VA Linux shares recovered slightly as it announced losses in line with its profit warning of two weeks ago.
Turnover for the first quarter was up 11 per cent to $56m, but losses ran to 15 cents per share, rather than the nine cents that analysts had been expecting before the warning.
The company blamed a downturn in sales to dot-com companies and the difficulty of increasing corporate sales. Its shares have been on a long slide from a high of $320 to Thursdays low of $12, but recovered slightly to $13.25 in after hours trading.
Linux start-ups have been under increasing pressure from mainstream computer companies, notably IBM, which has become a champion of the operating system.
"IT managers are more likely to buy Linux systems from the vendors they already deal with," said Dan Kusnetzky, senior analyst with IDC.
Compaq, Dell and Hewlett-Packard are also making a strong play with the open source software.