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            B R E A K F A S T   W I T H   T H E   F O O L
                      Friday, November 17, 2000

benjamin.rogers@enron.com
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"Have the courage of your knowledge and experience. If you have
formed a conclusion from the facts and if you know your judgment
is sound, act on it -- even though others may hesitate or
differ." -- Benjamin Graham


VA LINUX DOWN, BUT NOT OUT
Open-source software provider VA Linux reported first-quarter
results, meeting revised expectations.

By Mike Trigg

VA Linux (Nasdaq: LNUX), which makes software and computers
using the Linux operating system, reported its first-quarter
outcome after the market's close yesterday, in-line with revised
estimates. It was less than two weeks ago when the Freemont,
California-based company warned results would fall short of
expectations, citing slow sales growth from dot-com customers.
The market reacted harshly from that news with shares plummeting
42% in one day.

Excluding non-cash items, VA Linux's fiscal first-quarter (ended
October 27) net loss was $7 million, or $0.15 per share,
compared to a net loss of $7.2 million, or $0.27 per share, in
the year-ago period. The Street had expected a loss of $0.09 per
share prior to the warning. On the top line, the open-source
software provider reported $56.1 million in revenues, compared
to $14.8 million in the same period last year.

"While top and bottom-line results did not meet our expectations
for the quarter, we remain optimistic about our prospects for
growth in the future. We remain committed to profitability,
excluding non-cash charges, no later than the end of calendar
2001, and we anticipate revenue for fiscal 2001 to be
approximately 2.25 times fiscal 2000 revenue,'' said President
and CEO Dr. Larry M. Augustin.

VA Linux's stock, which closed last night at $12, is down
significantly from its 52-week high of $320. Clearly, the days
of unabashed enthusiasm for Linux stocks are gone. However,
investors continue to keep companies like VA Linux on the radar,
and being profitable one year from now would help the company's
prospects.

Management's ability to control costs while growing revenues is
critical. The other key to success will be monitoring the
commercial acceptance of Linux-based products, particularly
among Fortune 1000 companies. The fact remains that Linux
products are still something that appeal more to techies, and
until that changes investors will continue to have doubts about
VA Linux's ability to succeed
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NEWS TO GO

Caffeine haven Starbucks (Nasdaq: SBUX) announced fourth-quarter
earnings after the market's close yesterday. The company
(excluding non-cash items) reported income of $43.8 million, or
$0.22 per share, compared to $32.4 million, or $0.17 per share,
a year ago. That's a 35% increase. The Street consensus called
for the company to earn $0.22 per share. Revenues for the
quarter were $582 million, compared to $475 million a year ago.
Including non-cash charges to write down Internet investments,
Starbucks' profit was $0.01 per share. Same-sales stores grew
10%.

Southeastern U.S. local-phone company BellSouth Corp. (NYSE:
BLS) announced it expects earnings per share to grow between 7%
and 9% next year. The company previously forecasted 13% to 15%
growth. According to a spokesperson, the new estimate includes
the cost of entering Colombia and adding more customers for
digital subscriber line (DSL) Internet access, which was not
factored into the original forecast. BellSouth expects customers
for DSL service to expand threefold to 600,000 next year,
reducing earnings by $0.07 per share. Colombian acquisitions are
expected to cut earnings another $0.06 per share for the year.

Computer networking chipmaker Marvell Technology Group (Nasdaq:
MRVL) reported third-quarter results after the market's close
last night, exceeding Street expectations. Marvell's net income
was $1.8 million, or $0.02 per share. Excluding stock
compensation costs, profit was $3.4 million, or $0.04 per share,
compared to $5.5 million, or $0.07 per share, a year ago,
exceeding Street expectations by a penny. Revenue came in at
$36.2 million, a 54% year-over-year increase.

Semiconductor company Dallas Semiconductor (NYSE: DS) announced
that Chairman, CEO, and President Vin Prothro died yesterday
after suffering a heart attack. Prothro founded the company in
1984 and had served in his current duties since its inception.
The company announced its board would meet soon to start the
process of naming a successor. The 58-year-old Prothro had no
history of heart problems. Before trading was halted, Dallas
Semiconductor shares dropped $1.19 to $36.88.

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