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VA Linux Systems Leaving The Hardware Business
Posted by
CmdrTaco
on Wed Jun 27, 2001 02:30 PM
from the official-word-from-from-higher-ups dept.
from the official-word-from-from-higher-ups dept.
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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VA Announcement at 4:30
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This is a sound business decision. (Score:4)
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The niche is still there (Score:5)
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
ummm (Score:4)
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 [fuckedcompany.com] 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...
Re:Today.... (Score:3)
Yeah, it takes me a while to get off my butt from in front of the TV when there's good stuff recorded on the TiVo as well.
:-)
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Let's get this straight... (Score:4)
Does anyone else spot the teensy little flaw in the logic?
This actually makes sense now (Score:5)
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
Big deal (Score:3)
Their sales staff were dumb as stumps. Troy T., I'm talking to you.
Today.... (Score:4)
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
Re:Let's start a Slashdot deadpool! (Score:4)
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Who bought who? (Score:5)
Looks like the other way around
Wow, those guys at Andover are a sneaky bunch
Wow. (Score:3)
American Airlines has announced it will cease operation of it's fleet, and, instead, spend it's time and money working on an online set of websites where peopel can discuss issues related to travel.
Microsoft has announced it will be leaving the software business (yay) and solely making it's living off MSN(tm)Messenger(tm)
Sheesh. Bye VA.
Re:Workstations - server prices were great, though (Score:3)
Wow, it was definitely the other way around for the servers - they were incredibly reasonable. We just decided to pick up about 40 1u servers from them, and then today's announcement hits. So much for that plan. Nobody could even come close to touching their 1u prices, and the hardware was phenomenal. Single-CPU 1u units could be had for about $1,000, and you sure can't find that at Dell (except with the crappy Celeron units).
I guess I shouldn't be surprised. (Score:4)
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."
Re:I assume that you'll have a tremendous debt... (Score:3)
Is Raster and/or Mandrake still working for VA, by the way?
Mandrake is most definitely not, as you can find out by reading his web page at http://mandrake.net/. Raster appears (from his webpage, http://www.rasterman.com/) to still be working there, albeit it in Australia.
-sugarescentThis is unfortunate... (Score:3)
I'm sorry to see this hardware resource go, and wish them the best of luck in the software world.
Re:This is a sound business decision. (Score:5)
Maybe we could strip him naked and put him on a webcam like that guy on the Japanese TV show...
Hit the PayPal button and watch ESR dance around as a small piece of cheese drops out of a chute into his rice bowl.
I can't understand. (Score:5)
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 [pureftpd.org] - Upgrade your FTP server to something simple and secure.
VA Banner ad.. (Score:4)
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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Re:Let's get this straight... (Score:5)
The financial impact of the new VA Linux strategy will be significant. Historically, VA Linux has generated a significant majority of its revenues from the sale of its hardware products. VA expects its revenue to significantly decline with the elimination of the hardware segment.
Here's the gun, here's the bullet, now where's my foot again?
But one of the "new revenue streams" they're pursuing is this OSDN OnSite thing, which I guess gives people OSDN-like functionality on their own networks. Has anyone out there used this? Not just posted a project on OSDN, but actually paid for the OnSite product/service? Does it actually make your development more "efficient"? Do you use it to coordinate with development outside your corporate walls? Sounds like a neat idea, but are they really gonna make any money with it?
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The Dell of the Linux World (Score:3)
Re:I can't understand. (Score:5)
Well... if they can't pay for bandwidth they could always shut down for a weekend and blame it on an incompetant female Cisco tech. I hear that works....
-rt-
No longer a niche market (Score:3)
However, with the popularity of linux as a server system rising, we are starting to see the big boys such as Compaq and Dell get into the act. I'm guessing that VA has seen that they will not be able to compete with the larger hardware vendors, and are opting to stick with linux consulting/development roles. In one sense it's a shame to see VA driven out of the hardware role by the larger corps, but on the other hand it's a strong indication of linux's success.
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Re:Revenue != Profit (Score:3)
A move like this takes guts. Plenty of companies would keep pissing away money on the failing business area out of habit, or out of fear of change. It's a good sign that they are willing to face the facts and make cold, calculating decisions. If they succeed in turning themselves into a profitable open source powerhouse, today will be remembered like Microsoft's famous Internet reorientation.
How will this affect SGI? (Score:3)
That may sound like an odd question, but if you look at SGI's Linux offerings over the past 12 month, you'll see that they resemble a (poor) attempt at being a VA Linux wannabe.
Also note that some of SGI's Linux servers were OEMed from VA.
It will be interesting to see how this affects SGI over the next 6 months... will SGI's Linux offerings be better or worse as a result?
Rich? Say what? (Score:4)
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.
__
Let's start a Slashdot deadpool! (Score:3)
My guess: February 16, 2002
This may not be dumb at all (Score:3)
The ideal situation in business is when you can do some particular thing so much better than nobody else comes close. That's just not going to happen for hardware built from standard parts.
But VA, in doing the right thing with Source Forge, in terms of providing an environment to foster software initially to make their hardware look better, may have stumbled into an area where they can build a large business and keep the lead for some years.
The stupid thing about the dot com bubble was the notion that a group of computer jocks would be so much smarter about just everything that they could do retailing better than, say, outfits that are run by families that have decades, sometimes centuries, of retailing culture under their belts. As if ability to work with computers assured you of having 50 bonus intelligence points that could be applied anywhere in life.
Well, it's not that the nerds took over from the corporations. It's just the inverse: every traditional business of any size is becoming in significant part a software development house. And it's mostly a matter of working up from small projects that work for some particular location or department to a broader integration. The way to do this well, when you're not starting out with the computer system and trying to make the business fit it (the nerd model), is to start with the business intelligence in each of those locations and departments, and find a way to bring that all together.
But that's been very hard to coordinate. Which is why way too many large businesses bring in SAP or the big consulting firms to try to do it top down - basically, the nerd's mistake again. For generic enough businesses, where the people really don't need to do more than run a widget assembly line and sell to established markets, this can work. But for a business with more specialized intelligence innate to its operations, this can really f*ck you up.
Source Forge gives an organic way for a major corporation that's found that SAPiness saps their lifeblood, but that also has had prior trouble getting efficient, effective company-wide development worked up into higher-level integration, to pull niche-specific, wisdom-preserving integration off. Which puts VA into a position to get into the really serious money that currently mostly goes to stuffed suits who know nothing but how to walk the MBA walk - and who are hated by anyone in the firms being consulted who actually knows his or her shit, and sees how the "daddy knows best, he went to business school" attitude of the top-down fixers will destroy much of the real wisdom that older, successful corporations have accumulated in their staff.
Business likes to give lip service to the 'new,' but business is profoundly conservative. Source Forge is the conservative way to embrace and develop the newest technology without nullifying the intelligence embedded in your current business culture. It's revenge on the nerds' premise that we were smarter than everyone in every way. But it also allows the nerds, as we go to payroll or contract work for old-line firms, a degree of freedom and collaboration that we wouldn't have if the only model was SAP-like. If we've got to serf the web, at least we can whistle while we work.
(And this may be why Microsoft will essentially go out of business within a decade. Internal development based around open source models will leave no reason to license anything from Mickey G. He'll end up like Corel, with a slice of the home market from people who want to still use the software they used to know.)
Revenue != Profit (Score:4)
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.
Cerberus and VA's Hardware Legacy (Score:3)
> respect for a company that would use a program
> like Cerberus to stress-test its systems.
>where else can you buy hardware that you can
>count on not being crappy?
As the author and (still VA-employed) maintainer of Cerberus/VA-CTCS [sourceforge.net], this comment really made me feel better on a day of reckoning -- most of the SW group was hanging around a little depressed after the announcement and when I and my coworkers saw this post, I felt that maybe a FEW people understood why it was that VA's systems always seemed "overpriced".
We tried to change how PC hardware was manufactured. I developed automated factory quality control systems that enforced QA policies under Cerberus... while they were sometimes overridden for 'business reasons', the restrictions raised the bar for our products and made them more reliable per capita than anything else out there. A while back, I wrote an essay on "Microsoft Quality Hardware" published in the Linux Journal that described how I hoped Linux and Cerberus-like initiatives would save PCs from the scourge of the industry in quality.
And we punched some holes in the status quo. Beating the odds, we discovered problems in products from every big name in PCs (Intel, Adaptec, Tyan, Mylex, etc) before anyone else, and it is certainly no small thanks to VA's dedicated SW and HW engineering groups that modern server hardware works as well as it does under Linux.
I hope other HW vendors pick up the slack. With Linux and Open-Source drivers, it is _possible_ to prove conclusively if a piece of hardware is broken, and we can break the chain of component vendors pointing at Microsoft pointing at integrators, etc. Meaning that the PC industry can achieve the reliability of Sun at the price of Dell.
Some things are changing at VA, but Larry was right when he said in the press release that our software component really has always been our differentiator. I just wish that we would have figured that out sooner, sold that aspect to our customers, and avoided our current predicament.
Don't count VA out yet. There are a lot of smart people still here, and I think if VA can come out of this with morale intact and a concrete vision for the future, things will turn around.
This means one thing... (Score:3)
Didja know? (Score:5)
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?
--
Two witches watch two watches.
SourceForge OnSite?? (Score:3)
Re:I can't understand. (Score:5)
As far as OSDN is concerned VA Linux plans to continue to operate OSDN with no significant changes anticipated as the result of the restructuring. By the way, OSDN uses more than just web banners to support itself. Revenue comes from ad banners, sponsorships, events, and Thinkgeek [thinkgeek.com]. ;)
Re:In related news (Score:5)
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.
New Income Stream (Score:3)
Actually they are going to make money from configuring Cisco equipment for Exodus...
oops.
--T
Agreed (Score:3)
Re:Didja know? (Score:3)
That says something about legitimacy of "new OS economy" evangelists like ERS
Surprising... (Score:3)
I had thought that the value-added hardware sales, which VA had focused on, would have the best chance at generating a positive cash flow.
I thought that selling a 'free' OS like Red Hat would be more difficult, but these announcements(this and RedHat's quarterly results) seem to show just the opposite..
Oh, well, What I'd really like to know is if there will be any really good sales on VA Equipment?
Re:I can't understand. (Score:3)
If VA-Linux was keeping OSDN afloat then how the hell is OSDN going to keep VA-Linux going? By swapping banner ads with partners? If support of SourceForge software was such good business then what could be a better sell than to bundle it pre-configured on VA-Linux servers? But wait, "who'd want to pay 4k for free software on a development server that would never see incredibly high traffic to justify the cost", you ask? Well, then, who the hell is going to pay 10k for VA/OSDN to set it up? Or do you VA/OSDN could fly consultants around the country for two-week projects at a lower cost than that?
Any VA-Linux stockholder should feel they've just fell victim to the ol' bait-n-switch. "We're a hardware company, no...a publishing company, no, wait...a software company..." Next you'll hear that they're going into B2B which, as everyone knows, is the death-rattle of any "new-economy" company.