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Novell makes profit in Q4

Netware sales carry on falling

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Novell has reversed its year-ago loss on a five per cent rise in revenue, but it failed to meet some forecasts on the Street.

The maker of NetWare - and now a major force in the Linux business - posted net income of $13.1m, or $0.03 a share, for the three months to the end of October. Same time last year it lost $109m, or $0.29 a share, after recording an income tax expense of $125.1m.

Stripping out one-off charges, Novell had net income of $23m, or $0.06 a share, up from $19m, or $0.05 a share, a year earlier. Analysts, who calculated estimates excluding the one-time costs, had predicted income per share of $0.05.

While income estimates met forecasts, revenue estimates were $3.4m behind consensus estimates. Revenues were $304.6m, 4.9 per cent up on last year. New software licence revenue fell 8.2 per cent from a year ago to $64.7m, but was up 10 per cent sequentially.

Novell's SuSE Linux business brought in $12m in revenue. But NetWare revenue was down 12 per cent year-on-year.

"We are pleased that our revenue and net income remain strong during our ongoing transition to a growth company against the backdrop of a challenging IT market," said Jack Messman, chairman and CEO. "Our key growth initiatives of Linux and Identity Management continued their strong performance. In particular, our Linux solutions are allowing us to reach more and more new customers at a pace not seen at Novell for many years."

Messman was upbeat about the future of the Linux business, saying the company sees "no slowdown to the tremendous progress made by Linux technology to date." But he acknowledged that 2005 will be a "rebuilding" year for Novell, which will continue to invest in new businesses like SuSE Linux as its NetWare division declines.

This month, Novell announced a deal with Dell that will see its version of Linux shipped with Dell servers. The announcement could go a long way in boosting the firm's share of the Linux server market, although IDC reckons that rival Red Hat already has about 70 per cent of the sector locked up. Still, with the enterprise Linux market expected to grow by some 30 per cent to 35 per cent in 2005, there is considerable room for Novell to make gains. ®

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