Novell's results [LWN.net]

August 25, 2004

This article was contributed by Joe 'Zonker' Brockmeier.

Novell announced its 3rd quarter financial results on Thursday of last week. To get some additional information on Novell's results, we spoke to Novell spokesperson Bruce Lowry about the results, and how the purchase of SUSE Linux and Ximian is working out for Novell.

First on the agenda was Novell's financial results. Novell brought in $305 million in the third quarter, with a profit of $23 million, compared to $283 million in the third quarter of 2003 and a loss of $12 million during that period. Part of Novell's overall profits this quarter resulted from one-time payment of $19 million from The Canopy Group.

Overall, Lowry said that the company was happy with the profit from the third quarter, but "a little disappointed with the top-line revenue number." He explained that the sales of the company's Netware products had slowed their decline in recent quarters, but resumed a 12 percent decline in sales in the third quarter.

While Novell's other product lines have not been meeting expectations, SUSE Linux provided a welcome boost to Novell's bottom line this quarter. SUSE's revenues were up $2 million in the quarter, a 20 percent increase from the second quarter. A big factor in SUSE's increased revenues was a single customer that ordered 12,000 subscriptions to SUSE Enterprise. Lowry wouldn't disclose the customer's name, but said that the customer is a venture-backed company using SUSE in a "ASP sort of environment."

The $12 million in revenue from SUSE products broke down into three parts, $4 million was from subscription revenue, $5 million was from SUSE retail sales, and $3 million included "tech support alliance fees and other software products from SUSE Linux." Lowry noted that the SUSE subscriptions would continue to show revenue in future quarters, as subscription revenue is distributed over the life of the subscription rather than reported entirely in one quarter.

Ximian's revenue is not broken out separately by Novell, as the company mainly purchased Ximian as "a technology buy."

We basically said that the impact on earnings would be negligible...it's almost impossible to do that now. The major products were Ximian Desktop, which we're now combining into SUSE, hopefully later this year. The other main sort of component was Red Carpet Enterprise... what we did was added [that] to ZENworks.

We asked Lowry how the integration of SUSE and Ximian into Novell was going. Lowry said that the Ximian integration into Novell was "totally complete" and that the SUSE integration is "moving forward very rapidly," but noted that there was still work to be done, and that integrating a German company into Novell presented additional complications.

Lowry declined to offer specifics about the upcoming SUSE release with Ximian Desktop integrated into the release, saying that Novell was being "pretty tight-lipped" about the release. However, Lowry said that SUSE will continue to support KDE and GNOME.

It seems to be an issue that people continue to be hooked on, that we're trying to get beyond. But, we're trying to give people choice. We'll be adding the things you'd expect Novell to add... it's obviously going to be focused on the enterprise user.

We also asked whether the company would also be pushing Mono in its SUSE product line in order to help adoption of Mono. Lowry said that Mono is not shipped with SUSE Linux Enterprise Server 9, and said that Novell has "talked very loosely about it appearing in the desktop."

It's still very much an early stage thing, I have heard talk of pilot deployments of Mono in corporate environments. It's still fairly narrow...it's definitely an early stage technology.

He did say that Novell had been using Mono more for internal projects, and mentioned Novell's iFolder, which is now written with Mono. Lowry also mentioned the addition of JBoss to SUSE Linux Enterprise Server 9, and to the next major release of Novell exteNd as a replacement for Novell exteNd Application Server.

We'll be replacing the proprietary application server in the next major release, eating our own dogfood. We're going to look at open source and leverage open source where we can. It makes no sense to try to compete with a proprietary product in the same place... it's a mixed world. It's hard to envision a scenario where everything becomes open source.

It should be interesting to see how Novell continues to balance between open source and proprietary offerings. With iFolder, Ximian's Evolution Connector, and SUSE YaST, Novell has shown that it is willing to open source some of its technology when it makes sense for the company to do so -- and so long as that technology isn't a profit center for Novell.

Unfortunately, Novell does seem to be backing away from support of other distributions with Ximian Desktop, with only SUSE and older versions of Red Hat Linux listed as supported. Overall, though, it seems that Novell's entry into the Linux market has been both successful and beneficial for the community and has certainly been beneficial for Novell. Though Novell's income from SUSE is currently only a small fraction of their revenue, it does seem to be Novell's best chance for growth.

(Log in to post comments)