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VA Linux price target raised

VA Linux Systems received some good news after the bell Tuesday when ABN AMRO reiterated its "outperform" rating on the stock and bumped its 12-month price target to $70 a share from $50 a share.

VA Linux (Nasdaq: LNUX) shares closed off 57/64 to 54 7/64 Tuesday.

Analyst Keith Bachman said the company's entrance into the new network attached storage market should " drive not only top-line growth but also relatively high gross profit margins.''

Earlier Tuesday, W.R. Hambrecht & Co. also issued positive comments on VA Linux. W.R. Hambrecht analyst Prakesh Patel reiterated a "strong buy" rating and set a 6-month price target of $60. Patel was upbeat about VA Linux's plan for storage.

"While we are not changing our estimates, we believe that this announcement is significant because we expect it to have a positive effect on gross margins, differentiating the Company as an Open Source technology leader rather than as merely a commodity hardware vendor," Patel wrote in a research note.

Last quarter, VA Linux topped analysts' estimates, losing $4 million, or 10 cents a share, on sales of $50.7 million.

First Call Corp. consensus expects it to lose 9 cents a share in its first quarter and 26 cents a share in the fiscal year.

The stock surged up to a 52-week high of 320 in December before falling to a low of 26 1/2 in August.

All six analysts following the stock rate it either a "buy" or "strong buy" recommendation.