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VA Linux sees red

Cuts 100+ staff

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Did They Really Say That? (Part 94)... "In the open source world companies will have to offer employees a greater level of meaning, something higher up the Mazlow pyramid," Eric Raymond told LinuxWorld Expo three weeks ago. "Basic job security and good compensation isn't enough."

However 130 employees of VA Linux, who became ex-employees of the company yesterday, might have settled for something lower down the needs pyramid. Raymond is a director of VA Linux, which has laid off a quarter of its staff after losing $13.4m in the last quarter. Despite doubling its income to $42m on the back of the rising popularity of enterprise Linux in the period, VA Linux's expenses have also doubled.

In addition to the staff cuts, which CEO Larry Augustin said would be made in "non core" areas, the company would discontinue building custom hardware. "It was never core to our business model and we can't afford those investments," he said. Instead software engineering and software customisation would attract the focus. The company now expected to be in profit next autumn, nine months later than had been mooted, although Augustin said predicting demand in the coming months was next to impossible. The company said it was budgeting for costs of $30m for the coming quarter, saving a quarterly $5m over its current burn rate. VA has $126m in the bank.

The company's online publishing and software services network OSDN (which includes Slashdot and SourceForge) accounted for 10 per cent of income, and services 8 per cent. VA Linux saw margins slip on the bulk of its business, servers and NAS, to 16 per cent down from over 22 per cent. Two large customers - hosting site Akamai and stock trading company account for almost 30 per cent of VA's income between them.

Although it invests heavily in R&D, employing a stellar team of free software luminaries, that investment is beginning to pay off, with the NAS 2230 kit being an example. VA promoted Ali Jenab, formerly a President at Amdahl, to serve as COO and President, and appointed new VPs of engineering and marketing. ®

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