Is a linux from scratch build open source? Can my company really stop people having the source for free?

The company I work for has built a distribution using the "linux from scratch" route and built it from source. They intend to sell it on for loads of money but refuse to let even us "in-house" linux users from getting the source or modifying it to help us deploy it easier. Is this legal? and if so does that not go against the whole "open source" ethos?
The single application they run on the new OS is a in-house development ported from DOS, but how do they stand on licensing that too?

Just a bit confused,
G.

From what I understand, 100% open source is just that - you have the right to compile it and then sell it for money. Unethical yes, but the FSF basically wants GNU/Linux to be free to do as you please. It's what Xandros, Linspire, Vida Linux and a couple of other companies are doing. I don't know if you can make it closed source, though...

I guess, at the same token, the customers are free to do their research, find the software and compile it themselves.

I can't see any issues from porting a program from one OS to another, created in house. The power is held by the creator in this instance, I don't think anyone can dictate how it can be licensed.

It depends on the specific license. Generally, more open-source licenses require that you provide the source code to anything you derive from the original software. They are allowed to sell it, but they cannot make the source code exclusive.

As I understand it the open source license clearly states that the "cost" of using open source as a basis for your innovations is that you make the source of your improvements open as well.

Of course, as with most legal issues the devil is in the details. However, on the surface it appears as though the company is violating the intent, and perhaps even the letter, of open source licensing.