Last Updated on November 3, 2025 by Dave Farquhar
In the wake of the dotcom bubble bursting, the record-setting startup VA Linux made a difficult decision. On June 26, 2001, it exited the hardware business. It was a curious decision but probably the right decision, because it survived nearly 14 more years as an independent company before being acquired by Gamestop.
VA Linux’s origins as a Linux hardware vendor
Founded in November 1993 as VA Research, VA Linux sold professional workstations and servers with Linux pre-installed. At its peak, it held about 20 percent of the Linux hardware market. It started when the company’s founder, Larry Augustin, wanted a Sun workstation but couldn’t afford one because he was a graduate student, so he spent $2,000 building himself a 486-based PC from standard off-the-shelf components and loaded Linux on it. Before long, he and his friend James Vera started selling computers on the Stanford University campus, Michael Dell-style. And then they started selling those computers nationally, Michael Dell-style.
This led to an IPO six years later, in 1999, that made Augustin a billionaire on paper at the age of 38.
It especially appealed to business customers, because time is money. They may have had staff who was capable of doing that research. But they had better things for their staff to be doing. It was much more cost effective to just pay a couple of hundred dollar premium for a system from VA Linux that just worked. Its customers included Etoys and Akamai Technologies.
The problem for VA Linux
The problem for VA Linux was its business model wouldn’t last forever. Eventually, the larger, more established computer makers were going to realize they were leaving money on the table by not competing with VA Linux.
There is no rule saying that a system that runs Linux really well can’t run Windows really well also. In fact, usually a system that runs Linux really well does also run Windows really well. So all a company like Dell or HP really needed to do was build a class of systems using the same hardware VA Linux was using, and then offer those systems with your choice of Windows or Linux. And then you had a system that would run just as well as the VA Linux system. But because of the larger vendor’s volume, it probably cost less.
And from the other side, nothing really stopped smaller vendors from buying a VA Linux system and cloning it. You could either examine the output of dmesg or take the system apart to figure out what hardware it was running. Then it was a simple matter of finding off-the-shelf parts using the same chips, assembling it, and selling it for less.
What a hardware company does when it stops selling hardware
VA Linux abandoned the hardware business in June 2001, reinventing itself as an operator of technical websites. It had already been doing that on the side anyway. VA Linux developed the popular website Sourceforge in 1999. It followed that up on February 3, 2000 by acquiring Andover.net for $800 million. This brought the popular websites Slashdot, Andover News Network, Freshmeat, Newsforge, and Thinkgeek under its control.
During the summer of 2001, VA Linux dismissed all 153 of its hardware-focused employees.
But the turnaround took time. By December 2002, VA Linux was trading at $1.19 a share, well below its $239 per share IPO price. It changed its name to VA Software, then to SourceForge Inc, and, later, Geeknet, to better reflect its business model. On June 2, 2015, Gamestop announced it would acquire Geeknet for $20 per share, or $140 million. The deal closed July 17, 2015.
David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.