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VA Linux trying to make inroads into Japan

The company and Sumitomo create a subsidiary to help VA establish a toehold in the notoriously hard-to-enter Japanese market.

VA Linux Systems and Sumitomo have created a subsidiary to help VA establish a toehold in the notoriously hard-to-enter Japanese market.

VA has the controlling interest in the subsidiary, VA Linux Systems Japan, said Robert Russo, VA's general manager of worldwide sales, marketing and services.

VA, which last week moved its headquarters to Fremont, Calif., from nearby Sunnyvale, sells Linux servers and customization services and was one of the first Linux companies to go public. Its bread and butter is selling rack-mounted servers, but the company is expanding into special-purpose storage devices as well.

NTT Communicationware, NEC and Toshiba Engineering also have agreed to invest in the VA subsidiary, but completion of those deals awaits regulatory approval from the Japanese and U.S. governments, Russo said.

The partnership with those three companies, as well as Sumitomo, gives VA access that it would have had to fight for years to obtain otherwise, Russo said.

"We had immediate access to the presidents of divisions. That's phenomenal," he said. "Most companies wouldn't even get returned phone calls for six months."

The deal, a year in the making, will give VA a way to sell servers to large Japanese companies without the need for VA to hire a large sales and support staff of its own, Russo said. For example, VA will sell computers to NTT Communicationware, which in turn will sell them to the large Japanese telecommunications company NTT.

Even though VA's partners will take a fraction of the profit margin on the product sales, the company will regain that revenue because it doesn't have to pay for sales, marketing and support staff, Russo said.

VA has between 60 and 70 percent ownership of the subsidiary, a "super majority" that in Japan gives VA enough authority to take actions such as mergers or acquisition, Russo said.