Laurent Lachal
Novell continues to show strength
Novell has been pulling itself together for some time, but for a while its revenue figures have failed to reflect these efforts. This is no longer the case. Novell's latest quarterly figures (fiscal 2Q09, ended 30 April 2008) show continued strength. We expect more good news in the last two quarters. Having proved it has stabilised its business and improved profitability, next year the company will have to deliver on the more arduous ambition of delivering growth.Novell's revenue growth for its second fiscal quarter was essentially flat at $236 million, but this is only as a result of Novell's strategy to boost profitability by shifting lower-margin service revenues to its partners. The company is likely to deliver on its relatively conservative guidance of $940 million to $970 million in net revenues (of which $467 million have already been delivered) for the current fiscal year.Novell rightfully emphasised its success in recruiting and enabling partners, pointing out new ties with both SAP and HP (and thus delivering on its fourth - out of five - strategic objective for fiscal 2009: to expand relationships with one to two more global strategic partners). During the quarter, SAP exclusively selected SUSE Linux Enterprise Server as the only Linux distribution to run its all-in-one solution targeted at small and medium-sized companies, and announced a governance risk management and compliance solution based on Novell's identity solutions portfolio. HP announced it would preload SUSE Linux Enterprise desktop on its 2133 Mini-Note PC targeted at the education market (a partnership narrower than those Novell has with Dell and Lenovo, which are also shipping PCs preloaded with SUSE Linux Enterprise desktop). More importantly, HP basically agreed to migrate its identity customers to Novell's portfolio and to resell Novell's products. HP may not be a big player in the identity space, but this will nonetheless strengthen Novell as one of the key players in the area. Novell also delivered on its second strategic ambition (to grow product revenues at or better than market growth rates) for Linux, systems and resource management, and identity and access management. Workgroup product revenues did shrink, as usual, but only by 1%, and invoicing increased for the first time, positioning Novell to deliver its the third strategic ambition, to achieve workgroup product revenues of at least $285 million to $300 million (of which $209 million have already been delivered).The SiteScape and PlateSpin acquisitions did not impact its revenues much, though. While we expect Novell to eventually leverage the latter, we have doubts about the former. We agree that SiteScape enables GroupWise to catch up with the competition, but Novell needs to do better to turn GroupWise's improved position into actual market traction. The company believes that GroupWise will be able to piggyback on Novell's growing success in the Linux area. We do not share this belief.
