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VA Linux tumbles
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November 6, 2000: 2:54 p.m. ET
Firm sees 1Q revenue shortfall, wider loss; cites dot.com spending slowdown
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NEW YORK (CNNfn) - Shares of VA Linux Systems Inc., which provides computer products and services based on the Linux operating system, tumbled more than 40 percent, after it warned Monday of a fiscal first-quarter revenue shortfall due to an Internet spending slowdown.
In Monday afternoon trading, VA Linux (LNUX: Research, Estimates) plummeted $12.50, or 41.7 percent, to $17.50, beating its previous 52-week low of $23 a share and well below its high of $320.
 VA Linux said it expects to report a loss for the quarter ended Oct. 27 of 14 to 16 cents a share, due to lower revenue and increased spending based on higher revenue expectations. The Sunnyvale, Calif.-based company is due to report results Nov. 16. Wall Street analysts had expected a loss of 9 cents a share.
The company said revenue for the quarter increased 10 percent from the previous fiscal quarter and 275 percent from the year-ago quarter.
Analysts polled by First Call expected fiscal first quarter revenue to be $14.8 million.
 In its fiscal fourth quarter, VA Linux posted a loss of $4.08 million, or 10 cents per share, a nickel better than analysts had expected. Revenue was $50.7 million.
For all of fiscal 2000, VA Linux reported a net loss of $23.1 million, or 68 cents per share, compared with a loss of $12.2 million, or 85 cents per share, in fiscal 1999.
Fiscal 2000 revenue was $120.3 million, a gain of 579 percent from $17.7 million in fiscal 1999.
VA Linux lowered its estimate of fiscal 2001 revenue to roughly 2.25 times fiscal 2000 revenue from the previous guidance of 2.5 times. The company said it still anticipates becoming profitable, excluding non-cash charges, no later than the end of calendar 2001.
"Although repeat business with our existing customers remained strong during th first fiscal quarter, sales to new customers in the 'dot.com' sector were below our expectations. In particular, the number of new customer opportunities from venture-funded 'dot.coms' declined faster than anticipated," CEO Larry M. Augustin said.
"Going forward, we expect to benefit from our strategy of pursuing a broader account base, including business from large corporate and enterprise accounts. These customers require longer sales cycles, and we did not receive significant contribution to revenue from that sector in the fiscal first quarter," Augustin said.
VA Linux specializes in software and solutions based on the Linux operating system. Linux is an "open-source" operating system, which means that it is in the public domain and open to modifications by independent developers. VA Linux sells hardware, software and provides professional services for Linux systems as well.
Linux is viewed as the emerging rival to Microsoft's (MSFT: Research, Estimates) Windows operating system and has been gaining strength in the server market, especially among dot.coms. While it is offered free of charge, most corporate users pay for the operating system and its attendant support.
VA Linux competitors fell in sympathy with the company in Monday trade, including Caldera Systems (CALD: Research, Estimates), down 50 cents, or 11.3 percent, to $3.94 and Red Hat (RHAT: Research, Estimates), off $1.19, or 7 percent, to $15.81. 
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VA Linux
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