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VA Linux Systems Leaving The Hardware Business
The subject pretty much says it. You can read the announcement
over at Yahoo, but the short and long of it is that VA, the company that owns OSDN which owns Slashdot, Freshmeat, and assorted other Linux web sites, has announced that it is leaving the Hardware Business to focus on SourceForge OnSite, OSDN, and Linux development and consulting. Slashdot should be unaffected.Update: 06/27 08:43 PM by H :It's also relevant to point out this statement from Richard French, the General Manager of OSDN, which is a message to the Community.
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"Remember when the U.S. had a drug problem, and then we declared a War On Drugs, and now you can't buy drugs anymore?"
Frankly, this announcement was inevitable. There is a limited market for custom servers, and VA Linux was never interested in building enough volume to be the Dell of Linux (i.e., provide lots of cost-effective hardware for low prices), they wanted to be the Sun of Linux (i.e, sell high end server products for high prices). The problem is that Linux does not lend itself to a Sun approach. People who want to buy Sun buy Sun, not VA Linux Systems. People paid the premium for VA Linux servers when the dot.com money was flowing, but now that it's not, they buy Dell. Or, if it's a higher end server, IBM. VA Linux just did not have the volume to sell at a competitive price, and this move is a recognition of that fact. Unless you are buying parts in lots of 10,000 nowdays, you just can't make money in the hardware business -- and even at those volumes, Dell, HP, and IBM are all having to tighten their belt buckles to make any money selling PC's.
The wonder is that it has taken this long. I predicted this would happen back in March of 1999 (the ill-will from that prediction, which was sent to several high-level VA executives expressing concern over their business model and where I thought it would lead in the future, is one reason why I did not go to work for VA after they bought "selected assets" of Linux Hardware Solutions). I guess it took that long to burn through all the VC capital plus the IPO capital.
The interesting thing is that this basically leaves Sam Ockman's Penguin Computing as the "last man standing" of the Linux hardware business as of September 1998. I remember meeting Sam at the Atlanta Linux Showcase in September 1998, the last show before the Linux Movement died and the Linux Business was born. At that time he had started his business only a few months earlier, barely had enough money to meet payroll, and was wandering around poking his nose into our boxes and into VA's boxes to see what parts we were using so that he could think about what he could do to compete against us. He'd already been evicted from one apartment for running an assembly line in the back bedroom (or was it the living room?). He had nifty ads in all of the Linux magazines, but was out of cash for any further ads. I remember Kit Cosper of Linux Hardware Solutions saying that Penguin Computing was not long for this world. Sam certainly has the last laugh here!
-E
Send mail here if you want to reach me.
Slashdot should be unaffected.
;)
Riiiiiight. Now is this what you think, or what they're telling you? Cause I had the CEO of the company stand in front of the entire Corporate office and say that we had enough money to last us till at least June (this was in March). Then this happened. In March. March is a bit before June.
The PHBs always tell you that the company will be fine. Could you imagine if they said otherwise?
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If Bill Gates had a nickel for every time Windows crashed...
Does anyone else spot the teensy little flaw in the logic?
It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
When VA (and Penguin, and a few other companies) got into the hardware business, there was a small market niche for boxes that were optimized for Linux, and preconfigured/tested appropriately. Once the bigger vendors (with drastically lower costs) stepped into the marketplace and Linux itself became a product that could be sold and installed straight from the box, the niche companies were doomed. When Linux servers become a commodity, then only the vendors with economies of scale will thrive. VA can't play that game.
If there's any market to be had, it's in selling software and services (though probably not enough to justify the insane valuations that were taking place last year). In essence, Andover was onto the right idea for long-term sustained profitability, but VA wasn't. However, since Andover had much shallower pockets at the time, VA bought Andover instead of the other way around. Stock was cheap then. In the long term, VA was fated to be Just Another Box Company, and there's no money in that anymore (maybe a small shop can make money selling custom boxes, but big companies won't buy from a tiny boutique shop - just from the Dells, Compaqs, IBMs, and HPs of the world, cutting off the air supply of a small public company like VA).
As a software/services/portal company they should have a lower cost basis (building, selling, and supporting boxes is expensive) and, more importantly, lower their cash burn a whole lot. After all, there are portals that make money, software vendors that make money (including Open Source software vendors), and services companies that make money. And there is some synergy between all of them (except for maybe ThinkGeek, but ThinkGeek probably doesn't cost a lot to operate and earns them enough street cred to be worth it). So even though VA's insane valuation was based on their being a hardware company, dumping hardware was probably the right move at the right time. Of course, in another year or so we should know for sure.
- -Josh Turiel
-- Josh Turiel
"2. Do not eat iPod Shuffle."
Today, between the time when I know that there will be an impact but I don't know how many of my friends will be jobless, I hope that any who need to find a new job will be able to. The valley is pretty scary right now.
For example, the TiVO -> VA commute (8 miles approx.) used to take 45 minutes to an hour during rush hour. Yesterday, it took 23 minutes from two miles further.
If there are layoffs, some of the VA guys came from other places (like Linuxcare) and may have the pain (as I did) of having been downsized in more than one Linux company.
Hang in there guys.
_Deirdre
June 23, 2001.
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"Outlook not so good." That magic 8-ball knows everything! I'll ask about Exchange Server next.
Wait... I thought VA bought Andover.net...
Looks like the other way around
Wow, those guys at Andover are a sneaky bunch
Arrogance is Confidence which lacks integrity. -- me
Anyone remember when, during the big IPO craze, that lots of people were saying that VA was the Linux company most likely to succeed in the marketplace? The rationale was that VA actually sold real, physical products. Unlike, for instance, Redhat, who was spending a bunch of money on software development and then giving it away for free in the hopes that people would sign up for support.
Now, VA's hardware business is gone, and Redhat is on its way to becoming a profitable company. What happened?
I guess that, strangely enough, VA has become a victim of the success of Linux. As industry giants like IBM and Dell have jumped into the Linux business, VA has seen its market share erode, apparently to the point where it is no longer reasonable for them to continue.
It's a good thing they didn't have all their eggs in one basket. All of their purchases and investments after the IPO seemed a bit extravagant to me, but now they may be the only thing to keep the company alive. Sourceforge is a great product, and hopefully it is enough to alow VA to eke out a modest existence.
One thing is certain: that 300 dollar share price on LNUX stock a while back sure seems pretty silly now. I suppose it seemed silly even then.
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"Any fool can make a rule, and any fool will mind it."
"Any fool can make a rule, and any fool will mind it."
--Henry David Thoreau
How can OSDN earn money ? Web banners ? Ad banners on Slashdot and Freshmeat are all for other OSDN services (valinux, sourceforge, thinkgeek or free software) .
And OSDN needs a lot of bandwidth. I guess all that bandwidth isn't provided for free.
On the other hand, when I walk through alleys of server farms, I always see a lot of VA Linux racks. They are easy to distinguish with their blue leds. So I thought that VA Linux was selling a lot of hardware. And selling hardware bring money. SGI is also selling VA Linux hardware (they just add their sticker) .
I can't understand their decision. They just can't *loose* money. VA Linux hardware is expensive compared to the same hardware built by your own. And it's selling. And well, according to what I saw in racks.
Compaq drops Alpha processors, Mandrake runs out of money, Netscape focuses on a stupid web portal, VA Linux stops hardware... That's bad. Really bad times for the world of Unix and free software.
-- Pure FTP server - Upgrade your FTP server to something simple and secure.
{{.sig}}
Does anyone else find it funny to see the very first /. article talking about how VA is going to give up their HW biz, and then right above that is a banner ad extoling the virtues of a VA 1RU or 2RU server?
Ooh... now it says, "Need a VA Linux server? GREAT DEALS on VA Linux servers - CHECK 'EM OUT!". Well, yeah, I'd think if you're getting outta the biz, that you should be offering tremendous deals!
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Key to financial independence: Spend less than you earn. Save and invest the difference. Do it for a long time.
Hardware is a notoriously low-margin business. Only a few big companies can hope to compete on price. Anybody else who wants people to buy their iron had better add some serious value. "We'll install Linux for you" doesn't even come close.
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VA Linux has generated a significant majority of its revenues...
They need to maximize profits, which were not forthcoming from the hardware business, as you can tell from the discussion of "cash burn." OSDN can be made (maybe is already?) profitable, so it's worth keeping.
After all, I can sell dollars for 99 cents and make lots of revenue. Stockholders a couple of years ago were willing to fund such behavior. No more.
sulli
RTFJ.
That Microsoft can buy VA Linux for about 1% of its avertising campaign for XBox?
That throwing away the part that *makes* moeny is no way to run a compnay?
That a negative share price is *not* something desireable?
That money is actually *needed* on the real world? You can't eat GPL. Okay, you can, but it's a sorry state of events, and isn't very nurtitent.
That circular advertising is *not* a way to make money?
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Two witches watch two watches.
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Two witches watched two watches.
Which witch watched which watch?
Actually, the new release of slashcode is being delayed pending the port from Perl on MySQL to VisualBasic.NET on IIS.
One notable change will be that all users will log in to slashdot using their Passport accounts. This will allow everyone to surf seamlessly between slashdot, hotmail and the MSDN site without needing to retype their passwords.
Unfortunately, slashcode 2001 will only allow users to post via a special ActiveX rich text edit control. However, this new control will enable users to embed great streaming multimedia content in their flames and trolls. The port of this control to non-IE6 platforms may be done by a third party at a to-be-determined date. In the meantime, Windows XP will now be the /. user's platform of choice.