VA LINUX SHARE FLOAT _ FLYS
posted 13th Dec 99

If the VA Linux gains hold after floating on the stock markets in the USA, it will be the most successful first-day float opener. VA Linux opened at 299 Thursday before settling to 247. The company had earlier priced shares of its 4.4 million share offering at $30.

VA Linux upped its price range twice prior to the offering. On Wednesday, the company said its new range was $28 to $30 per share, up from the $21 to $23 announced Tuesday, and far above the original price range of $11 to $13. The company sells systems running Linux, a freely available Unix variant largely developed by a grassroots community of software writers.

Cobalt Networks was a good example of what can happen when a leading company taps into the Linux buzz. The market in recent weeks has furiously traded Linux-related stocks, including Andover.net, which soared in its public debut Wednesday. VA Linux will use the proceeds to fund operating expenses, including broadening its professional services organization, hiring more research and development staff, and expanding sales into Europe.

VA Linux offers computer systems, software and services for Linux users, but in terms of sales it is largely a hardware company. Servers accounted for 88 percent of revenue for the quarter ended Oct. 29 and 59 percent of sales for fiscal 99. Products include dual Pentium III workstations, server clusters and other hardware running on Linux. VA Linux also operates a flagship site, Linux.com, which serves as an information hub for the popular operating system.

Sales for the fiscal year ending July 31 were $17.7 million with a loss of $14.5 million. In 1998, sales were $5.5 million. For the first quarter ending Oct. 29, sales were $14.8 million, seven times greater than sales in the same quarter of 1999. VA Linux lost $10 million in the first quarter.

The company attributed its losses to development, sales and marketing and administrative expenses, particularly as it expanded its direct sales force. VA Linux is also beefing up its Internet operations and services.

This needs some attention, the big successes in the stockmarkets of the US are big failures in trad accounting terms. Accountants aren't, perhaps never were, the gurus their high-rise buildings imply. People still spend money according to one thing, fashion. The penguin is king.