Shares of Linux firms plunged yesterday after an earnings warning by VA Linux, which said sales to dot.com customers were sharply lower. Its shares were down nearly 40 per cent by midday and Linux companies Red Hat and Caldera were also down.

VA Linux, once a star performer, is now trading at a new low of $18.19 (€21.16) following its spectacular debut in December, when it jumped more than 700 per cent on its first day of trading. Its year high was $320.

Other Linux firms suffered as investors questioned whether they could develop a profitable business model around a free operating system.

VA Linux said first-quarter results would show a loss of 1416 US cents a share. Consensus analyst estimates centred on a loss of nine cents a share.