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EXHIBIT 99.1
VA LINUX SYSTEMS REPORTS RECORD SECOND QUARTER REVENUE
SUNNYVALE, CALIF.-- February 24, 2000--VA Linux Systems, Inc. (Nasdaq:LNUX -
news) today reported record results for its second quarter which ended January
28, 2000.
Revenues for the second quarter were $20.2 million, up 537% from the same
quarter of the prior year, and up 36% from the prior quarter. Revenue from
Professional Services, of $300,000 represented 1.5% of total revenue. According
to IDC, shipments of Linux operating systems during calendar 1999 grew 93%, more
than four times faster than shipments of any other software operating system.
New customers accounted for 49% of total revenue. The top 10 customers
represented 41% of total revenue, down 9 percentage points from the previous
quarter. VA Linux's largest customers for the second quarter were Akamai
Technologies, NetLedger, Vstream, Abba Technologies, and C/Net.
VA Linux' gross margins improved to 14.0% for the second quarter from 13.2% in
the previous quarter. The operating loss, excluding deferred compensation
charges of $4.2 million, was $8.4 million. The operating loss also included an
additional $1 million in non-recurring non-cash charges associated with stock
options issued for recruiting and marketing consulting services incurred prior
to our IPO.
As a percentage of revenue, the operating loss, excluding deferred compensation
charges, improved 8.2 percentage points from the previous quarter to a 41.4%.
The operating loss, including deferred compensation, was $12.6 million or 62.5%,
an improvement of 6.4 percentage points from the previous quarter. In another
significant step, VA Linux virtually eliminated its manufacturing inventory as
it expanded its high velocity contract manufacturing model.
In January of 2000, VA Linux introduced SourceForge(TM), a development center
for open source projects. Since that time, SourceForge has become the
development home for more than 2,200 such projects and more than 13,000
registered developers, and the numbers continue to grow. Web traffic on VA
Linux' other web sites, such as Linux.com and Themes.org, grew 23% in pageviews
sequentially versus the prior fiscal quarter.
VA Linux also announced progress in strategic partnerships during the quarter.
For example, VA Linux's announced relationship with nVidia and SGI is aimed at
the creation of state-of-the-art workstation-class graphics processing on Linux
systems this year. In VA Linux's Professional Services area, Hewlett-Packard and
VA Linux announced a collaboration to create great Linux and open source
printing.
"This was an excellent quarter. We believe our results show that our open
solutions model, a balanced ability to provide complete Linux solutions for
customers, is the business model of choice for the Linux and Open Source
markets," said Dr. Larry Augustin, CEO of VA Linux Systems. "We intend to grow
aggressively in the forseeable future, both organically and through additional
acquisitions."
"VA Linux's growth rate last quarter was tremendous. We are particularly happy
with the growth in our services business after its first full quarter of
operation," said Todd Schull, CFO of VA Linux Systems. "In addition, our
progress on inventory asset management was outstanding. Inventory has been
virtually eliminated allowing us to focus our resources on more strategic
areas."
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ABOUT VA LINUX SYSTEMS
Since 1993, VA Linux Systems has been a recognized leader in advancing Linux and
Open Source solutions. VA Linux provides a single point of contact for Linux
systems, Open Source software, and world-class professional services and
support. VA Linux Systems owns and operates SourceForge, the world's largest
Open Source development center, as well as Linux.com and Themes.org.
Headquartered in Sunnyvale, VA Linux is located on the Web at
http://www.valinux.com/.
Forward-looking statements in this press release are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934.
Investors are cautioned that statements that are not strictly historical
statements, including, without limitation, statements regarding current or
future financial performance, management's plans and objectives for future
operations, product plans and performance, management's assessment of market
factors, and statements regarding the strategy and plans of VA Linux and its
strategic partners, constitute forward-looking statements which involve risks
and uncertainties. These risks and uncertainties include, without limitation, VA
Linux's limited operating history and the evolving market for Linux-based
systems; the risks associated with VA Linux's dependence upon an open source
business model; reliance on sales of server products; continued market
acceptance of Linux; continued reliance upon independent third-party Linux
developers; management of growth; reliance upon strategic relationships and
ability to implement specific terms relating to them; reliance on our single
source contract manufacturer; governmental clearance and successful integration
of acquisitions; competition with larger and more established companies,
particularly those with announced Linux strategies; continued introduction of
new products; expansion of VA Linux's business focus and operations,
particularly internationally; our ability to attract and retain qualified
personnel -- especially in the areas of professional services and overseas; the
enforceability of the GNU General Public License; the scarcity of Linux-based
applications; the risks of economic downturns generally; the risks associated
with competition and competitive pricing pressures; the viability of the
Internet and of our web-based businesses as profit-making entities; and other
risks detailed in VA Linux's filings with the Securities and Exchange
Commission, copies of which may be accessed through the SEC's web site at
http://www.sec.gov.
Note: VA Linux Systems and SourceForge are trademarks of VA Linux Systems, Inc.
Linux is a registered trademark of Linus Torvalds. All other trademarks and
company names are property of their respective owners.
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VA LINUX SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
Jan. 28, Jan. 31, Jan. 28, Jan. 31,
2000 1999 2000 1999
-------- -------- -------- --------
Statements of
Operations Data:
Net revenues $ 20,191 $ 3,170 $ 35,039 $ 5,605
Cost of revenues 17,356 3,324 30,243 5,377
-------- -------- -------- --------
Gross margin 2,835 (154) 4,796 228
Operating expenses:
Sales and marketing 7,111 406 12,175 583
Research and development 2,431 216 5,205 264
General and administrative 1,658 654 3,154 790
Amortization of deferred
stock compensation 4,258 371 7,113 489
-------- -------- -------- --------
Total operating
expenses 15,458 1,647 27,647 2,126
-------- -------- -------- --------
Loss from operations (12,623) (1,801) (22,851) (1,898)
Interest and other income
(expense), net 1,062 (14) 1,235 (14)
-------- -------- -------- --------
Net loss (11,561) (1,815) (21,616) (1,912)
-------- -------- -------- --------
Dividend related to
convertible
preferred stock -- -- (4,900) --
-------- -------- -------- --------
Net loss attributable
to common stockholders $(11,561) $ (1,815) $(26,516) $ (1,912)
======== ======== ======== ========
Basic and diluted net
loss per share $ (0.50) $ (0.44) $ (1.73) $ (0.41)
Pro forma basic net
loss per share $ (0.36) $ (0.26) $ (0.90) $ (0.31)
Weighted average shares
outstanding:
Basic and diluted 23,325 4,151 15,372 4,626
Pro forma 32,300 7,026 29,412 6,094
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VA LINUX SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
January 28, July 31,
2000 1999
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 148,510 $ 18,653
Accounts receivable 11,537 4,033
Inventories -- 1,971
Prepaid expenses and other assets 1,470 381
--------- ---------
Total current assets 161,517 25,038
Property and equipment, net 2,931 1,759
Other assets 807 798
--------- ---------
$ 165,255 $ 27,595
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of loans and
notes payable $ 563 $ 759
Accounts payable 9,629 6,243
Accrued warranty 607 239
Accrued liabilities and other 3,737 1,567
--------- ---------
Total current liabilities 14,536 8,808
--------- ---------
Notes payable and other, net of
current portion 575 424
--------- ---------
Stockholders' equity:
Convertible preferred stock -- 19
Common stock 41 15
Additional paid-in capital 219,956 45,461
Stockholder note receivable -- (50)
Deferred stock compensation (28,376) (12,121)
Accumulated deficit (41,477) (14,961)
--------- ---------
Total stockholders' equity 150,144 18,363
--------- ---------
$ 165,255 $ 27,595
========= =========
Contact:
VA Linux Systems
Joyce Chowla, 408/542-5718
jchowla@valinux.com
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