VA Linux chief sees profitability by October 2002

Yukari Iwatani

CHICAGO: VA Linux Systems Inc., which makes software and products for the

Linux operating system, still expects to turn profitable in the quarter ended

October 2002, a company executive said on Tuesday.

Despite an increasingly weak economic environment, chief executive Larry

Augustin told Reuters in an interview that he believed VA Linux will still reach

profitability within that time frame by targeting enterprise customers and

growing its business.

Like many other companies in the technology sector, VA Linux has been hit by

an economic slowdown, forcing the company to report in February a wider loss

than expected in its fiscal second quarter. At the time, VA Linux said it would

also slash 25 per cent of its work force and postpone its profitability target

date to the October quarter of 2002, nine months later than originally planned.

Shares of VA Linux have taken a precipitous drop from their year high of $103

to today's close at 2-3/32 on Nasdaq. Earlier in trading on Tuesday, VA Linux

stock reached a new low of 2-1/32.

"I'm beginning to think that it's going to be 2002 before we see the

economy picking up in general," Augustin told Reuters at Comdex Chicago, an

annual technology conference.

He added that he expects VA Linux's business to begin picking up at the end

of this year and into 2002. Augustin explained that VA Linux suffered from the

collapse of the Internet companies because many of them are customers, but the

company was now targeting large enterprise customers.

He said VA Linux hopes its end-to end product line of hardware, software and

services will give it an edge against traditional computer makers like IBM,

Compaq and Dell that are also offering Linux products.

Augustin cited a Deutsche Bank Alex. Brown study that projected 30 per cent

of all servers sold by 2004 would be based on Linux. The same study also

predicted that information technology departments will be spending $75 billion

on open source systems including Linux by 2004 compared with about $7 billion

now.

Open source operating systems are programs where the source code is known and

available to all and can be easily customized. In contrast, Microsoft's Windows

operating system is proprietary.

(C) Reuters Limited 2001.