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VA bolsters push for big-business customers

VA Linux Systems, hoping to be carried along by IBM's emboldened Linux push, is adjusting its business to try and woo less avant-garde customers.

VA Linux Systems, hoping to be carried along in the draft of IBM's emboldened Linux push, is adjusting its business to try and woo less avant-garde customers.

In a conference call with analysts Wednesday, VA chief executive Larry Augustin said his company expects that big-business enterprise customers will be a faster-growing segment than the company's traditional customer type, Internet companies.

"Today we are in the late stages of early adoption," Augustin said. "It's our goal to diversify our customer base."

Augustin said the company is making progress in its enterprise effort, recently closing a deal to sell more than 1,000 servers to a financial services company. Indeed, traditional customers looks like a good deal when compared with VA's historical Internet customer base.

Although selling products that were part of the Internet infrastructure has been the rage for more than a year, some of the allure has worn off as Internet companies no longer look like they'll take over the world. Slowing business in Internet start-ups was one problem VA cited in November when it warned about worse-than-expected financial performance.

But bolstering business sales means VA will bump into Big Blue as well as Compaq, Dell, Hewlett-Packard and other traditional server companies. IBM Monday pronounced it would spend $1 billion on Linux products in 2001.

VA insisted it's undaunted by the ever-heavier presence of Big Blue.

"We think the movement of IBM into the market really helps us validate the use of Linux and opens the door for us," Augustin said. IBM's support of Linux helps convince software companies that it's worth their time making sure their products work with Linux, said Robert Russo, general manager of worldwide sales, marketing and services at VA.

VA is working on repackaging its products and services for business customers, Augustin said. "Enterprise customers are looking for a higher class of service," he said. In addition, VA is changing its sales strategy, hiring Gary Green on Nov. 28 to be vice president of strategic accounts and assigning salespeople and technical staff to specific customers.

Linux stocks were propelled upward today by IBM's Linux moves. VA stock increased $1.81, or 16 percent, to $12.81. Red Hat rose 84 cents, or 10 percent, to $9.25. Caldera Systems, with slimmer revenue than VA or Red Hat, increased 81 cents, or 31 percent, to $3.44.

Red Hat will report quarterly financial results Thursday. Analysts surveyed by First Call/Thomson Financial expected the company to report a loss of 2 cents per share.