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Press Release Index


VA Linux Reports Results for First Fiscal Quarter, 2002

FREMONT, Calif. November 20, 2001 VA Linux Systems, Inc. (Nasdaq: LNUX), the provider of the SourceForge[tm] collaborative software development (CSD) platform, today announced results for its first fiscal quarter of 2002, ended October 27, 2001.

First quarter revenue totaled $5.6 million. Excluding residual revenue from the Company's exited Linux hardware and related businesses, quarterly revenue was $3.9 million. Net loss from operations was $8.7 million, or ($0.16) per share, excluding non-cash, restructuring and special items. At the end of the first quarter, the Company had approximately $71 million of cash and marketable securities. Revenue was within guidance, and net loss and cash usage were better than forecasts provided in VA's August 23, 2001 release.

VA now focuses primarily on its SourceForge enterprise software business. The Company expects revenue in the second quarter of fiscal 2002 to fall in the range of $4.0 to $4.5 million, with a net loss from operations in the range of $8.0 to $8.5 million. Quarterly cash usage is expected to approximate the operating loss.

"We were able to exit our Linux hardware and related businesses more quickly and with lower costs than we originally expected. Our expense levels and cash usage are down significantly," said VA Chairman and CEO Larry M. Augustin. "We have put a seasoned team in place around our SourceForge product and are pleased with the favorable response SourceForge Enterprise Edition 3.0 is receiving in the market. We see business conditions for us stabilizing, and expect to see continued declines in our cash usage combined with modest bottom line improvements over the remainder of this fiscal year."

A conference call to review results will be held at 2:00 pm (Pacific) today. The call may be accessed via webcast at http://www.valinux.com or by dialing (800) 700-7860 (access code 607990).

Recent Highlights

On November 6, VA announced SourceForge Enterprise Edition 3.0--the latest version of its CSD platform. SourceForge 3.0 introduces key features such as enterprise search, enhanced monitoring and reporting capabilities, as well as improved performance through database integration with OracleŽ. SourceForge Enterprise Edition helps engineering, R&D and IT organizations accelerate development by improving internal visibility and control through a centralized, integrated CSD platform.

Other Notable Events

  • Customers. SourceForge was selected by Cornell University as the CSD platform for The National Science Digital Library (NSDL), and by HP as the underlying platform for the HP Embedded Software Developer's Network (devnet). Additional customers announced during the quarter included IIJ Technology in Japan.
  • OSDN. On November 13, Compaq announced its sponsorship of the SourceForge.net Clustering Foundry, a central place for the Open Source community to share ideas and collaborate on clustering projects. Additional OSDN sponsors and advertisers include leading technology companies such as Intel, Sun Microsystems and IBM.
  • Management Team. On October 16, Colin Bodell was named VA's Senior Vice President of Product Development, reporting directly to President and Chief Operating Officer Ali Jenab. Mr. Bodell brings more than seventeen years of experience in software engineering and product development, and previously served as a senior executive at WebGain, Intellicorp and Merant.
  • Company Name. In its Proxy Statement, filed October 30, the Board of Directors recommended that stockholders approve a proposal to change the Company's name to "VA Software Corporation." The Board believes the new name would better identify the Company and its primary business: developing, marketing, selling and supporting the SourceForge CSD platform. The Board also believes that the current name is primarily identified with the Company's former Linux hardware systems and consulting businesses.

About VA Linux

VA Linux Systems is the provider of SourceForge[tm], the collaborative software development (CSD) platform used by more than a quarter million developers worldwide. SourceForge Enterprise Edition helps engineering, R&D and IT organizations accelerate development by improving internal visibility and control through a centralized, integrated CSD platform. Information on VA's SourceForge enterprise software product, services and support is available at www.valinux.com and at 1-877-VALINUX.

 

Note Regarding Forward-Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding VA's: future financial performance and results of operations, including anticipated revenue, cash usage and net loss from operations; technological trends in and emergence of collaborative software development; the future functionality, market acceptance and adoption of, business potential and demand for, and efficiencies created by SourceForge enterprise software; management's strategy, plans and objectives for future operations; the impact of our restructuring, reductions in force and new business model on our operating expenses and the amount of cash utilized by operations each quarter; our intentions and strategies regarding customers and customer relationships; our intent to continue to invest significant resources in software development; our intent to develop long-term relationships and strategic alliances; competition, competitors, the bases of competition and our ability to compete; liquidity and capital resources; and sales strategy and anticipated benefits from such strategy. Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including: unforeseen expenses that VA may incur in future quarters; the possibility that VA will not identify sufficient sources of expense reduction; VA's quarterly sales cycle and fluctuation in demand for VA's products and services; competition with, and pricing pressures from, more established competitors; VA's success in expanding its SourceForge enterprise software business; the risk that VA's restructuring efforts will not succeed; VA's ability to successfully attract, retain and motivate employees; the possibility of further deterioration in the general economy and its impact on VA and its current and potential customers; VA's reliance upon strategic relationships with other companies and its ability to negotiate, close and implement specific terms relating to them; rapid technological and market change; future guidelines and interpretations regarding software revenue recognition; and VA's ability to protect and defend its intellectual property rights. Investors should consult VA's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended July 28, 2001, for further information regarding these and the other risks of the Company's business. These documents are available at the SEC Web site: www.sec.gov. VA assumes no obligation to update the forward-looking information contained in this news release.

Note to editors: SourceForge and OSDN are trademarks of VA Linux Systems, Inc. Linux is a trademark of Linus Torvalds. All other trademarks are property of their respective owners.

Contact:
Patrick Fossenier, Investor Relations
VA Linux Systems
510-687-6854

Eureka Endo, Media Relations
VA Linux Systems
510-687-6754


PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

  Three Months Ended
  October 27, 2001 October 27, 2000
 
(unaudited)
Net Revenues $ 5,578 $ 56,062
Cost of Revenues (1) 4,419 43,450
Gross Margin 1,159 12,612
 
Operating Expenses
Sales and Marketing 4,293 11,547
Research and Development 2,903 4,730
General and Administrative (2) 3,698 5,554
Total Operating Expenses (3) 10,894 21,831
Loss from Operations (9,735) (9,219)
Interest and other income, net 1,082 2,179
Loss from continuing operations $ (8,653) $ (7,040)
   
Pro forma basic net loss per share $ (0.16) $ (0.15)
 
Pro forma basic and diluted weighted-average shares outstanding: (2) 52,678 45,978
 
(1) Excludes a net credit of $1,976k, consisting of a credit of $2,747k due to a change in estimate for inventory reserves and warranty requirements, and a charge of $771k primarily for severance and other related costs from the exit of our professional service business.
(2) Excludes a credit of $823k due to a change in estimate in the allowance for doubtful accounts.
(3) Excludes amortization of goodwill and intangible assets, amortization of compensation expense related to acquisitions, amortization of deferred stock compensation, and restructuring costs and other special charges.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

  Three Months Ended
  October 27, 2001 October 27, 2000
 
(unaudited)
Net Revenues $ 5,578 $ 56,062
Cost of Revenues 2,443 43,450
Gross Margin 3,135 12,612
 
Operating Expenses
Sales and Marketing 4,293 11,547
Research and Development 2,903 4,730
General and Administrative 2,875 5,554
Restructuring costs and other special charges 44,956 -
Amortization of deferred stock compensation 1,984 20,883
Amortization of goodwill and intangible assets 2,087 23,424
Total Operating Expenses 59,098 66,138
Loss from Operations (55,963) (53,526)
Interest and other income, net 1,082 2,179
Net loss $ (54,881) $ (51,347)
   
Basic and diluted net loss per share $ (1.04) $ (1.12)
Weighted-average shares outstanding:
Basic and diluted 52,678 45,978

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

  October 27, 2001
(unaudited)
July 28, 2001
Assets
Current Assets
Cash and cash equivalents $ 51,491 $ 60,347
Marketable securities 19,202 22,595
Accounts receivable, net 1,040 10,107
Inventories 711 343
Prepaid expenses and other current assets 3,086 3,895
Total current assets 75,530 97,287
Property and equipment, net 12,343 17,703
Goodwill and intangible assets, net 24,011 56,730
Other assets 1,521 1,313
   
  $ 113,405 $ 173,033
   
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,300 $ 14,319
Accrued restructuring liabilities 2,483 3,135
Accrued liabilities and other 12,306 15,283
Current portion of loans and notes payable 727 756
Total current liabilities 19,816 33,493
Notes payable, net of current portion - 42
Accrued restructuring liabilities, net of current portion 13,605 6,378
Other long-term liabilities 1,344 1,366
Minority interest 5,095 5,392
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 55 54
Additional paid-in capital 765,982 768,793
Deferred stock compensation (1,533) (6,108)
Accumulated other comprehensive loss (1,191) (1,490)
Accumulated deficit (689,768) (634,887)
Total stockholders' equity 73,545 126,362
   
  $ 113,405 $ 173,033
   

 

 



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