Henry Blodget is a name I haven’t heard in a while. The former securities analyst, who is banned from the securities industry for life following allegations of fraud, has returned to the headlines this week with his suggestion that the Mozilla Foundation could and should file for IPO this year or next.

Blodget’s theory has been dismissed by Mozilla COO John Lilly as well as the likes of Larry Dignan and Glyn Moody. Lilly best sums it up with the following statement: “We’ve said this before on the record and we’ll reiterate categorically that there’s no intent or desire to do a public offering, no plans to do so, and an overwhelming sentiment here that to do something like this would fundamentally undermine what Mozilla is about.”

Although Blodget’s analysis and calculations make a potential IPO sound attractive (”a business this exciting would probably trade for at least 30X-50X current profits, which would put you at $1.5 billion to $4 billion using the mid-point of the multiple range”) you have to start with the fact that he did not even use the publicly stated accounts to come up with that valuation.

Blodget admits this himself in his follow-up. Even though the actual results support his earlier calculations, this lack of attention to detail is indicative of a fundamental misunderstanding of how and why the Mozilla organization works. As Lilly suggests and Mozilla CEO, Mitchell Baker, has previously expained Mozilla has been successful because it has avoided the distractions of shareholders and investors and been able to focus on the needs of developers and users.

“Firefox is a great product because thousands and thousands of people care about it, and contribute to making it better,” wrote Baker back in August last year. Would the same people contribute to Firefox if it were the product of a for-profit organization? Granted, it happens with other open source vendors, but they have radically different structures that are specifically designed to balance the different needs of shareholders and the community.

The Mozilla Foundation simply isn’t structured to support a public company. “Firefox is created by a public process as a public asset. Participants are correct to feel that Firefox belongs to them. They are correct legally, since the Mozilla Foundation’s assets are legally dedicated to the public benefit. They are correct practically because Firefox could not exist without the community; the two are completely intertwined,” added Mitchell.

There are also good financial reasons why Mozilla would be unlikely to flourish as a public company, not least the fact that over 85% of its revenue in 2006 came from a single source: Google. That contract is due to expire in November 2008. While there is no suggestion that the contract will not be extended, could a public company survive with that level of risk?

The organization had cash and equivalents of $13.2m at the end of 2006, with no pressure to invest it or return it to shareholders. As Mozilla’s financial FAQ for 2006 states: “We have significant retained earnings, which allows us a good degree of flexibility… First, the cash reserve is of course a form of insurance against the loss of income. We will continue to maintain enough of a reserve to allow us flexibility in making product decisions.”

Mozilla also plans to spend its money on people and infrastructure, new development programs, and grant and grant-like initiatives that are fundamental to its stated aim that the Internet is a public resource that should be open and accessible to all. Supporting the public resource as a public company would not be impossible, but it would be a lot more difficult.

As Lilly noted in a response to Blodget’s follow-up: “pursuit of these goals is best achieved as an independent company, with no shareholders who would conceivably want to focus on short-term (or even long-term) profits instead of the public benefit mission.”

There will be plenty of open source IPOs in the years to come from companies that have been set up to balance the needs of a public company and a public development model. Just don’t expect Mozilla to be one of them.