Caldera, which is currently suing Microsoft for alleged antitrust behaviour, said that its board of directors and those of Ragula Systems, were no longer considering merger.
It explained that they had been "unable to come to a mutual understanding of the terms of the proposed reverse acquistion between the parties and all negotiations between the parties have been terminated.
Caldera now sells the OpenLinux Unix operating system, but also sells and supports DR-DOS, which it claims was unfairly targetted by Microsoft.
Ragula Systems, on the other hand, was founded in 1989 and is funded by venture capital firms and accredited independent investors.
Its flagship product is FatPipeTMT1, which is a high speed Internet access product that combines multiple T1, DSL and /or ISDN routers providing Internet access speeds upto 4.5 Mbps.
Both firms are privately owned and refused to comment further.
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