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VA Linux Systems (Nasdaq: LNUX) fell US$1.59 to $5.66 in morning trading Wednesday, after the software maker reported a loss for the fiscal second quarter and announced a planned restructuring -- including approximately 139 job cuts and a charge to third-quarter results.
Chief executive officer Larry Augustin blamed the weak results on "the overall economic slowdown," which he said hurt demand for products and services.
As a result, the company said it will cut its 556-person workforce by 25 percent, taking a restructuring charge in the third quarter. The amount of the charge has yet to be determined.
The Fremont, California-based maker of so-called "open source" software said revenue for the quarter ended January 27th rose 111 percent from a year earlier to $42.5 million.
However, the loss before non-cash and non-recurring charges widened to 28 cents per share from 20 cents. The company posted a net loss of $74.15 million, or $1.57 per share, compared with a loss of $11.56 million, or 50 cents, a year earlier.
VA Linux also said it established reserves of $14 million for excess inventory and $2.5 million for bad accounts.
"The effect of the restructuring will be to position the company to achieve profitability at lower revenue levels," Augustin said.
Augustin, however, was optimistic about the company's prospects.
"We believe
that the overall slowdown in IT spending will ultimately create more demand
for open source technologies among enterprise customers as they tighten
their IT budgets," Augustin said. "Our leadership in Linux and open source
positions us to benefit from the adoption of those technologies by large
corporations."
