VA Linux set for flotation

Will use the IPO proceeds to fund operating expenses, including expanding sales into Europe

VA Linux will make its market debut Thursday with 4.4 million shares priced at $30 (£19) each.

VA Linux upped its price range twice leading up to the offering. On Wednesday, the company said its new range was $28 to $30 per share, up from the $21 to $23 announced Tuesday, and far above the original price range of $11 to $13. The company sells systems running Linux, a freely available Unix variant largely developed by a grassroots community of software writers.

CS First Boston is the lead underwriter with an assist from DB Alex Brown, Hambrecht & Quist and Lehman Brothers.

The market in recent weeks has furiously traded Linux-related stocks, including Andover.net, which soared in its public debut Wednesday. VA Linux will use the IPO proceeds to fund operating expenses, including broadening its professional services organization, hiring more research and development staff, and expanding sales into Europe.

VA Linux offers computer systems, software and services for Linux users, but in terms of sales is largely a hardware company. Servers accounted for 88 percent of revenue for the quarter ended 29 October and 59 percent of sales for fiscal 1999.

Products include dual Pentium III workstations, server clusters and other hardware running on Linux. VA Linux also operates a flagship site, Linux.com, which serves as an information hub for the popular operating system.

The company said its largest customers include Akamai Technologies, eToys, StarMedia Network and 24/7 Media. Sales to those customers accounted for 14.3 percent of total revenue in fiscal 1999 and 23.2 percent in the first quarter of fiscal 2000.

Sales for the fiscal year ending 31 July were $17.7m with a loss of $14.5m. In 1998, sales were $5.5m. For the first quarter ending 29 October, sales were $14.8m, seven times greater than sales in the same quarter of 1999. VA Linux lost $10m in the first quarter.

The company attributed its losses to development, sales and marketing and administrative expenses, particularly as it expanded its direct sales force. VA Linux is also beefing up its Internet operations and services.

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