Ubuntu maker boosted revenue in 2013 but doubled loss to $21 million

Canonical's UK-based operations earned $65.7 million in revenue during fiscal 2013, a significant boost over the previous year's revenue of $56.8 million. However, the company is in investment mode as it attempts to expand beyond desktops and servers to the mobile market. While Canonical lost $11.1 million in fiscal 2012, its losses rose to $21.3 million in fiscal 2013.

The numbers come from an annual report (PDF) made public this month, as required by UK law. The report provides our best look at the finances of Canonical, which is a private company and doesn't file the quarterly reports we see from public companies. This report has limitations, though, covering the 12 months through March 31, 2013, the date Canonical's fiscal year ended. It also doesn't cover Canonical's entire worldwide operations.

The annual report (provided to Ars by financial research firm DueDil) seems to cover most of Canonical's business, though. The report says that $50.6 million of the reported $65.7 million in revenue came from sales outside the UK, including $48.2 million from outside Europe. The numbers include the operations of subsidiaries in the US, Canada, and China. China alone covers "the majority of global units shipped."(Canonical reported its numbers in US dollars because it is the "functional currency of the company.")

Canonical's website says the company has "more than 500 employees in over 39 countries." The annual report covers the financial impact of 348 employees in the UK base of operations and subsidiaries. $47.7 million of Canonical's expenses were for paying salaries and benefits in fiscal 2013, up from $39.9 million the previous year.

In our feature last August, Why Ubuntu’s creator still invests his fortune in an unprofitable company, Canonical founder Mark Shuttleworth told Ars that his company could become profitable by stripping down to its most successful components, like its server and cloud business. "We could slice Canonical to something profitable pretty straightforwardly," Shuttleworth said at the time.

He has a grander vision, however, of turning Ubuntu into an all-encompassing platform on phones, tablets, PCs, servers, and the infrastructure underlying cloud services. As Shuttleworth said, "In my mind the scope of the opportunity has grown, and with it my willingness to invest. I'm interested in the type of disruption, in the idea that at some future date you could have an app running on your phone, that app could be an Ubuntu app, you could dock that app to a big screen, and it would then be an Ubuntu PC. The data for that could be processed in a cloud running an Ubuntu guest and that cloud could be running on an Ubuntu host."

Shuttleworth's investment may have expanded even further since the end of fiscal 2013 in March. Canonical just recently released the first stable version of Ubuntu for phones, and it plans to bring Ubuntu to tablets within a few months. If you're looking to install Ubuntu on mobile devices before officially branded hardware launches from Canonical partners, it looks like the Nexus 4 phone and second-generation Nexus 7 tablet will be the primary supported reference platforms.

Ubuntu’s path to sustainability

While the Ubuntu operating system is free and open source, Canonical's quest to become profitable has been a source of discussion for Ubuntu users for years. Canonical turning a profit would signify that the platform itself could be sustainable even without a rich benefactor.

We asked a Canonical spokesperson today if the company can provide any further financial details from countries not covered in its annual report and for the period after March 31, but we haven't heard back yet.

Canonical struck a positive tone in its annual report, describing why it's continuing to spend more than it makes in revenue. The company unveiled the phone platform in January 2013, after what the annual report describes as a significant investment in research and development. In addition to mobile, the company expects its enterprise IT and cloud businesses to power future growth.

Here are some highlights from the report:

Continuing Canonical's existing relationships with a number of leading OEMs, Ubuntu has grown, both in number of units shipped and total revenue from professional engineering engagements. China was the stand out geographic region, accounting for the majority of global units shipped.

Canonical continued to invest in building a world class global support operation to meet its corporate customers' needs. Canonical's Ubuntu Advantage program, which provides customers with first-rate support and systems management tools, plus the added benefit of legal assurances, continued its steady year-on-year growth.

Canonical said it expanded its online services portfolio with more third-party applications in the Ubuntu Software Centre and a new developer program to accelerate software publishing. "Ubuntu One, Canonical's subscription-based personal cloud service, continued to release a number of new features," the company also said. "Canonical continues to invest in this area and expects significant revenue increases in FY2013 and beyond."

Noting that Ubuntu is found "on desktops, servers, and in-vehicle entertainment system," Canonical said it is expecting "material future growth... both in terms of number of users and customer engagements." One of Canonical's most significant deals involves building a new version of Ubuntu for the Chinese government.

Canonical's services for IT shops are another important revenue stream. "Canonical's zero license fee model has made Ubuntu the operating system of choice for cloud deployments," Canonical said. "This, in turn, is expected to drive commercial consulting and support engagements as the market matures."

UPDATE: A day after this story was published, Canonical sent us the following statement: "Canonical operates in multiple geographies across both client (desktop, phone, tablet) and cloud, and the UK business is just a small part of a global organization so does not reflect a true picture of Canonical group. As a private company, we do not discuss financials and percentages of business operations.

"Over the last year, Canonical has been growing at technology and customer levels. In the UK, we have continued to increase investment into UX design, R&D, commercial and European sales hub teams. We're excited by 2014 with the 14.04 LTS planned for April as well as announcements on both the phone and cloud sides of the business."

Listing image by Flickr: God DRAGON