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VA Linux to cut 139 jobs

    VA Linux plans to cut 25 percent of its staff after hitting the low end of its diminished range of expectations and falling short of analyst estimates in the second quarter.

    After market close Tuesday, the maker of servers and storage systems for the Linux operating system reported a fiscal second-quarter loss of $13.4 million, or 28 cents per share, excluding special charges. The company last month warned of a second-quarter loss ranging between 24 cents and 28 cents per share.

    Shares of VA Linux traded at $5.75 in after-hours activity on the Island ECN, immediately following the release of quarterly results. VA Linux stock fell 50 cents to $7.25 in Tuesday's regular trading ahead of the quarterly report.

    Second quarter revenue increased 111 percent year-over-year to $42.5 million. VA Linux (Nasdaq: LNUX) expected sales of $43 million to $50 million.

    Analysts surveyed by earnings tracking firm First Call produced a consensus estimate calling for a loss of 26 cents per share on revenue of $52.5 million.

    Gross margin fell to 16.12 percent from 22.50 percent in the first quarter. VA Linux will slash 25 percent of its 556-person workforce and cut other costs to become profitable at lower sales levels than previously planned for, CEO Larry M. Augustin said.

    "We have recognized the need to adapt to this new economic environment," he said. "We have established reserves to address financial exposures and we are restructuring the company to better compete."

    The company expects to record an undetermined restructuring charge in the fiscal third quarter to pay for the job cuts.

    Including amortization and one-time charges, VA Linux in the second quarter lost $74.1 million, or $1.57 per share.

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