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Novell profits even as sales slide

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Commercial Linux distro and NetWare seller Novell has managed to stay profitable in its third quarter of fiscal 2009 even as sales slide thanks to the economic meltdown.

In the quarter ended July 31, Novell's revenues slid by 11.9 per cent to $216.1m, but thanks to radically reduced sales, marketing, and development costs, the company was able to bring $16.7m to the bottom line, which is a lot better than the $15.1m loss the company booked a year ago when its sales were $245.2m.

During the quarter, Novell's software license sales continued to shrink as it shifts from selling perpetual NetWare operating system licenses to selling support subscriptions for the open source SUSE Linux operating system. Software license sales fell by 49 per cent to $27m in the quarter, but maintenance and subscription sales - which includes NetWare maintenance as well as SUSE Linux support contracts and support for other products like GroupWise, ZENworks, PlateSpin, and so on - rose by five per cent to $163.7m.

Services sales, which includes integration, training, and other stuff not related to product support, continues to be a bad business for Novell. Sales fell 30.1 per cent to $25.4m, and more importantly, with a cost of revenue of $30.5m in the quarter.

Within the Open Platform Solutions division at Novell, where the company has staked its future to a large extent on being the number two provider of commercially supported Linux, maintenance and subscription revenues rose by 22.3 per cent to $38.2m. Other so-called open platform products accounted for $73,000 in software licenses and $1.7m in maintenance and subscription fees. Total open platform sales came to $39.9m, up 19 per cent.

The company's Workgroup division, which sells the Linux-based Open Enterprise Server as well as NetWare and GroupWise groupware, had sales of $80.5m, down 11.9 per cent. Software licenses for OES and NetWare (meaning, NetWare) fell from a tiny $9.5m a year ago to $5.1m in this quarter.

Maintenance and subscription fees for this category held up better, thanks to the still large NetWare base, with revenues of $40m, down 4.4 per cent. GroupWise and related collaboration products accounted for $26.3m in the quarter, down 8.5 per cent.

Novell's identity and security management products posted sales of $30.3m in the quarter, down 17.9 per cent, and its systems and resource management tools collapsed, too, with sales down 15.1 per cent to just under $40m.

The company paid off some convertible debentures in the quarter, and that dropped its cash pile down to $921m - including short-term investments - from the $1bn stash it had at the end of fiscal Q2. ®

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