linux Supercomputing. 

HPCwire: Do you think these changes will make you stronger in any specific vertical markets?

Ewald: We think that they'll help strengthen us across the board, and should enable customers and industries that are relatively new to Linux and clustered systems to accelerate their move to successfully leverage Linux supercomputing systems in production environments.
HPCwire: Are these changes a reflection of the way the HPC market is changing?
Ewald: Yes, we are moving past the pioneering phase of adoption of clustered Linux architectures into a stronger production Linux Supercomputing environment. We want to help accelerate that trend.

HPCwire: Is there anything else you'd like to add?

Ewald: The financing that we've just completed is another key milestone in the company's growth. It demonstrates both the confidence and support of our ongoing investors, principally Oak Investment Partners and Tudor Ventures, and a new investor — Lehman Brothers, a major global banking business. We are equally excited about moving our business ahead!

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