VA Linux sales explode, losses grow

VA Linux Systems, one of a handful of companies selling Linux-based server and workstation systems announced its sales are soaring, as are its expenses, resulting in an $11.6 million loss compared to $1.8 million a year ago. VA Linux in Sunnyvale said sales increased six-fold to $20.2 million on strong demand for its servers, which are pre-loaded with the Linux operating system, along with several key business application.

VA Linux share continue to trade at around $125 per share, three times its opening price of $40, but well below the $320 the stock closed at on December 9 on the first day of trading last fall, setting an all time initial public offering trading record.

VA Linux has been on a hiring and spending spree to help expand sales and manufacturing. The added expenses are causing short-term losses to increase. But, analysts believe that just as with Internet companies, Linux companies have to invest heavily to establish critical mass in order to reap in the benefits when the market expands.

"VA Linux had a blowout quarter,'' said Keith Bachman of the WR Hambrecht investment banking firm in San Francisco. "They're executing on their strategy.'' Besides direct investments in its own infrastructure, VA Research is also expanding through acquisition. Last month the company paid $1.04 billion in stock for Andover.Net, whose Web sites is the most visited portal in the Linux world.