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ARSes crush Novell profits

Could be worse

For the Year

For the full year, Novell reported sales of $956.5m, up 2.6 per cent, and a net loss of $8.7m, which was a lot better than the $44.5m loss it had in fiscal 2007. The Open Platforms division accounted for $128.8m in sales in the full fiscal year, up 37 per cent, and the Workgroup division posted sales of $366.2m, down 1.8 per cent. OES was a stopgap product to help preserve the NetWare base and maybe convert some workloads to Linux, and by and large the strategy has worked. But it has not yielded the kinds of profits Novell wants. For fiscal 2008, Novell's identity and security management products had $137.2m in sales, up 9.2 per cent, while its systems and resource management products accounted for $170.5m in sales, up 15.4 percent.

Novell has burned a bit of cash doing acquisitions, buying back its own stock, buying back debentures, and running itself in the past year. The company had just under $1.1bn in cash and equivalents and $777m in short-term investments as fiscal 2007 came to a close, but finished fiscal 2008 with only $680m in cashish and $387.8m in short term investments. Novell had around 4,000 employees, down about 100 from the prior quarter because of restructurings.

Ron Hovsepian, Novell's president and chief executive officer, said in the call that of the $240m in SUSE Linux licenses that Microsoft said it would acquire with its landmark November 2006 partnership, $195m have been invoiced so far. He added that Microsoft has agreed to buy $100m in additional SUSE Linux licenses for servers and has taken $25m worth of licenses from this second round that will be booked in the first quarter of fiscal 2009. (Why not just clean out the first round of licenses? Good question. But this is the IT business).

Hovsepian said that Novell added more than 3,000 Linux customers in fiscal 2008 and gained 3 per cent of market share in the Linux space and outgrew the Linux industry (which he pegged at 22 percent growth). And he banged on about how SUSE 9 and SUSE 10 have 2,500 certified applications, which he claimed is more than for other Linuxes. (This means you, Red Hat). Such claims are dubious from all operating system makers.

All in all, Hovsepian was pretty upbeat, saying that when Novell started out fiscal 2008, it was expecting double-digit declines in its legacy NetWare and OES business, but only saw a decline of 1.8 per cent. He added that there was some softness in the fourth quarter and said Novell would be cautious and monitor the situation.

He added that Novell was pleased that over 60 per cent of Novell's revenues come from recurring maintenance or subscriptions, but said Novell was not comfortable, given the current economy climate, to make projections for future quarters individually or for fiscal 2009. Russell added that Novell felt "feels good" about the first quarter of 2009 so far, but forget about getting any hard numbers. ®

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