VA Linux revenues rocket – but so does loss

And the cost of buying Andover.net is still to come

VA Linux Systems lost $12.6 million during its second quarter, which came to a close on 28 January, despite making $20.2 million in sales of hardware running the open source OS and associated services. For the same period last year, at which point the company was privately held and so under no obligation to publish its results, VA lost $1.8 million on revenues of $3.17 million, what translates into a year-on-year increase in revenue of 537 per cent. Sales of $20.2 million also represent an increase of 36 per cent on the previous quarter. Almost all of the company's revenue came from hardware sales, with just 1.5 per cent of it coming from sales of services. New customers accounted for just under half of the quarter's sales, while VA's top ten customers accounted for 41 per cent of sales, down nine per cent on the previous quarter. Clearly VA is widening its customer base rather than just selling more to the faithful. VA's gross margins improved to 14 per cent for the second quarter from 13.2 per cent in the previous quarter, so the revenue prospects for the next quarter look good. Much of the latest quarter's loss is attributed to deferred compensation charges of $4.2 million associated with stock options issued for recruiting and marketing. That takes the operating loss down to $8.4 million, from which you can take a further $1 million for a one-off charge covering consulting fees paid in stock before the IPO. The big hit is going to come in three months' time, when VA will take a $60 million cash charge made to holders of Andover.net common stock holders as part of its acquistion of the Slashdot owner. Andover's latest results contain a loss of $15.7 million (including charges) on revenues of $2.1 million, so it's not going to contribute too much to VA's bottom line, at least for the foreseeable future. ®

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