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Glory fades on Novell's Microsoft deal

From black to red

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Novel has turned a year-ago profit into loss as the impact from its controversial distribution and patent protection deal with Microsoft fades.

The vendor reported a $2.2m loss, down from a $3.5m profit, on revenue that increased 2.5 per cent to $239m, with a loss per diluted share of one cent - down from a one cent profit.

Novell's management trumpeted $19m in total revenue for its Linux platform products business, an increase of 83 per cent, and attributed Novell's modest growth to SuSE Linux Enterprise Server (SLES) gains.

Microsoft accounted for a quarter of Novell's Linux revenue and more than half of invoicing - $18m compared to $11m from Novell. Growth in Linux invoicing slowed to 114 per cent down from 659 per cent ($91m) during Novell's previous quarter.

Worryingly, it'll be invoicing that Novell uses to measure the state of its relationship with Microsoft - and latterly Dell. Chief executive Ron Hovsepian said Novell will no longer report how many SLES certificates distributed by the partners have been activated, but will instead report on the basis of total invoicing because it's getting too hard to know where the money's coming from.

Hovsepian called invoicing a "healthier metric" saying "joint sales efforts mean it's becoming difficult to distinguish Novell-only sales efforts from Microsoft efforts.

"It will get more muddy from my point of view now we have Dell as part of the equation. That's why I want to focus on total invoicing and less the channel by which it may travel," Hovsepian said.

So far, 49,000 of Microsoft's 70,000 SLES certificates have been activated, equating to $91m out a total $240m value. Novell has announced 10 customers in the US, referred to a "lighthouse accounts" by Hovsepian. He claimed huge growth is left in the US, Europe and Asia Pacific, particularly migrating customers from Unix.

Novell's management is - rather nicely - encouraging joint Microsoft and Novell sales teams to share leads and results, according to Hovsepian. ®

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