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
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Stephen Shankland has been a reporter at CNET since 1998 and writes about processors, digital photography, AI, quantum computing, computer science, materials science, supercomputers, drones, browsers, 3D printing, USB, and new computing technology in general. He has a soft spot in his heart for standards groups and I/O interfaces. His first big scoop was about radioactive cat poop.
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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.