VA Linux to Exit Hardware Business
In another humbling setback for the Linux community, News.com is reporting that VA Linux plans to leave the server hardware business, layoff 35 percent of its staff, and take a $10 million cash charge. If what analysts say is true, the burn rate that has resulted from being in the hardware business is substantial, relative to VA's revenue. But, their business will now be known to the general public almost entirely for the OSDN Network Web Sites, like Slashdot.
They hope to make money through consulting and system integration with their enterprise software products, such as SourceForge OnSite. But, this will be hard to sell against things like ClearCase. VA Linux management looks pretty dumb for not cutting the hardware business in the last restructuring they did, which took place last quarter. We shall see if this change really does reduce the bleeding.
Dave Aiello wrote, "When VA acquired Andover.net, I was surprised that either side saw it in their interest. Clearly, the leadership of Andover saw it as a way to lock in the valuation of their company at that point. How such a transaction was supposed to benefit VA was anyone's guess."
"Even before the acquisition, people were warning of the fact that VA could not make it as a Linux server manufacturer if the product became commoditized. CTDATA bought one VA FullOn 2x2 (now known as a 2140 AFAIK), and its a good machine. But, six months later, we could just as easily have bought servers from Dell."
"From my perspective, this will exacerbate the flight to quality in the Linux market, which is to say it will strengthen Red Hat's hand. It's hard to imagine, in light of recent events, how any business would feel comfortable dealing with anyone else in the 'pure Linux' market."