Monday, 01 March 2010 11:24

Novell says Linux now breaking even

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Novell has announced results for the first quarter of 2010 and says its income from Linux has risen, compared to the first fiscal quarter of 2009 and that this part of its business has reached a break-even point.

Chief financial officer Dana Russell told an analysts' briefing: "We made a commitment that Linux would be breakeven at the end of this year, even though we don't report Linux separately this business was breakeven which is a significant milestone."

He said Linux platform products revenue was $US37 million, a rise of six percent. Linux invoicing "was fairly consistent with the last few quarters, but was up 75 percent year-over-year."

Russell said renewal of Linux distribution associated with Microsoft certificates began during the quarter, "and as expected we realised much lower invoicing than the original agreement."

Novell signed a patent-licensing agreement with Microsoft in November 2006, under which the latter had, among other things, agreed to sell certificates for Novell's SUSE Linux to the tune of $US240 million.

"Lower invoicing associated with Microsoft certificates was offset by significant growth in our non-Microsoft invoicing," Russell said.

The company reported that overall net revenues for the quarter had fallen slightly from $US215 million in the first fiscal quarter of 2009 to $US202 million for the current quarter.


Novell chief executive Ron Hovsepian said the company planned to sell two new products during the year.

Novell cloud security service will enable businesses to enforce their own identity and security protocols into the cloud and Novell Identity Manager 4 will build on the company's identity management product and allow for secure management of identities and access across physical and virtual environments.

Asked about the renewal rate on the original Linux invoicing by Microsoft - which analysts put at about $US73 million for the quarter - Russell said that while these had been originally sold at something like a 45 percent discount, present market conditions meant that this time around there would be 80 to 90 percent discounts.

Hovsepian also provided an indicator that Novell's old cash cow, NetWare, is finally being put out to pasture and customers are being encouraged to move to the company's Open Enterprise Server which is based on SUSE Linux.

Support for NetWare 6.5 runs out on March 7 and any extended support contract will last only two more years.

"...you have to give the customer choices and we've give them two choices in our mind. One where they can migrate to a new environment that provides longer-term flexibility and then two, they can get the extended support," Hovsepian said.

NB: All quotes taken from Seeking Alpha's transcript of analysts' briefing.


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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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