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See also: last week's Commerce page.
VA Linux Systems filed for its Initial Public Offering, finally. They seek to get some $70 million from the offering, which is being underwritten by Credit Suisse First Boston and others. People interested in details and who are gluttons for punishment in general are invited to slog through VA's S-1 filing but be warned that it is not light reading. For the rest of you, here's a few highlights...
For the last fiscal year, VA Linux managed to lose $14.5 million on $17.7 million in revenues. The loss is mostly attributed to their aggressive expansion efforts over the last year. And it has indeed been quite an expansion: despite having been formed in 1995, VA only had 15 employees in July, 1998. In July 1999, they were up to 153 employees.
What are those employees doing? They have 29 people in research and development, 66 in sales and marketing, 10 in customer and professional service, and 48 in administration, finance, and operations. For its development staff, VA has been aggressively hiring high-profile Linux names for a while. The S-1 filing gives a current list of who they are: Ted T'so, San Mehat, Leonard Zubkoff, Walt Drummond, H.J. Lu, Mark Vojkovich, Brad Grantham, Geoff "Mandrake" Harrison, Carsten Haitzler (aka "Rasterman"), Michael Jennings, Chip Salzenberg, Sean Perry, Joey Hess, and Jon "maddog" Hall. Their associated projects include kernel development, XFree86, Enlightenment, cluster management, Perl, and Debian.
VA's business is currently 85% servers. Their strategy reflects this in general - it is very much oriented toward business, rather than home, customers. They have an impressive list of business customers, including Akamai Technologies, Argonne National Lab, Cisco Systems, CNET, EMC, eToys, France Telecom, GTE, Linuxcare, Lucent, MIT, Rhone-Poulenc Rorer, Sandia National Laboratories, Tucows.com, and 24/7 Media. They have more than 50 customers who spent more than $50K in fiscal year 1999.
VA's business plan remains very firmly tied to hardware sales and services associated with the use of that hardware. They stress the importance of their web sites in a couple of ways: (1) over 80% of their sales go through their web site, and (2) sites like Linux.com and themes.org are an important part of their branding strategy. But they seem to have no ambitions to make their living through a portal site strategy - the web sites are there to support the primary business.
Branding is important to them. They see their competitors as being companies like Dell, Gateway, HP, Sun, Compaq, etc. One senses a certain feeling of "brand inadequacy" compared to those names. Thus they plan to continue to promote themselves hard to build up a well-known brand.
They give the usual set of risk factors. One of them is the current set of inadequacies in the Linux system:
Because the Linux operating system currently lacks some functionalities, we cannot sell our systems in markets which require those software capabilities. For example, Linux cannot support some database applications which precludes our selling our products to entities which require those types of database applications. If these efforts to expand the functionality of the Linux operating system are not successful on a timely basis, our ability to continue to grow our business will be impeded.
Other risk factors include that they expect to run losses for "the foreseeable future," that Linux could suffer fragmentation, possible problems enforcing the GPL, that they have no control over the Linux trademark, and that the barriers to entry in their business are low.
What will they do with the money? The filing is pretty vague:
We intend to use the net proceeds from this offering primarily for working capital and general corporate purposes, including the expansion of our sales and marketing efforts and our professional services organization, as well as for capital expenditures.The possibility of acquiring other companies is also mentioned, though they state that there are currently no such plans or negotiations in progress.
So who owns VA? The big owners, according to the filing, are:
A number of people hold substantial (but smaller) shares.
In the end, VA's approach to the field can be summarized by a couple more quotes from the filing:
We believe that open source solutions will continue to gain market acceptance as the limitations of more expensive and less customizable proprietary applications become more pronounced.and
We believe successful Linux vendors must combine in-depth knowledge of Linux and other open source software with system design expertise and close ties with the open source developer community in order to maximize the benefits of Linux for customers.VA Linux Systems has come a long way in a short time; clearly they intend to continue on that path.
TAO CORBA ORB released Object Computing Inc. has announced the availability of its TAO product. TAO is an open source object request broker (ORB) compliant with CORBA 2.2. It is specialized toward real-time and high-performance applications. Commercial support services are available.
Section Editor: Jon Corbet.
October 14, 1999