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VA Linux's Loss Greater Than Expected; Shares Plunge

TECH EARNINGS

February 21, 2001|From Times Wire Services

FREMONT, Calif. — VA Linux Systems Inc. on Tuesday posted a quarterly loss that exceeded Wall Street's reduced forecasts and said it will slash 25% of its work force in a bid to turn a profit amid the U.S. economic slowdown.

The loss and layoffs spooked investors, who sent shares of VA Linux plunging about 18% to $5.88 in after-hours trading. The stock closed at $7.25 a share, down 6.5%, in Tuesday trading on Nasdaq. VA Linux shares have tumbled from a 52-week high of $130.50.

The Fremont-based company, which develops software and products for the Linux computer operating system, said its fiscal second-quarter operating loss widened to $13.4 million, or 28 cents a share, from $6.3 million, or 20 cents, a year earlier.

Revenue more than doubled to $42.5 million from $20.2 million a year earlier, slightly less than the forecasts of $43 million to $50 million.

The loss was larger than Wall Street expectations of 26 cents, according to First Call/Thomson Financial, and was on the lower end of guidance given by the company last month, when it said the slowing U.S. economy meant the loss would be between 24 and 28 cents a share.

"We have been affected by the overall economic slowdown which has impacted demand for our products and services," said Chief Executive Larry Augustin.

"We have recognized the need to adapt to this new economic environment. We have established reserves to address financial exposures and we are restructuring the company to better compete," he said.

To try to achieve profitability at reduced revenue levels, the company said, it will lay off 25% of its 556 employees. It also will take an unspecified restructuring charge in its third quarter.

VA Linux said it had set up additional reserves of $14 million to cover excess inventory and $2.5 million in reserves for potentially uncollectable accounts receivable.

The company named Ali Jenab, former vice president of the systems division, to the newly created posts of president and chief operating officer. The move will put day-to-day operations in Jenab's hands.

The duties of president were formerly part of Augustin's responsibilities.

At a Glance

Other earnings, excluding one-time gains or charges unless noted, include:

* Agilent Technologies Inc. said fiscal first-quarter operating profit rose 66% to $237 million, or 51 cents a share, a penny better than expectations, but it sharply reduced guidance for its second quarter amid a dramatic slowdown in orders. Revenue rose 26% to $2.84 billion. The maker of testing equipment said it now expects earnings of 30 cents to 40 cents for its second quarter, rather than the 58 cents analysts forecast. It cited declining demand for cell phones and other communications gear amid a slowing U.S. economy. Agilent also said it expects sales growth of 10% to 15% for the full year, rather than the 19% growth analysts had been expecting. Agilent said it has taken measures to streamline costs in preparation for a slowdown. Cost-cutting also helped its first-quarter results.

* Personal finance software maker Intuit Inc. said its operating earnings gained 14% to $104.2 million, or 48 cents a share, citing a solid start to the U.S. tax season, which typically accounts for all of its profit. The earnings beat analysts' expectations of 45 cents. Revenue rose 8% to $457.6 million. The results exclude one-time items, such as losses on investments.

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* MORE TECH COVERAGE: C6

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