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VA Linux adjusts to vanishing server sales

VA Linux Systems reports a $55 million loss, with most of the shortfall stemming from restructuring costs after it ditches the server market.

Stephen Shankland Former Principal Writer
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Stephen Shankland
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VA Linux Systems reported a loss of $55 million on revenue of $5.6 million for its most recent quarter, with most of the shortfall attributed to restructuring costs as the company left the server hardware business.

The Fremont, Calif.-based company is in the midst of changing its name to reflect the change to sales of its SourceForge software for helping companies with collaborative programming projects. Still, $1.7 million of the company's revenue for the first quarter of its fiscal 2002 came from the hardware business, the company said.

In the year-ago quarter, when the company still sold servers, it reported revenue of $56 million and a net loss of $51 million. VA decided to abandon the server market because of its dependence on Internet companies, the declining market, and competition with established competitors.

Excluding restructuring and other charges, the company had a loss of $8.7 million, or 16 cents a share. That beat the estimation of the single analyst covering the company, who expected a loss of 22 cents per share, according to First Call.

VA, with a stellar initial public offering amid the peak of the Linux hype, is one of a host of companies now emphasizing proprietary software rather than open-source products. VA last week announced its first proprietary extensions that build on the open-source SourceForge core.

VA announced three new customers for this product: Cornell University's National Science Digital Library; Hewlett-Packard's Embedded Software Developer's Network; and Compaq Computer's Clustering Foundry.

In October, VA named Colin Bodell senior vice president of product development. He had worked at WebGain, Intellicorp and Merant before.