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VA Linux buying Andover
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February 3, 2000: 6:40 p.m. ET
Open source provider acquiring developer network for $860M cash and stock
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NEW YORK (CNNfn) - VA Linux Systems, a high-flying maker of Linux-related hardware, said Thursday it agreed to buy Andover.Net, a Linux-information Web site operator, for about $860 million.
VA Linux, based in Sunnyvale, Calif., is a leading provider of large-scale computer servers and workstations designed for the Linux operating system, which powers one-third of all Web servers and competes with Windows NT. Andover.Net, based in Acton, Mass., runs several Web sites that offer software downloads and information for Linux programmers and developers. Andover said that its network of Web sites generates 50 million page impressions from more than 2.4 million users a month.
"This acquisition effectively creates a Yahoo! for Linux and open source developers," VA Linux founder and CEO Larry Augustin said. While a graduate student at Stanford in 1993, Augustin gave up the chance to become a co-founder of Yahoo!, starting VA Linux instead. VA Linux (LNUX: Research, Estimates) is paying $860 million for a company that barely existed six months ago and went public in December. Andover.Net's (ANDN: Research, Estimates) revenues were a paltry $1.6 million in the nine months ended June 30, 1999. Its revenues totaled $2.1 million in the quarter ended Dec. 31, 1999.
The transaction is slated to be completed in VA Linux Systems' third fiscal quarter, ending April 30, and has been approved by both companies' boards. It is subject to approval by Andover.Net stockholders.
Linux, which has a publicly available source code and can be copied, modified and distributed with few restrictions, was developed by hundreds of independent developers, and competes with proprietary operating systems, such as those made by Microsoft Corp.
The stocks of Linux-associated companies have soared over the past several months. VA Linux's IPO jumped a record 733 percent in its first day of trading last year. Andover.Net rose 252% on its first day of trading. VA Linux is using its stock as currency for the transaction. At current share prices, Andover.Net shareholders will receive about $800 million worth of VA Linux stock and $60 million in cash.
Following the news, Andover.Net's stock closed at 45-1/8 up 9-1/8, while VA Linux closed at 128, down 8-7/8.
Andover. Net, which describes itself as an independent, unbiased source for Linux information, may need to prove that its content will not be influenced by VA Linux's ownership.
While the number of commercial programs that can run on Linux is small compared with the number written for Microsoft operating systems, Linux is gaining market share quickly.
In 1998, Linux disks comprised 15 percent of all new server operating system licenses sold worldwide, according to a March 1999 International Data Corporation report. 
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