Original URL: https://www.theregister.com/2004/08/20/novell_q3_04/

Novell Q3 revenue disappoints

Better profits

By Drew Cullen

Posted in On-Prem, 20th August 2004 10:02 GMT

Novell revenues were up nicely in Q3 04, coming in at $305m, against $283m for same time last year. But the headline figure is less than what it seems - like-for-like sales were down to $265m.

Revenues for the quarter ended 31 July include $38m not available last time around, including a $14m contribution from SUSE, $19m revenue and interest income from the Canopy Group arising from a legal judgment, and a currency upswing worth $5m.

But the Provo, Utah software vendor did rather better on profits, producing net income of $23m (Q3 O3: -$12m). On the nine months tally, Novell has totted up revenues of $865m (Q3 03: $819m) and net income of $44m ($-53m).

The company formerly best-known for its Netware networking operating system is re-inventing itself as a Open Source-based OS and apps vendor. It says it is in transition to becoming a "growth vendor" once again. But today's results show that it has a little more transitioning to do. It points to Linux and identity management as growth areas, claiming a good performance from its SUSE Linux business, which is proving "instrumental in positioning Novell as a strategic vendor to large enterprises".

Sales of subs for SUSE LINUX Enterprise Server reached 19,000 units in Q3 04, with 12,000 of the units sold to one customer. Presumably, that one customer is a big hardware vendor, such as IBM. Anything else, and such a reliance on one customer would make SUSE look vulnerable.

According to Jack Messman, chairman and CEO of Novell, the company is "witnessing the early impact of Linux, a disruptive technology, as it gives enterprises incomparable choices and flexibility in lowering their costs and reducing their vulnerability to security breaches. The collective innovation of the open source community that supports Linux will significantly disrupt the historical order in the information technology market to the benefit of corporations and consumers."

Novell ended the quarter with $1.1bn in cash and short-term investments, against $636m same time last year. The leap comes courtesy of the $600m debenture issue during the quarter and positive cashflow from operations of $65m. The company spent $125m buying back stock. At some point it will have to pay back the debenture, but in the meantime it has a useful warchest to buy a niche software vendor or three. ®

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