"...don't toss VA Linux onto the ever-growing trash pile of Net
stocks that were once mighty. This company still has a good
business plan, an admirable market niche, and a big pile of cash to
keep it running until it reaches profitability, which should be
sometime before the end of 2001. Despite that first-quarter sales
hiccup, this company's revenues are still impressive."
"VA Linux' primary business is selling huge server computers
that are used primarily to host Web sites and that run on the Linux
operating system, chief rival of Microsoft's Windows. One of the
reasons VA Linux became such a popular stock was that venture
capitalists were helping so many new Web sites open up, and
typically, the first capital spending for them was a
multimillion-dollar order for server computers. Thanks in large
part to that market, VA Linux was able to increase revenues at a
double-digit rate for each of the past four quarters."
"So, what is VA Linux to do? ... It now has to make up for
the lost business by selling massive amounts of hardware to the
enterprise market, otherwise known as really big companies.
The problem is that most large companies already have
entrenched relationships with the likes of IBM ( IBM ) and
Sun Microsystems ( SUNW ), which sell competing servers. ...
Nevertheless, such companies are allowing VA Linux to get a
foot in the door. Of the $56 million in first-quarter sales, nearly
5% came from the large-enterprise market."
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