VA Linux Reports Sharply Higher Sales, But Loss Widens

VA Linux Systems today reported that second-quarter revenue rose fivefold on the strength of new contracts and the soaring popularity of the open-source Linux operating system. But the company's operating expenses climbed as well during its inaugural quarter as a public company, leading to a comparably larger net loss.

VA Linux reported revenue rose 537% during the quarter ended Jan. 28, to $20.2 million, compared with $3.2 million one year ago. The company's net loss increased by the same percentage, to $11.6 million, compared with $1.8 million last year.

During the quarter, new accounts generated 49% of total revenue. VA Linux is also becoming less reliant on its largest customers: The company's 10 largest accounts contributed 41% of revenue during the second quarter, compared with 50% one year ago. Its largest customers include Akamia Technologies, NetLedger, and CNet.

"We're executing on our business model," CEO Larry Augustin said during a conference call with analysts. VA Linux, which sells server and desktop systems pre-loaded with Linux and performs custom software development, is hoping to increase its revenue from consulting and integration services. Professional services revenue was just $300,000, or 1.5% of sales, during the quarter. Augustin expects that contribution to increase to 5% during the third fiscal quarter.

VA Linux held a successful initial public offering in December; as of Thursday, the company had a market value of $5.05 billion.