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SourceForge is the new ERP – VA Linux

ClosedSourceForge, anyone?

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The smart choice: opportunity from uncertainty

Barely six weeks ago VA Linux Systems was an open source hardware vendor. Now, the company is undertaking a Napoleonic retreat from the hardware business and it's doing the unthinkable: adding proprietary subscription software to its open source software flagship, SourceForge.

VA swallowed charges of around $230 million in the last quarter - $160 million coming under the category of "impairment of goodwill and intangible assets", and almost $70 million as a one-time charge - contributing to a net loss for the quarter of $290 million as it liquidated its PC manufacturing and sales businesses.

Costs will continue to affect the bottom line for two further quarters, said VA. Its Japanese subsidiary will continue to sell hardware, the company said, but that amounts to chump change.

The new software-only VA expects to make an operating lost of $10-13 million on revenue of $3-4 million in the forthcoming quarter. With a cash pile of $83 million, that gives the company as little as six months to ramp revenue, or else seek new investment. VA said its burn rate will continue to decline, suggesting that more layoffs are to be expected.

But CEO Larry Augustin is bullish. He says there was no competition for the distributed code management system SourceForge. Current development processes and tools haven't kept pace with geographically dispersed or ad hoc teams, according Augustin, who predicts that the impact of SourceForge could be as great as ERP or CRM.

Typically VA deals with in-house developers using a range of tools (it cites Borland, Rational and Microsoft as well as GNU tools). The company emphasises that seeks to complement rather than supplant existing tools.

VA is gunning for $600 revenue per seat per year - it claims that buyers typically see a return on investment within six months.

Augustin talks of adding "proprietary software features and functionality" to the subscription version SourceForge. That VA is looks at the software-hoarding model to save the business is an irony a few will savour, but we guess that by now badly singed VA investors will simply be hoping it flies. ®

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