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Linux giants report contrasting fortunes
Do you want the good news or the bad news?

By Jon Bernstein

Published: Thursday 28 June 2001

Linux supporters were given mixed messages yesterday when two leading suppliers of the operating system experienced contrasting fortunes.

VA Linux announced that it would exit the Linux hardware business and plans to lay-off staff. By comparison, competitor Red Hat recorded its first ever profitable quarter.

In a statement issued by the California company last night, VA Linux said that it will stop selling Linux computers on 10 July and that 35 per cent of its staff - around 150 people - would lose their jobs.

"VA expects its revenue to significantly decline with the elimination of the hardware segment," the statement continued.

Hardware has proved an increasingly expensive business for the company that had been spending an average of $25m per quarter, according to reports. VA Linux will now concentrate on software and services.

The move away from hardware is a major step given the company was founded back in 1993 on that very premise. It recognised the growing popularity of Linux early on, which enabled the company to float in 1999. By the end of the first day's trading, VA Linux's share price had risen 698 per cent.

From a high of $240, its share price has been hovering around the $3 mark for some time.

Meanwhile, Red Hat has a net income of $600,000 for its first quarter. This compares favourably with a loss of $3.7m in 2000.

Two high-profile networking company's showed their support for Linux by signing major deals with Red Hat. Cisco is using the operating system internally while Nortel is using Linux at the heart of its telecoms equipment software.