Linux companies are sharing in the financial gloom inflicted on web firms, with two open source vendors having to give their business plans a major rethink.

Embedded operating systems provider Lineo said it will slash its workforce in half, while open source software and hardware provider Ebiz Enterprises has filed for bankruptcy protection.

Lineo, which withdrew its initial public offering in January, said it would lay off 60 staff and lose another 100 to peripheral technology projects the company expects to spin off, leaving it with about 110 employees.

Ebiz, and its subsidiary Jones Business Systems, filed separate voluntary petitions under Chapter 11 of the US Bankruptcy Act.

Dave Shaw, chief executive at Ebiz, said the bankruptcy filing will allow the company to restructure its old debt and help it towards profitability.

In a letter to shareholders Shaw said: "The economic and investment climate in the first half of the year has not allowed us to secure the funding we need to execute our 2001 business plan. Our plan is to reorganise, not to liquidate."

Ebiz operates several online shopping site for Linux open source products and is also a manufacturer of server systems and desktops. The Jones Business Systems subsidiary manufacturers Unix-based servers.