VA Linux to cut 35 % of its staff, exit hardware

FREMONT: VA Linux Systems Inc. on Wednesday said it would exit the hardware

business and cut its staff by 35 per cent, or 153 jobs, under a restructuring

program that will focus the company's attention on applications based on the

Linux operating system.

VA Linux expects the new strategy would mean revenues would

"significantly decline" because historically the company has generated

a significant majority of its revenues from the sale of its computer hardware

products.

The company said the changes would reduce its operating expenses and the

amount of cash it needs to finance its operations. VA Linux said that after the

change that amount - its cash burn rate - would be about $8 million a quarter

and decline from there.

VA Linux said it expects to take a $10 million cash charge for the

restructuring including the staff cuts, closure of facilities and asset

write-offs. The company will continue to accept hardware orders until July 10,

2001, with the goal of completing all deliveries by the end of the fiscal year,

July 28, 2001.

(C) Reuters Limited 2001.