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VA Linux revenues crash – 41% down

Demand goes South

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The fortunes of Wall Street's Linux poster children, Red Hat and VA Linux Systems, continue to diverge. While Red Hat boasted of bullish figures, VA yesterday reported a drop in sales of 41 per cent on last year's equivalent period.

Revenue for the most recent quarter was $20.3 million, down from $34.6 million in the corresponding quarter last year. The net loss is directly attributable to a mushrooming cost base, however, and operating expenses of almost $20 million are four times what was incurred in the same period last year.

The company swallowed hard, and incurred a restructuring charge of $46.8 million in the most recent quarter. VA has $100 million in cash, which should give it twelve months life if the current dismal demand continues. VA has previously said that it should be profitable in the last quarter of 2002, but the current strategy of betting on being able to throw high margin kit at server farms and large ISPs, and hoping some sticks, doesn't seem to be delivering. In theory, this strategy ought to be able to insulate VA from the price wars being waged by other PC vendors. Or not...

But assiduous Reg readers will know that this isn't VA's only golf club.

It has been putting that costly R&D spend to good use in creating NAS devices, and embedded appliance servers that provide an alternative to Windows boxes for basic file and print services. The latter don't quite replace Windows Primary Domain Controllers, but they're good enough to save customers a fortune in Windows Client Access Licenses. Only hardly anyone has noticed, and there only really seems to be us banging on about this. Capitalising on this requires a reseller partner, or several, and some canny marketing. Surely it isn't beyond the whit of the leading Linux company to place itself at the forefront of the 'Windows replacement' market?

As the saying goes - and it's true in the Linux business as any other - if you don't take a long lunch, you end up as lunch. ®

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