Novell Linux revenue soars as global server revenue plummets
The bad news is that global server revenue is down 25 percent in the last quarter, according to IDC, with Microsoft Windows server revenue down a whopping 29 percent.
The good news? Novell reported Thursday that its Linux Platform revenue climbed 25 percent year over year in the midst of one of the worst recessions in history. Talk about Linux swimming against the economic current.
Well, it's good news for some. Microsoft, of course, won't take any comfort in Novell's numbers, especially as recent Eclipse survey data suggests that Linux is eating into its Windows server and client businesses, with 43 percent of Eclipse developers citing Linux as their preferred deployment platform (versus Microsoft's 41 percent).
It wasn't the best of quarters for Novell, either. Net revenue was down to $216 million from $236 million a year earlier, though cost cutting resulted in $16 million in net income. Novell's problem is that outside its Linux Platform and Identity Management businesses, which both grew, its other lines of business stumbled -- Workgroup was down 14 percent, while Systems and Resource Management dropped 2 percent.
Novell reported $37 million in Linux Platform Products revenue, up 25 percent compared to the same period last year. While not on par with Red Hat's continued growth -- 18 percent last quarter on a higher revenue base, -- Novell's execution on its Linux Platform business, in particular, is impressive.
Workgroup, of course, continues to deliver the biggest chunk of revenue ($79 million in the current quarter), but is also the biggest drag on Novell's brand. Workgroup is a constant reminder of the old Novell: NetWare, GroupWise, etc. I understand the reasons for keeping that revenue, even declining revenue, on the books, but it comes at a high cost to Novell's credibility.
With $1 billion in cash or short-term assets, Novell could conceivably buy relevance in this market, as it has tried in the past with its Sitescape acquisition, but thus far it has failed and throwing more money at this line of business won't likely help. Novell is an enterprise server company. Its desktop-related business is a distraction.
Novell's Linux performance, however, suggests a way forward for the company. It's called open source, and perhaps Novell's own flavor of open source (hybrid source) could be a winning strategy against Red Hat and Microsoft.
Follow me on Twitter @mjasay.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
UNIX revenue - 3.7 billion
Windows Server - 3.3 billion
Linux - lame 1.4 billion
As far as I can see, Linux remains stagnant where revenue is concerned. You also need to get out of this mentality that Linux is competing against Windows Server. Linux is competing with itself, the market and UNIX. The server revenues that are plummeting are actually happen because of a couple reasons, consolidation through virtualization technologies such as Windows Server 2008 Hyper-V, Big Iron UNIX Servers in the $100,000 to $500,000 range are not being purchased right now which are actually running either UNIX or Windows Server, not the lame Linux. So please Matt, get facts straight before you start with another year of the Linux fiasco.
Down by 29% is not a 'hit'.
1.4 billion for something that is free is remarkable.
Apache beats Windows Server by a wide margin, and almost always runs on Linux.
As for the competition, I think I blogged the "duopoly" idea yesterday. Maybe you read it? While we *are* starting to see Linux cut into Windows (see the Eclipse data), I do think that we're going to see Microsoft alongside a leading open source product in each market. I don't see Microsoft going away anytime soon.
I am not surprise by these results. We had to replace all the windows 2008 server in our data center with either 2003 server or Linux. Good for Novell.
So, no, Java developers won't be using VS on Windows. It's either Eclipse or NetBeans.
They sort of covered this in the q2 conference call
http://seekingalpha.com/article/123039-novell-inc-f1q09-qtr-end-01-31-09-earnings-call-transcript
"Within open platform solutions, Linux platform products revenue in the quarter was 35 million, increasing 24% from the year ago quarter. Linux invoicing was 23 million, down 42%. As we have stated before, our Linux business is dependent on large deals which may result in some fluctuations of our quarterly invoicing. This quarter we did not sign any large deals, many of which have been historically fulfilled by Microsoft certificates. Today we have invoiced 199 million or 83% of our original 240 million agreement."
My interpretation of that was that no significant new voucher income was booked in Q2. But I don't know how voucher income is booked generally. They could spread it over multiple quarters, so most of the baseline revenue could be MS voucher related. This would make it sound like the increase in income over Q1 was non-MS voucher related. But its not completely clear.
However, you'll notice that they say there is still about 40 million in MS voucher income left to be invoiced. So if their linux business continues to grow at the same rate, that growth will have to come from non-voucher income, They've only got 40 million left in that tank. If they break the 40 million mark in q3 for linux revenue there wont be any question in q4..
-jef
here is the q2: http://seekingalpha.com/article/140246-novell-inc-f2q09-qtr-end-04-30-09-earnings-call-transcript?source=bnet&page=2
Looking at the two transcripts together you get a better feel for what's going on.
q2: linux invoicing $40 million
q2: MS certificate income invoiced: $13 (leaving $27 million in the tank)
To my reading... in q2 that just ended, $13 out of $40 million of the linux revenue invoiced for the quarter were from the MS deal. So about 1/3 of their quarterly linux revenue is accounted for by the MS certs.
At that rate they can rely on the MS income for another 2 quarters or so.
Also worth noting in the transcript that their linux business is not yet profitable. That's something Matt should have noted.
-jef
- by June 8, 2009 10:32 AM PDT
- Another note is that Novell has set the end of life on the Netware product. So, that product income has to end in a few years because they will not be selling or updating it.
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(12 Comments)Netware users will need to migrate to another NAS or OS product. Novell does have a Linux replacement for Netware. Netware is more like a powerful "NAS appliance", where as the Linux product is more, and adds "application server" and all the bells and whistles of Linux.
I think the Linux vs. Windows arguments as old news. Most businesses will have both Windows and Linux servers in there environment and can choose when to implement either.
In my case we have Linux appliances and Windows application servers, VMware servers, without any battles.
I think Novell?s work toward making ?Windows vs. Linux? battle more irrelevant a good thing. These systems should work together without a bother.