VA Linux shares take a beating

VA Linux Systems, which has made Wall Street history with the biggest one-day
increase in stock value, has seen its shares plunge 93 per cent. On Monday, the
company's shares lost 42 per cent of their remaining value after the Sunnyvale
maker of Linux servers and workstations said its fiscal first-quarter loss was
wider than forecast and sales were lower than expected due to the crunch in the
dotcom industry.

VA Linux shares fell $12.63 to just $17.38, a $664.9 million drop in the
company's market value. VA Linux also lowered its fiscal 2001 sales forecast by
10 per cent to $270.7 million from $300.8 million.

The company blames the turbulent times in the Internet industry for most of
its problems. Internet companies have been relying heavily on Linux to run their
networks of Internet servers. But dotcom companies have been going out of
business at about the same rate this year they appeared on the scene in 1998 and
1999. Most are unable to attract the level of advertising and sales commission
support needed to stay in business.

"All of our larger customers are in the Internet market,'' said VA Linux
spokesman Patrick Fossenier, adding that the company is trying to broaden
product appeal in other sectors. Analysts said VA Linux is also suffering from
increased competition from IBM, Compaq and Dell, all of which are now pushing
their Linux-based servers as a way to compete more effectively with Sun
Microsystems.