VA Linux Systems

(LNUX)

reported second-quarter results Tuesday that fell short of Wall Street's lowered estimates by 2 cents and said it would lay off 25% of its staff.

For its fiscal second quarter ending Jan. 27, Linux lost $13.4 million, or 28 cents a share, excluding one-time charges, compared with a loss of $6.3 million, or 20 cents a share, in the year-ago period. According to

First Call/Thomson Financial

, six analysts expected the company, which is based in Fremont, Calif., to lose 26 cents a share.

Linux posted second-quarter revenue of $42.5 million, up from $20.2 million in the year-ago quarter.

The company provides software and professional services to corporate users of so-called open-source software systems, chiefly the Linux operating system. VA Linux said it will reduce its workforce 25% from the 556 people employed at the end of fiscal 2000 and will take an as-yet unspecified restructuring charge in the third quarter.

``We believe that the overall slowdown in

technology spending will ultimately create more demand for Open Source technologies among enterprise customers as they tighten their

technology budgets," the company said.

Shares of Linux fell 50 cents, or 6.5%, to close at $7.25 on the

Nasdaq

. In after-hours

Island

trading, shares recently fell sharply to $5.87.