Credit Suisse First Boston
cut its rating on
VA Linux
(LNUX)
to hold from buy Wednesday, a day after the software and services company
announced earnings that fell short of Wall Street's estimates.
Analyst Amit Chopra reduced his 2001 earnings-per-share estimate to a 96-cent loss from a 82-cent loss. In a note to investors, Chopra explained that VA Linux, whose Linux-based systems compete head-to-head with products from industry giant
Microsoft
(MSFT) - Get Report
, was attempting a difficult transition -- focusing on larger, more stable companies in a space where it is not the established leader.
"The company is driving an overhaul in its customer base, from perishable dot-coms to mainstream enterprise clients such as
Instinet
and
Cisco
(CSCO) - Get Report
," he wrote. "One challenge as it migrates to the enterprise will be the ability to compete with entrenched traditional server players offering Linux products."
Lehman Brothers
analyst George Elling also lowered his 2001 earnings-per-share estimate while reiterating his market-perform rating and keeping the price target at $15. The 2001 estimate was dropped to a loss of $1.01 a share from a loss of 92 cents a share, while 2002 is expected to end with a 65-cent loss. The current Wall Street consensus estimate for 2001 is an 86-cent loss, while 2002 was expected to be breakeven.
Next quarter, Elling expects VA Linux to make $30 million in revenue, heeding guidance from the company. VA Linux came in with $42.5 million in revenue for the second quarter, but said that $30 million in revenue could be something of a problem next quarter.
W.R. Hambrecht
analyst Prakesh K. Patel also kept his neutral rating on the stock and scaled back revenue estimates to $29.4 million for next quarter.
