Novell's Linux revenue soars 22 percent, while everything else tanks
Novell reported on Thursday a 22 percent year-over-year increase in its Linux revenue, topping $40 million. That's the good news. The bad news is that overall, net revenue slumped to $216 million from $245 million for the third fiscal quarter of 2008, with every product besides Linux dropping considerably. From identity and security management (down 16 percent) to systems and resource management (down 15 percent) to workgroup (down 12 percent), Novell is in serious trouble, with at least two potential options:
Turn to the open-source community or Microsoft to fix its failing businesses.
Novell's Open Platform business, of which Linux comprises the majority of revenue, has consistently soared for several straight quarters. Though it has had hiccups, Linux has been a factor in Novell's resilience through the downturn. This is either a factor of Novell's commitment to open source or its partnership with Microsoft, or both.
Whichever it is, Novell needs more of it. Now.
Novell's Workgroup business has been underperforming for years now as the company tries to Band-Aid the declining relevance of its once-leading solutions, like GroupWise. It's time to either amputate (sell off assets) or graft new products onto the product line. Companies like Jive, MindTouch (Disclosure: I am an adviser to MindTouch), Open-Xchange, and others could fill out Novell's Workgroup product offering.
Ever the savvy operator, Novell CEO Ron Hovsepian was able to steer the company to positive growth in operating margin, but now he needs to turn around the company's revenue story. His contention that Novell's "revenue performance was similar to many companies in the software industry" is certainly not true of Novell's chief Linux competitor, Red Hat, which has thrived through the recession, even despite plummeting semiconductor sales, signaling lower overall demand for the servers and personal computers that fuel Novell's business.
That's not to suggest that everything is rosy at Red Hat. As The 451 Group reports, Red Hat's rate of revenue growth has steadily declined over the past few quarters, requiring it to take some action to kickstart growth.
Fortunately for Red Hat, the market has clearly signaled that it welcomes acquisitions, as its highest valuation in the past five years came on the heels of its JBoss acquisition. Apparently, investors would like to see Red Hat grow beyond its core Linux business.
Back to Novell. The company needs a growth strategy, and it has only found two ways to grow over the past few years: open source and Microsoft. One or the other will do. Novell's current strategy of using Linux as a loss-leader of sorts to promote its separate, proprietary products is not working.
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. 
http://www.novell.com/documentation/pso_orchestrate20/pso20_install/?page=/documentation/pso_orchestrate20/pso20_install/data/index.html
Their product, SuSE seriously lacks community once it had, people wondering if they would accept MS licenses when they install the community edition etc. All because of Mono, Moonlight and the person behind them. What did half .NET compatibility give Novell or Linux? Nothing but a disastrous image.
Shareholders shouldn't be worried. MS won't let their trojan in OSS die.
Linux or anything open can't live without a true community. That includes the distributions. No kind of MS/IBM/Enterprise support can keep a Linux distro without community alive. Ask Corel.
Novell was of course Novell because they had some insanely stable, network centric operating system which in one case buried into a wall accidentally and kept working for years without updates or whatever.
I have no clue what current Novell is for, really especially while a enterprise focused company like Redhat exists without inking weird deals with MS.
I guess it's not a huge surprise that in the OSS column, the writer intones about the ability of OSS to save the day.
But consider this: There are NO OTHER COMPANIES IN THE WORLD who are trying to compete with Microsoft with their own technology in the workgroup networking space, outside of various Linux-bundlers who mostly just distribute other people's code. (I guess you could say Sun might have been one, but we know what just happened to them.)
The woes of Novell's proprietary businesses are more than likely the woes of any company these days who would attempt to compete in that arena. I give them credit for continuing to try.
Of course, Microsoft as usual is the one with the most strategic (and Machiavellian) smarts. As with their $150M investment in Apple in 1997, they're quite aware that it doesn't reflect well on them when all semblance of competitors vanish, and if that means propping up those minor competitors, then that's what they'll do. Novell in its current state really isn't much of a threat to them in general, so it's useful to keep them alive. (But on a starvation diet, of course.)
I have been using SLES11 in a high availability setup which for cost and performance blows vmware away this I think will start to be more widely used.
As far as GroupWise 8 tell me what Exchange has over it, I'll help you nothing disaster recovery in GroupWise light years easier than Exchange.
Resource management ZenWorks compares to Altiris/Symantec Client Management but one again better.
Their Identity Manager product always wins awards.
Teaming services, their latest release has many benefits over Sharepoint form Microsoft
The list goes on and yes I have worked with these other products.
This is where I think many people are wrong Novell shouldn't dump or split these products they all run on Linux and Windows and will be what separates them from their biggest competitor Red Hat. Red Hat has nothing to go toe to toe with Novell on many of these fronts that businesses need. As the economy gets better I think they will see an uptick of these products. Exchange 2010 is coming out how many people upgraded to 2007, not many. same thing happened with SQL. This environment today is to hard to predict people have been saying this for years, Novell has finally moved it's full product line over to Linux and now will be able to do a better job selling the supporting products.
One last note they are coming out with drivers to allow programs that don't natively support GroupWise to support GroupWise this is what has been Novell's biggest killer once people needed to use Exchange they left Novell they won't have to anymore. There's a lot more going on at Novell and to write some of this stuff without knowing the whole picture I guess shows our ignorance and I guess ignorance is bliss.
- by cableguy4444 August 28, 2009 9:31 AM PDT
- Novell's products aren't the problem. Novell's name (image) is the problem. And it goes back to WAY before the Microsoft deal, which really hasn't hurt business. If Novell's proprietary software was sold under a different brand name it would do MUCH better, and anyone who has worked with Novell's products knows this. It's one of the main reasons Platespin was kept as its own brand name, unfortunately the stigma was enough to bring Platespin sales to a screeching halt.
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- by jack_nbox September 8, 2009 10:56 AM PDT
- I agree with cableguy. Novell's brand is very tarnished and at all levels. Management see it as a poor investment, Active Directory and Windows are seen as essential, eDirectory and most Novell products as an unnecessary and no longer affordable luxury. New Techs are unwilling to learn or mentally invest in Novell products. Users see it as dated and are sometimes surprised they are still in business when told we still use some of their products. Novell has completely crushed its brand on the client end. Products are often not even considered when clients do an evaluation, regardless whether Novell's product is better or more affordable. I have always been a Novell fan but I could write a book on their failings. I think Novell seriously needs to look at merging or putting up a fore sale sign. People of all levels are only willing to invest in something if they think it is a winner and has a future. That ship has sailed.
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(14 Comments)A lot of people see the name Novell and think Netware - clunky, old Netware - and simply dismiss Novell as not being relevant. This is not a failure of technology, or capabilities, but simply a failure of branding. Microsoft did a great job from 1995 forward making Netware seem irrelevant (hey, Windows NT has a GUI, it must be better! or easier...) and Novell's demise has spiraled from that point forward.