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The VA Linux 10Q analyzed

By streetlawyer in News
Mon Jun 18, 2001 at 10:59:59 PM EST
Tags: Hardware (all tags)
Hardware

(warning: Long post)

Below, see the VA Linux quarterly report on form 10Q to the SEC, excerpted and annotated by me. It doesn't make wonderfully cheerful reading.

NB: I did this rather hastily, and so all conclusions should be regarded as tentative. If anyone sees an obvious mistake (my analysis is in italics, please say so. The full form (minus section 1) is available at Edgar Online. In related news, there's a quite interesting posting on the Yahoo bulletin board for this stock ( a post which has since been updated

Lots of you guys (resisted temptation to link to Raymond there) have this stock. Make your own decisions.


VA LINUX SYSTEMS INC (LNUX)

Quarterly Report (SEC form 10-Q)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

[VA Linux disclaimer]

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements regarding future financial performance and results of our operations; composition of revenues between our various product, support, OSDN and service offerings; the Company's sales strategy and anticipated benefits from such strategy; future growth of SourceForge.net(TM) and expected benefits of SourceForge Onsite; successful adoption of Open Source technologies by large corporations; the Company's ability to benefit from large corporation's adoption of Open Source technologies; demand for the Company's consulting services and OSDN(TM); anticipated benefits from cost-cutting and other restructuring actions; technological trends in the computer industry; our future product and service offerings, costs and features; the ultimate success of our product and service offerings; anticipated domestic and international revenue; future gross margin on products and services; sufficiency of the Company's existing cash balances and credit facilities to fund operations; management's strategy, plans and objectives for future operations; demand for our products and service plans; the future functionality, business potential, demand for and adoption of build-to-order software, the Build-to-Order Software Selector (BOSS), and OSDN; growth in adoption of and support for the Open Source development model; and the expansion of the range of Open Source software applications. Our actual results may differ materially from those projected in the forward-looking statements due to various factors set forth in this report, including as set out in "Management's Discussion and Analysis of Financial Condition and Results of Operations."

The following discussion and analysis should be read in conjunction with the section entitled "Risk Factors," as well as the condensed consolidated financial statements and the notes thereto included in Item 1 in this Quarterly Report, and our other filings with the SEC made from time to time.

[streetlawyer's own disclaimer] Although this anonymous website post discusses newsflow related to a publicly traded security, it does so in a purely journalistic manner and no opinion on the advisability of buying, selling or holding any traded security is given or implied. A certain amount of care has been taken to ensure accuracy of figures, but not anything approaching the level which might be expected of a paid professional and no statement of fact below should be relied upon for any decision purpose whatever unless independently verified.

..... and on with the 10-Q my friends ...


OVERVIEW

We are a leading provider of Linux-based solutions, integrating systems, software and services. Our broad-based technical expertise in systems and software design, as well as our focus on the Linux operating system and related Open Source solutions, enable us to provide high-quality Linux systems designed for optimal performance, reliability and scalability. To further expand our service offerings, we established a professional service organization in September 1999 and OSDN in June 2000.

[snip history and description of VA Linux' business] --SL


RESULTS OF OPERATIONS

The following table sets forth our operating results for the periods indicated as a percentage of net revenues, represented by selected items from the unaudited condensed consolidated statements of operations. This table should be read in conjunction with the condensed consolidated financial statements and the accompanying notes thereto included in this Quarterly Report.

[snip unwieldy table] -- SL


THREE AND NINE MONTHS ENDED APRIL 28, 2001 AND APRIL 28, 2000


NET REVENUES

The Company has two reportable business segments for revenue: Systems and Services; and OSDN. The Company allocates resources to and evaluates performance of its segments based on revenue.

Net revenues for the three months ended April 28, 2001 decreased by approximately $14.3 million or 41% to $20.3 million, compared to net revenues of $34.6 million for the three months ended April 28, 2000. The Systems and Services business segment and the OSDN business segment accounted for $17.0 million or 83.8% and $3.3 million or 16.2% of net revenues, respectively, for the three months ended April 28, 2001, compared to $34.6 million or 100% and $0 million or 0% of net revenues, respectively, for the three months ended April 28, 2000.

Net revenues for the nine months ended April 28, 2001 increased by approximately $49.3 million or 71% to $118.9 million, compared to net revenues of $69.6 million for the nine months ended April 28, 2000. The Systems and Services business segment and the OSDN business segment accounted for $106.5 million or 89.6% and $12.4 million or 10.4% of net revenues, respectively, for the nine months ended April 28, 2001, compared to $69.6 million or 100% and $0 million or 0% of net revenues, respectively, for the nine months ended April 28, 2000.

To summarise, sales are up nine-months on nine-months, but down 41% quarter on quarter. In other words, the stock market (which has been selling off VA like warm Ebola since January) saw this one coming.

The decrease in net revenues for the three months ended April 28, 2001, as compared to the three months ended April 28, 2000, was due primarily to a decrease in the sales volume of our Internet server products resulting from the general economic slowdown and lower pricing due to market competition, while being partially offset by the increased revenues from web-based advertising sales and professional services. The increase in net revenues for the nine months ended April 28, 2001, as compared to the nine months ended April 28, 2000, was due primarily to the increases in sales volume of our Internet server products and professional services and to the newly introduced web-based advertising sales.

Surely can't have much to do with advertising sales - half the ads on OSDN are "house ads" for other VA companies, or for Thinkgeek products, who can't pay too well. The increase is due to the launch of SourceForge Onsite, the product that lets you pretend you're doing "Open Source" while not actually doing so. Which isn't to say that SFOS is a bad product - it's very good. But will it save VA as an Open Source company?

For the third quarter in fiscal 2001, our top ten customers accounted for approximately 45.5% of net revenues, as compared to 44.4% of net revenues for the same period in fiscal 2000. The only customer to account for more than 10% of net revenue in the third quarter of fiscal 2001 was Akamai Technologies, which represented 26.2% of net revenues. For the first nine months in fiscal 2001, our top ten customers accounted for approximately 41.4% of net revenues, as compared to 34.0% of net revenues for the same period in fiscal 2000. Akamai Technologies, which represented 23.9% and 16.1% of net revenues, was the only customer to account for more than 10% of net revenues in the first nine months of fiscal 2001 and fiscal 2000, respectively.

This is bad. It's been known for at least a year that VA is a one-client company - effectively, if anything happens to Akamai, or if they find another vendor, VA is in serious trouble. Not so long ago, VA were telling us that they had plans to land more big accounts to diversify revenue streams a bit more ....

No other customer accounted for more than 10% of net revenues during any of the periods presented. We have limited visibility of future revenue but currently expect revenues to be sequentially flat or vary by plus or minus 15% as a result of the slowdown in the economy and our focus on enterprise customers which have a longer sales cycle.

"Limited visibility" means what it says; this is a crap shoot. VA's clients equal Akamai, plus a load of tiny dot coms, which are going down like jelly shots on the Fourth of July. Remember the bit abut "focus on enterprise customers", it comes up again later.


COST OF REVENUES

Cost of revenues decreased to $25.1 million for the three months ended April 28, 2001, as compared to $28.4 million during the same period ended April 28, 2000. Cost of revenues for the first nine months of fiscal 2001 increased to $118.2 million from $58.7 million for the same period in fiscal 2000. The gross margin percentage was (23.6%) and 0.6% for the three and nine months, respectively, ended April 28, 2001, as compared to 17.8% and 15.7% for the three and nine months, respectively, ended April 28, 2000. The decline in margin for the three months ended April 28, 2001 was primarily due to decreased leverage of our manufacturing, customer support, and professional service infrastructure as total revenue decreased and key personnel were retained, and to additional charges of $3.4 million primarily from an inventory write-off caused by the closing of our San Diego operations and severance attributable to 69 people, of which 28 former employees had been terminated as of April 28, 2001. The decline in margin for the nine months ended April 28, 2001 was primarily due to an additional inventory provision of $17.4 million to establish a reserve for excess material that resulted from a high level of inventory compared to the Company's current reduced expectations for systems and services revenue, restructuring charges of $3.4 million, and from lower selling prices. Pricing pressures due to the competitive market, the liquidation of excess inventory, potentially below our costs, changes in sales volume, and changes in customer demand may adversely impact our gross margins.

In other words, VA's costs are at rock bottom. Fair enough, they've been hit by one-off restructuring charges, but the fact remains that there is no fat left to trim - they're even having to pay up to "retain key people". Unless revenues start to arrive, they're going to have to start making cuts which will strike at the heart of the business.


SALES AND MARKETING EXPENSES

In absolute dollars, sales and marketing expenses increased to $9.7 million and $32.7 million for the three and nine months, respectively, ended April 28, 2001 from $7.6 million and $19.8 million for the three and nine months, respectively, ended April 28, 2000. For the three and nine months of fiscal 2001 ended April 28, 2001, the increase primarily reflects expenses associated with increased branding activities for our new products, costs related to new locations and costs related to the OSDN. Sales and marketing expenses were 47.7% of net revenues for the third quarter of fiscal 2001 and 27.5% of net revenues for the first nine months of fiscal 2001, an increase of 25.8 percentage points when compared to the third quarter of fiscal 2000 and a decrease of 0.9 percentage points when compared to the first nine months of fiscal 2000. The increase as a percentage of net revenues for the third quarter of fiscal 2001 was primarily due to revenues significantly decreasing while spending for branding activities increased. The decrease as a percentage of net revenues for the first nine months of fiscal 2001 was primarily due to leveraging our investment in marketing expenses as revenues significantly increased. We expect that sales and marketing expenses will remain relatively constant or slightly decrease in absolute dollars.

Great self-delusions of our time: the check's in the post, I won't come in your mouth and "marketing expenses will remain constant". The branding expenditure is not a one-off; if it had been, they wouldn't still be spending on brand-building for OSDN when it was first launched over a year ago.

However, due to the limited visibility of future revenue, sales and marketing expenses may increase as a percentage of net revenues.


RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses consist of payroll and related expenses for software and hardware engineers and cost of materials for prototyping and testing units. We expense all of our research and development costs as they are incurred. Research and development, as a percentage of net revenues, was 23.7% and 12.1%, respectively for the three and nine months ended April 28, 2001 and 8.6% and 11.8%, respectively for the three and nine months ended April 28, 2000. In absolute dollars, research and development expenses increased to $4.8 million for the three months ended April 28, 2001 and $14.4 million for the first nine months of fiscal 2001 from $3.0 million and $8.2 million for the three and nine months ended April 28, 2000. The increase in absolute dollars was due to an increase in engineering personnel and spending for prototyping material for new product development. The increase as a percentage of net revenues was due to revenues significantly decreasing while spending increased. We expect to continue to invest in system design, Open Source software and other research and development initiatives. Additionally, we expect research and development expenses to be relatively constant or to slightly decrease in absolute dollars. However, due to the limited visibility of future revenue, research and development expenses may increase as a percentage of net revenues.

Interesting to see that VA is still increasing spending on R&D - this is usually the first thing to be cut, and the fact that it hasn't been is the first spot of good news so far. The story this paragraph is telling us is that they've been spending on developing new products. How do they plan to launch these while keeping "sales and marketing expenses relatively constant"?


GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of salaries and related expenses for finance and administrative personnel, professional fees and costs associated with implementing and expanding our information systems. General and administrative expenses, as a percentage of net revenues, were 23.5% and 15.3%, respectively, for the three and nine months ended April 28, 2001 and were 6.0% and 7.5%, respectively, for the three and nine months ended April 28, 2000. In absolute dollars, general and administrative expenses increased to $4.8 million and $18.3 million, respectively, for the three and nine months ended April 28, 2001 from $2.1 million and $5.2 million, respectively, for the three and nine months ended April 28, 2000. The increase in absolute dollars for the third quarter of fiscal 2001 was primarily due to an increase in administrative personnel and the associated costs of new business activities. The increase in absolute dollars for the first nine months of fiscal 2001 was primarily due to an additional provision for bad debts of $2.5 million, an increase in administrative personnel and the associated costs to support our increased operations. The additional bad debt provision of $2.5 million was a result of a deterioration of the Company's ability to obtain payment from certain "dot-com" customers.

Oh dear.

We do not intend to increase our current level of spending to support our infrastructure, and, as a result we expect general and administrative expenses to be relatively constant or to slightly decrease in absolute dollars in the future. However, due to the limited visibility of future revenue, general and administrative expenses may increase as a percentage of net revenues.

This is where the squeeze will first be seen. You can always squeeze the G&A budget by 5 to 10 per cent; perhaps more in the context of a company that's been run with a plentiful supply of IPO cash in the recent past. A 10% reduction in overhead would only be worth $2-2.5mn, however. That might prop up the R&D budget if revenues remained constant; if sales took another drop, it's meaningless.


RESTRUCTURING COSTS AND OTHER SPECIAL CHARGES

[snip - synopsis is that they're treating this in a quite prudent fashion, writing off assets that might still be worth something] -- SL


AMORTIZATION OF DEFERRED STOCK COMPENSATION EXPENSE

In connection with the grant of stock options to employees during fiscal 1999 and prior to our initial public offering in fiscal 2000, we expensed deferred stock compensation of $2.7 million and $8.1 million, respectively, for the three and nine months ended April 28, 2001. We expensed $4.6 million and $11.7 million, respectively, of deferred stock compensation for the three and nine months ended April 28, 2000.

In connection with our acquisitions, we amortized $17.2 million and $53.0 million, respectively, of compensation expense for the three and nine months ended April 28, 2001.

Stock options - what happened to these? the insider trades screen on Yahoo will tell you. I see that Larry Augustin still doesn't think the stock is cheap enough for him to buy.


AMORTIZATION OF GOODWILL AND INTANGIBLES


WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT

[both snipped] -- SL


INTEREST AND OTHER INCOME, NET

Interest and other income, net includes income from our cash investments, net of other expenses. Net interest and other income of $1.7 million and $5.4 million, respectively, for the three and nine months ended April 28, 2001 decreased from $2.0 million and increased from $3.2 million when compared to the same periods, respectively, in the prior year. The decrease for the three months ended April 28, 2001, was primarily due to a lower cash balance, while the increase for the first nine months was primarily due to a higher average cash balance for the period. We expect interest and other income, net to decline as our cash balance decreases to support our operations.

The "burn rate". This line tells us that the accounting picture is not misleading - VA is running down cash. VA says it has about $100mn left, which makes it interesting that they've generated $1.7mn of "interest and other income". If this was all interest on the cash balance, it would imply an annual yield of 6.9% -- well above current CD rates. The highest current CD rate available on www.bankrate.com is 4.5%. To generate $1.7mn of income at this rate would imply that the average balance over the period had been $153mn. Either there's a lot of "other income" in here, or that's a pretty high quarterly "burn rate".


INCOME TAXES

As of April 28, 2001, we had federal and state net operating loss carry-forwards for tax reporting purposes available to offset future taxable income. The federal net operating loss carry-forwards expire at various dates through 2021 to the extent that they are not utilized. We have not recognized any benefit from these net operating loss carry-forwards because of uncertainty surrounding their realization. The amount of net operating losses that we can utilize is limited under tax regulations because we have experienced a cumulative stock ownership change of more than 50% over the last three years.


LIQUIDITY AND CAPITAL RESOURCES

At April 28, 2001, cash and cash equivalents and short-term investments totaled $99.1 million, down from $176.3 million at July 28, 2000. This decrease was due to cash used in operating activities and cash used to acquire property and equipment.

Heh, my average balance figure wasn't too far off!

For the nine months ended April 28, 2001, we used $62.1 million in cash for operating activities, compared to $12.1 million for the nine months ended April 28, 2000. This represents an increase of 413% and is primarily due to an increase in our net loss of $235.2 million for the nine months ended April 28, 2001, compared to our net loss of $42.2 million for the nine months ended April 28, 2000. The increase in our net loss is primarily due to the amortization of goodwill of approximately $71.4 million, the amortization [my bolds - SL] of compensation expense of approximately $53.0 million, both in connection with our acquisitions, restructuring costs and other special charges of $43.4 million, and to an increase in our operating expenses for sales and marketing, research and development, and general and administrative purposes.

If the person who wrote this can tell me how "amortization" (the quintessential non-cash item) reduced cash balances by $73mn, let them post it here. The fall in cash was driven, purely and simply, by an excess of costs over revenues.

For the nine months ended April 28, 2001, $2.7 million was provided by investing activities and for the nine months ended April 28, 2000, we used $25.1 million in cash for investing activities. In the nine months ended April 28, 2001, cash provided by investing activities was from the sale of short-term marketable securities. We used cash for the purchase of computer and facilities-related assets, and for acquisition-related activities. In the nine months ended April 28, 2000, we used the cash for investing activities for acquisition-related activities and for the purchase of property and equipment.

For the nine months ended April 28, 2001, and April 28, 2000, we generated $2.5 million and $143.9 million in cash from financing activities, respectively. In the nine months ended April 28, 2001, cash provided by financing activities was due to proceeds from the issuance of common stock, partially offset by payments on notes payable. In the nine months ended April 28, 2000, cash provided by financing activities was due primarily to the proceeds from our initial public offering.

Worrying. It's all stock issue and "short term marketable securities". What you'd like to see here would be the support of a big bank, with the balance sheet to lend and bring VA through a short-term financing crunch to see it through to profitability.


RECENT ACCOUNTING PRONOUNCEMENTS

[snipped, irrelevant] -- SL

RISK FACTORS

[most of these appear to be industry boilerplate, and have been snipped. All except the first ] -- SL


RISKS RELATED TO COMPETITION WITHIN OUR INDUSTRY


IF WE FAIL TO ATTRACT AND RETAIN LARGER CORPORATE AND ENTERPRISE-LEVEL
CUSTOMERS, OUR REVENUES COULD DECLINE SUBSTANTIALLY. We face competition from different sources, and we must compete effectively against other current and future competitors to retain and expand our customer base. To date, our revenues have been principally derived from smaller companies in the Internet marketplace. We have begun to focus our sales and marketing efforts upon larger corporate and enterprise-level customers. This strategy to broaden our customer base by, among other things, pursuing business opportunities from larger corporate and enterprise accounts may fail to generate sufficient revenue to offset the substantial demands that this strategy will place on our business, in particular the longer sales cycles, higher levels of service and support and volume

pricing and terms that larger corporate and enterprise accounts often demand. A failure to successfully obtain more of our revenues from larger customers could materially adversely affect our operations.

Again, VA seems to believe it can do this without increasing its marketing spend. Using, perhaps, the same sales and marketing strategy that has, so far, failed to land them any big clients other than Akamai? There is some cognitive dissonance going on here.


Streetlawyer's take

These guys need to understand, and quickly, that profit is the difference between revenue and expense. Expenses appear to be cut to the bone. So they need to grow revenues. Either the Internet booms back up, or they get some more enterprise clients - competing against the sales forces of IBM and the like (in fairness, this is disclosed as a material risk). I suppose if you want to run a company without "marketroids", you need an environment in which the fish will snap at an unbaited hook. Unless the clue train arrives soon, there are problems.

If VA cut capital expenditure to the bone (so that the only remaining drain was its operating loss), made no more provisions (which it could afford to do; it has been very conservative up to now), kept its revenues constant (quite optimistic given that marketing expenditure is not going to change), and squeezed the G&A budget by 10%, we could make the following assumptions:

Sales - $14.3mn

Cost of sales -- $11.7mn (assuming a return to 2000's gross margins)

Marketing and sales expenditure -- $9.7mn (constant)

R&D -- $3.0mn (return to 2000 levels)

General and admin -- $21mn (10% fall on most recent quarter)

[non-cash items and interest and other income ignored]

This gives a burn rate of $31.1mn per quarter. Which gives VA three quarters to reach profitability, or it will have to cut core functions. Larry Augustin thinks they can make it by October 2002. That's five quarters, by my countin'. Something's gotta give.

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The VA Linux 10Q analyzed | 62 comments (32 topical, 30 editorial, 0 hidden)
Us guys have this stock? (3.66 / 6) (#2)
by ucblockhead on Mon Jun 18, 2001 at 02:35:37 PM EST

Does anyone here own VA Linux stock? That actually paid for it, I mean?

(I do admit to owning CORL for a while. Bought it at 5, sold it at 6. Should have sold it at 25. Sigh...)


-----------------------
This is k5. We're all tools - duxup

Bad moves with COREL (3.00 / 1) (#46)
by aphrael on Tue Jun 19, 2001 at 04:26:49 AM EST

sometime in the spring of 2000, Borland stock hit $14, the highest it had been in 3 years. Borland's employees were given nifty new options. Management announced a merger with Corel.

Stock price plummeted. It hit *3.5* late last summer. The merger fell apart. The options were worthless.

No, i'm not bitter.

[ Parent ]

I remember that... (3.00 / 1) (#53)
by ucblockhead on Tue Jun 19, 2001 at 11:07:24 AM EST

It pissed me off mightily as I had Borland stock at the time. I managed to get out without losing, but it pissed me off royally to see one bad investment take out another.
-----------------------
This is k5. We're all tools - duxup
[ Parent ]
Get your history right. (none / 0) (#58)
by ghjm on Wed Jun 20, 2001 at 12:50:14 PM EST

There is one big lesson to be learned from Borland's stock performance of the last five years: It's all about Delphi, and the market is a lot more technically savvy than you think.

1997: Delphi 3.0 is released, and is a good solid version with interesting new features. Stock performance is quite good.

1998: Delphi 4.0 is released, is buggy as hell, and really doesn't provide any compelling new features. As the year progresses, it becomes clear that Borland (Inprise)'s focus is on "enterprise" (read: mainframe) products like Entera. Small ISVs/VARs are given no clear picture - at the time it was not even clear whether Delphi had a future at Borland. Stock price plummets.

1Q 1999: Stock continues to free-fall. This is actually when the historic low of 3.5 was reached. Note that this had nothing to do with the Corel merger deal, which was still not publicly known. Del Yocam "resigns."

2Q 1999: Borland makes some strong statements about supporting Delphi and small developers. Stock price stabilizes.

3Q 1999: Delphi 5 released - at last, a stable new version with compelling new features. ISVs (at least, those remaining in the Borland camp) breathe a sigh of relief. Stock price remains stable.

4Q 1999: Borland announces its intentions for Kylix, and its *partnership* (not yet merger) with Corel. At last! Something really cool, that ISVs actually understand and want! Share prices skyrocket, topping over 16, a nearly four-year high.

1Q 2000: Borland announces Corel merger. ISVs, still bearing scars from Borland/Corel treatment of Paradox, WordPerfect, etc., run in fear. D5 and Kylix may be really cool, but can it possibly be worth having to deal with *Corel*? Stock prices _instantly_ go into total chaotic free-fall, leveling off only when the Corel merger is called off.

2Q/3Q 2000: The only big news is the idiotic song and dance around Interbase, which I refuse to discuss on the grounds that I might puke.

1Q 2001: Kylix actually arrives, the first geniunely new and useful thing for Delphi developers in a year and a half. Except: It's even buggier than D4, it doesn't quite do what people want, and the ISVs can't really figure out how to use it. It's exciting, and a copy goes in the war chest, but hmm...this one will take a while to figure out. ISV satisfaction up and down in erratic fashion, share prices likewise.

2Q 2001: BorCon 12 flyers go out, with *all kinds* of sessions on amazing new D6 stuff. ISVs: Damn, new Delphi tech! That's all we ever wanted, all along! Maybe BorCon's actually worth going to this year! Share price: steady rise to 12+ territory again. (aphrael: hope you held onto those options...)

My prediction: D6 is the biggest, baddest new Delphi release since 3.0. Borland share prices will do very well as D6 adoption increases. Major risk factor: Even-numbered Delphi releases have been buggy as hell. Does Kylix spare D6? If D6 is a bug pit, forget it - ISVs are worn out after the emotional roller-coaster of the last couple years. D6 *must* be stable or people will leave the camp. And as always with Borland, the other major risk factor is: Management doing something incredibly, obviously, patently stupid, defying incredible odds to snatch defeat from the jaws of success.

-Graham

[ Parent ]
I'm well familiar with that (none / 0) (#59)
by aphrael on Thu Jun 21, 2001 at 01:00:40 PM EST

seeing as i've worked for Borland since 1994. :) Kylix actually arrives, the first geniunely new and useful thing for Delphi developers in a year and a half. Except: It's even buggier than D4, it doesn't quite do what people want, and the ISVs can't really figure out how to use it. It's exciting, and a copy goes in the war chest, but hmm...this one will take a while to figure out. ISV satisfaction up and down in erratic fashion, share prices likewise. I wouldn't say it's buggier than D4, and a lot of the bugs are wine bugs in any event. :) I agree that it doesn't quite do what people want and that ISVs are confused by it; i've always been of the opinion that C++Builder for Linux will be more useful. :)

[ Parent ]
Borland (none / 0) (#62)
by deeznuts on Sun Jul 01, 2001 at 12:52:37 PM EST

We used Delphi 4 at work for its lifespan, and never encountered a single bug with it. Several bugs in third-party libraries, but nothing with the IDE / compiler / etc. I thought D4 offered some nice improvements over D3, although I can understand the people who complained that there wasn't enough to merit a major version increase.


I've had some issues with Kylix, but it's to be expected with the first generation of a product on a new (and half-baked), and I think the minor issues I encountered were KDE / K, not Kylix. We're mainly a Windows shop, so I haven't really had time to get down-n-dirty with Kylix. I hope to change this now that I bought a personal copy and am trying (successfully?) to get our new web products written in Kylix instead of (shudder) Java.


Also, I'm quite happy with the 93% gain I've had with the BORL stock I purchased several months ago.

[ Parent ]
VA Linux stock (3.55 / 9) (#8)
by Delirium on Mon Jun 18, 2001 at 03:21:23 PM EST

I'm pretty sure you're not the first to reach the conclusion that VA Linux stock is not something you want to own right now, but I'm also pretty sure everyone else reached this conclusion in less than 10 pages.

true (3.50 / 4) (#43)
by streetlawyer on Tue Jun 19, 2001 at 01:58:22 AM EST

but, for a variety of reasons, I don't expect anyone to take my word at face value on a subject which is, however tangentially, related to Eric Raymond. In any case, there's an educational function; people *ought* to learn to use primary sources.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]
Some thoughts (3.75 / 8) (#11)
by jd on Mon Jun 18, 2001 at 03:48:32 PM EST

First, right now, tech stocks are only just starting to come out of a near-catastrophic nose-dive. If tech companies didn't pull up soon, they weren't just going to hit the floor, it would be a floor somewhere in the vicinity of the Southern Cross.

That VA Linux is taking longer to recover is no big surprise. People are going to upgrade software LONG before they buy new computers. Hardware companies are going to stay in a coma for many more months, maybe years.

(The current political climate is NOT inducive to expansion. Too easy to be devoured by rampaging megacorps who know damn well that there's not a chance in hell of any anti-trust lawsuit in the next 3-4 years, no matter -what- they do. Since it's easier for megacorps to buy into a fortune than earn one, acting like a meal looking for a diner is not going to top anyone's TODO list.)

I am NOT a financial advisor. Nor would I ever want to be. Those guys must be earning serious bucks to make the danger worth it. However, as an armchair observer, I'd say that holding on (and even buying, as the hardware slump continues) might be a gamble worth considering. Hey! It's only money! And when the slump reverses - probably when America drops the Whitehouse in Boston harbor - it's always possible the value will rocket up.

tsk! tsk! (4.40 / 5) (#15)
by yankeehack on Mon Jun 18, 2001 at 04:42:16 PM EST

Streetlawyer, you're a little slow on the uptake I see, since you failed to mention how this scandal possibly affected the IPO and later stock price of VA Linux.


Here's hoping that this Democratic Senator will run for President in 2004.

Scandal (4.33 / 3) (#24)
by sigwinch on Mon Jun 18, 2001 at 06:43:34 PM EST

That article has a really funny quote.
Said Weiss: "People who bought in the after-market bought at prices and lost a ton, believing in the integrity of the market."
In other words, investors decided that if other people were willing to throw away money on a stock, they should too. Frankly I don't see what the scandal is. If people make buying decisions based on anything other than the company's prospects, they're doomed.

--
I don't want the world, I just want your half.
[ Parent ]

The problem really was this (3.33 / 3) (#31)
by yankeehack on Mon Jun 18, 2001 at 07:06:07 PM EST

From the article: Regulators are worried that some firms may have caused the price of IPO shares to be artificially high once they started trading. That could happen if brokers required investors who got the coveted IPO shares to buy additional shares in normal trading, an illegal practice known as ``tie-ins.''

The investigation centered upon wether or not the "hot IPO" prospects had their shares inflated by the financial organization running the IPO via this tie in scheme. Thusly, if someone got into the IPO, it is presumed that there was some sort of deal for the someone to purchase additional shares once the firm went public (as in making the stock seem scarce/desirable for others to hold). I'd see that market manipulation as a problem because as we've read, VA Linux isn't exactly the world's best bet on Wall Street at this moment.

Here's hoping that this Democratic Senator will run for President in 2004.
[ Parent ]

heh (2.66 / 3) (#42)
by streetlawyer on Tue Jun 19, 2001 at 01:56:22 AM EST

I've covered that story extensively in the past, but I included a number of cheap anti-Eric Raymond shots which resulted in its being rejected. Which was partly intentional; I've had enough dealings with some of the players in that story to not want to tangle with them unless I'm getting paid.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]
I hope you're wrong. (3.61 / 13) (#16)
by Inoshiro on Mon Jun 18, 2001 at 05:28:41 PM EST

You may have a hate of VA Linux systems, but they currently help support a lot of the community. Do you want to see freshmeat, newsforge, sourceforge, thinkgeek, etc, to go away?

I don't. I enjoy and use those sites regularly. If OSDN folds, K5 loses its current only revenue stream (OSDN ads). This means rusty and I have to find other jobs to make up for the money we won't be taking in, in order to keep the site up. Especially since we've grown a lot in the past 6 months.

What'd be left, realistically, if they folded? LWN, LinuxToday, and The Register. Good sites all, but I like variety.



--
[ イノシロ ]
I would agree (3.50 / 6) (#18)
by untrusted user on Mon Jun 18, 2001 at 05:48:39 PM EST

if these websites were all there is to "the community". Who the f*ck needs them? I say, let OSDN die, just to show life goes on without them.

[ Parent ]
But (4.00 / 4) (#21)
by spacejack on Mon Jun 18, 2001 at 06:23:49 PM EST

I doubt streetlawyer hates VA Linux. I don't hate VA Linux, but at the same time one can see why a company has a responsibility, a moral obligation to its shareholders, and the people depending on the paycheques they issue to be profitable (this is a comment I've seen zeroed on /. several times and I never know why). If they're selling false hopes and a lot of good people get taken down, that doesn't help anyone.

I'd like to think that k5 can survive on OSDN's ad revenue, but if it can't I'll buy a subscription... it's one of the few sites I think is worth it. Keep us posted.

[ Parent ]
Other revenue streams... (4.00 / 4) (#34)
by dragondm on Mon Jun 18, 2001 at 07:24:55 PM EST

If it comes to that, & you need money to run the site... A minor suggestion:

Charge for posting privileges.

You need an account to post. Make folks pay to get and keep their accounts. Not a great deal, mebbe US $6.00 per year or so. I run a fairly high traffic website myself. I know how much colocation costs. You guys are probably paying what, $500-$700 a month to keep this show going? It's only fair to have the folk who benefit from your hard work help foot the bill. People will pay to have their opinions read. As a bonus, you will also cut down the troll problem rather a bit too.

[ Parent ]

I second that (3.50 / 2) (#36)
by coryking on Mon Jun 18, 2001 at 09:08:47 PM EST

I'd like to second that idea. I think that by charging for posting privlages, you'd not only cut down on trolls/crap, but it would help bring in some $$$. Not only that, but I'd say only paying folk can moderate the queue.

I think I'd pay something like $20 a year or so for posting privlages to K5

[ Parent ]

me toooo! (4.00 / 2) (#48)
by neuneu2K on Tue Jun 19, 2001 at 05:57:09 AM EST

I would pay to post on K5... but only if I can keep the trolls!
I would certainly pay two accounts to have a troll account (that is... if I trolled of course ...)


PS: I think most of the user-base would pay (maybe not 20$...) but that might make it a problem for newbies...

- "And machine code, which lies beneath systems ? Ah, that is to do with the Old Testament, and is talmudic and cabalistic..." - Umberto Eco
[ Parent ]
what on earth do you mean? (3.20 / 5) (#41)
by streetlawyer on Tue Jun 19, 2001 at 01:54:23 AM EST

I have no hatred at all of VA Linux; I might even buy a computer from them if they can promise the **** thing will work with Linux. I do think that it's a shame that so many important sites are dependent on one single company. I've already seen Suck and Feed pulled down by Plastic, so consider this a hint that diversifying revenue sources might be an idea.

Honestly, Inoshiro, if you truly love a company, there are better ways to show it than by pretending it's profitable when it's not. Get a tattoo or something.

--
Just because things have been nonergodic so far, doesn't mean that they'll be nonergodic forever
[ Parent ]

VA Computers (4.00 / 2) (#52)
by stepson3 on Tue Jun 19, 2001 at 09:54:09 AM EST

I work as a SysAdmin for a small dot com (we aren't under just yet!). We have 6 VA Linux servers. One of which just hit an uptime of 1 year! In fact, i haven't even seen it in that year, its up in NYC at Cushman & Wakefield. The others are in a colo at exodus, and we have 2 va linux 'workstation' machines (dual p2s, raid) here we use for test servers. All work very well. I especially like the 1000 series (now discontinued). 1U, dual processor, remote rebooting (no console though w/o a console server or similar), and power control. All very cool, and much cheaper than what networkengines wanted for the exact same server (the guy came in and showed me the spread sheet he 'wasn't supposed to show me', and they wanted to charge me twice as much).

Anyway, what I'm saying is, the hardware is good. Support is so good I've never even had to call! :). Yes, I've never called, so I don't know how good it is ... but which would you rather have, free service for your car, that breaks down once a week, or paying for service and having a car that (Almost) never breaks down?

Then again, if the car were cool/fast/babe-magnet enough .... ;-)

[ Parent ]
The unfortunate truth (4.00 / 1) (#55)
by ucblockhead on Tue Jun 19, 2001 at 12:08:54 PM EST

Unfortunately, "a good product" is only part of the equation that makes a company successful. It also has to sell that product for a profit, and it also has to fend off competitors that may also have good products. It is these last two that are the issues for VA Linux.

The trouble is that hardware sales and support is an extremely difficult business to make money at because of the low margins that hardware typically has.
-----------------------
This is k5. We're all tools - duxup
[ Parent ]

Odd (3.00 / 3) (#47)
by aphrael on Tue Jun 19, 2001 at 04:28:18 AM EST

i didn't think he was saying it would be good if VA folded, just that there is a high risk that they will do so. And there is --- and while that would suck, and would be a bitter blow to the open source community, badly wanting it to not be so won't change the economics of the situation.

[ Parent ]
OSDN would probably be sold off (none / 0) (#61)
by vastor on Mon Jun 25, 2001 at 06:19:45 PM EST

Companies that go bust generally sell off the profitable assets (which the OSDN advertising segment ought to be), or they get bought out by companies after the profitable parts once the shares hit next to nothing.

So it's probably quite likely that OSDN will still be around for some time even if VA Linux folds. What will be cut back with a change in ownership is probably more of concern (if Kuro5hin has its income halved for example - though doubling the regular membership would counter that).

Concentration of media in one set of hands was one of the concerns about OSDN in the past (by controlling 50% of the open source media they could slant press reports in it to their favour etc). It could be, in a few quarters things like - what happens if MS buys out the OSDN segment? Kuro5hin atleast isn't owned by VA Linux, places like slashdot however are.


[ Parent ]
Reminds me of Southpark (3.80 / 10) (#22)
by stuartf on Mon Jun 18, 2001 at 06:27:10 PM EST

Reminds me of that episode of Southpark, with the underpant gnomes. Step 1: Steal underpants, Step 2: ?, Step 3: Profit.

I can't see a viable business model based on the VA Linux style of business, the margins are so low in hardware it really is quite difficult to compete. They've put their faith in the belief that open source will succeed, but have yet to show that they have a business model to match.

Then again, I don't see a viable business model in RedHat either, who are trying to make money selling distributions and support. It's not going to happen guys, come up with something better.

Major question is: What is an effective business model based on Linux?

I want to thank you... (1.00 / 1) (#45)
by ti dave on Tue Jun 19, 2001 at 03:45:22 AM EST

For making me laugh my ass off!
That was my favorite South Park scene~

Cheers,

ti_dave
"If you dial," Iran said, eyes open and watching, "for greater venom, then I'll dial the same."

[ Parent ]
well support IS a good business model ! (3.50 / 2) (#49)
by neuneu2K on Tue Jun 19, 2001 at 06:03:08 AM EST

Why do you think I recommend Sun hardware for servers instead of cheap *nix clusters ?
Because I do not want do do the fscking hardware support !!!. When a server goes down: you call Sun, you pay, it goes up :-)

It is the same with software, Oracle sells mostly because of their good support... I would really prefer to sell Postgres but international 24/7 support is 'difficult' to get!
- "And machine code, which lies beneath systems ? Ah, that is to do with the Old Testament, and is talmudic and cabalistic..." - Umberto Eco
[ Parent ]
yeah well (3.00 / 1) (#50)
by eudas on Tue Jun 19, 2001 at 06:27:14 AM EST

it probably reminded you of southpark because southpark was mocking the dot-com IPO type business cycle. the conclusions are left as an exercise for the reader.

eudas
"We're placing this wood in your ass for the good of the world" -- mrgoat
[ Parent ]
title (2.00 / 1) (#51)
by eudas on Tue Jun 19, 2001 at 06:37:30 AM EST

the title of this reminds me of all the 10Q analyzing that went on in apr and may of this year over at netslaves.com by steve gilliard.

eudas
"We're placing this wood in your ass for the good of the world" -- mrgoat
Making money off of VA Linux (3.00 / 1) (#56)
by ucblockhead on Tue Jun 19, 2001 at 03:25:53 PM EST

Well, obviously not everyone is in danger of being left destitute...
-----------------------
This is k5. We're all tools - duxup
Timing... (none / 0) (#57)
by ucblockhead on Tue Jun 19, 2001 at 10:49:49 PM EST

Great timing, Streetlawyer! Look what's hit the rumor mills today...
-----------------------
This is k5. We're all tools - duxup
Wait a minute (none / 0) (#60)
by rabbit on Fri Jun 22, 2001 at 04:54:23 AM EST

so....does that mean streetlawyer is actually Steve Gilliard ?


-- I have desires that are not in accord with the status quo.
The VA Linux 10Q analyzed | 62 comments (32 topical, 30 editorial, 0 hidden)
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