The Linux world got a little fired up this week following former Linspire CEO Kevin Carmony’s blog about Xandros buying Linspire. Carmony’s blog is tinged with his contempt for his old Linux company and particularly its president, Michael Robertson, who has his own history with tech companies. What seems ironic to me is that, according to Carmony, Linspire, which is based on open source, transparent, collaborative Linux software, is functioning in proprietary, closed-door, self-interest driven fashion. Not exactly the formula for success in open source if you ask me.

The Xandros-Linux deal, which has yet to be officially announced, is for real Xandros CEO Andy Typaldos told me today. However, he would not disclose any details. Typaldos had a story consistent with his company’s holistic stack approach I heard when Xandros bought Scalix for an undisclosed amount in July 2007. I am conflicted about the meaning of the Linspire deal. I think it could be another Linux distribution consolidation that ends up putting the best of two different versions together, but not the kind of thing that can drive traction beyond the attention and market share both held respectively before they merged (see Mandrake + Connectiva = Mandriva). However, as Xandros looks to improve its hand at the Linux and open source table by acquiring cards such as Scalix and Linspire, it may have a wild card in the form of netbooks, many of which run Xandros OS, email and other software.

Typaldos says the purchase of Linspire will give Xandros a software wharehouse for applications and content, a reference to Linspire’s CNR software, which is the main value for Xandros. The CNR application packaging and delivery technology stands out more than Linspire’s OS, Windows-like experience and ease of use. The company is also known, of course, for its former name, ‘Lindows,’ and its long court fight with Microsoft, which resulted in a name change and payment from Microsoft to ‘Linspire’ for $20m in 2004. As for New York-based Xandros, the company’s Linux distribution is limited by the fact that it is not actually available for free. While Xandros has some Linux desktop and server business (30% of revenue) in North America and Europe, the Linux company is looking to netbooks and other OEM business (40% of revenue), Scalix email business (30% of revenue) and management software made possible through its partnership with Microsoft that has yet to be released for the future. By the way, Typaldos says Xandros’ relationship with Microsoft is not related to the purchase of Linspire, which also had a Redmond partnership in place. He described Carmony’s reaction as part of a ‘family fight.’

It makes sense for Xandros to focus on newer areas of opportunity and leave the Linux server business to Red Hat and Novell and the Linux desktop quest to Ubuntu and others. However, it’s still hard to assess how significant the opportunity is when we don’t know how the business is working for Xandros. Typaldos referred to the millions of users swarming to netbooks and I have blogged quite a bit about how significant of an opportunity I truly believe netbooks and MIDs are for Linux. When I asked Typaldos whether Xandros is licensing its Linux OS to Asus for the EeePC and how Xandros makes its money from the 1-1.5 million netbooks he referred to, he responded by saying it’s ‘complicated.’

I won’t penalize him too much since Typaldos is straightforward about his view that giving the software away for free is no way to make money. Instead, Typaldos and Xandros are looking to piece together the open source alternative to Windows-plus-applications. I would be more skeptical if I wasn’t a believer in the opportunity from emerging netbooks, MIDs or whatever you call them. Even though its business model and operations may not be in keeping with the open source ideas that drive development of its products, the Xandros idea of a netbook stack, complete with a warehouse of applications that can grow to include more music, video and other content, holds a lot more promise than any Linux desktop dreams. Still, I don’t think companies like Xandros and Linspire do themselves favors when they act more as traditional, proprietary vendors than as supporters and providers of open source.