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Business Week: There's Plenty of Life Left in VA Linux

Nov 21, 2000, 17:43 (0 Talkback[s])
(Other stories by Sam Jaffe)

"...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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