ENGINEERING

FREMONT, CA -- VA Linux Systems, Inc. (Nasdaq: LNUX) today reported results for its fiscal fourth quarter and year ended July 28, 2001. As indicated in its June 27, 2001 press release, VA Linux has now exited the systems hardware business in all regions except for Japan. Final systems hardware orders and deliveries of systems, excluding Japan, have now been completed and closed. Fourth quarter revenue totaled $16.0 million. Net loss per share for the quarter was ($5.58), primarily due to $267 million of non-cash charges for goodwill and intangible assets and restructuring charges associated with the exit from the systems hardware business. At the end of the fourth quarter, the Company had approximately $83 million of cash and marketable securities. The VA Linux business model has dramatically evolved. The Company is now primarily focused on its SourceForge application software business. With the new model, the Company expects revenue in the first quarter of fiscal 2002, excluding August hardware shipments, to fall in the range of $3 to $4 million, with a net loss from operations in the range of $10 to $13 million. Cash usage is expected to exceed the net loss by approximately $6 million in this quarter, due to payments related to previously accrued restructuring charges. "We have made a significant transition over the past two months," said VA Linux CEO Larry M. Augustin. "We are now focused on delivering our software expertise through our new application software strategy, with our SourceForge product at its core. Our reduced levels of operating expense and cash use will provide stability as we further develop and improve SourceForge." For more information visit www.valinux.com