Novell chief: 'Our Linux performance did not meet our expectations'

Novell chief: 'Our Linux performance did not meet our expectations'

Summary: Novell's fiscal first quarter results were a mixed bag and Linux invoices fell sharply as the company failed to sign big deals.For the first quarter ending Jan.

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Novell's fiscal first quarter results were a mixed bag and Linux invoices fell sharply as the company failed to sign big deals.

For the first quarter ending Jan. 31, Novell reported non-GAAP earnings of $24 million, or 7 cents a share, on revenue of $215 million. Those results were a penny better than Wall Street estimates. Net income for the first quarter was $11 million, or 3 cents a share.

On the surface, Novell's quarter told a familiar tale. Open platform sales, which are dominated by Linux offerings, were $35 million, up 24 percent from a year ago. Other units had a mixed performance. Novell CEO Ron Hovsepian said that "invoicing was below our expectations in this weak economy."

Hovsepian elaborated on Novell's earnings conference call. Linux, viewed as Novell's growth engine, sputtered in the quarter. Hovsepian said:

Our Q1 Linux performance did not meet our expectations as our pipeline coverage and conversion was overly reliant on direct sales and sales cycles lengthened. Going forward, we are focused on building our pipeline with and through partners and we will be aggressive on pricing to gain market share.

Matt Asay put it best: Novell will be putting its Linux on sale.

Novell CFO Dana Russell noted:

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.

Add it up and it appears that the Microsoft reselling agreement that put Novell's Linux business on the map has played itself out. Meanwhile, an aggressive pricing strategy--for services attached to free software--can't be good for profit margins going forward.

On the bright side, Novell said it is rolling out SUSE Linux Enterprise 11 later in the quarter. That rollout may improve Novell's Linux invoicing fortunes.

Needless to say the Microsoft agreement gravy train was the big topic among analysts covering Novell. A few nuggets gleaned from Novell executives:

  • Russell said that "customers certainly are price sensitive" and Novell expects that the prices for Microsoft-Novell Linux certificates are not going to hold.
  • Demand generation for Novell's Linux business is the company's responsibility--not Microsoft's. The big problem was that Novell was relying on big deals that failed to materialize.
  • Invoicing for Novell's Linux certificates appear to be moving back to historical norms, said Russell. If that's the case then the first quarter hiccup will be an aberration.

Topics: Linux, Hardware, Open Source, Operating Systems, Software

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20 comments
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  • The Price

    No doubt Novell is experiencing the results of months of negative public feedback from the community that they betrayed with their MS deal.

    With the recent Red Hat/MS agreement (which doesn't compromise the community) Novell has lost their "interop" advantage.

    Red Hat didn't sell their soul to Redmond and they are doing just fine. Solid business model.
    Tim Patterson
  • Umm, maybe

    it's because companies that are cash-strapped are actually *GASP* doing it themselves (in-house) for FREE (as in beer)? If your product is available for free and you make your money on support, you better be top-notch in your support!

    Novell's best advantage is offering an alternative to dealing with the DeadRat salesdroids. I remember when DeadRat demanded that Ford audit their systems and pay for licenses - during a prove-out period. Needless to say, Ford went with SuSE and DeadRat lost a chance at a couple thousand recurring annual licenses. That must have hurt . . .
    Roger Ramjet
    • RE: Umm, maybe so

      <font color=#808080><em>"Novell's best advantage is offering an alternative to dealing with the <strong><font color=#000000>DeadRat</font></strong> salesdroids."</em></font>

      "The beginning of wisdom is to call things by their right names."

      ^o^
      <br>
      n0neXn0ne
      • ???

        ["The beginning of wisdom is to call things by their right names."]

        But I AM! :)
        Roger Ramjet
        • ....

          I was just surprised you used the word "<strong><em>Dead</em></strong>".

          Novell Inc. (NOVL) 10:09am ET: <strong>3.31</strong> Up 0.01 (0.27%)

          Red Hat Inc. (RHT) 10:08am ET: <strong>13.94</strong> Down 0.01 (0.07%)


          ^o^
          <br>
          n0neXn0ne
          • RED rat?

            just doesn't have the same "zing" that Dead Rat has. 13 bucks a share is higher than InHell, GE and close to Crisco and M$. M$ is only at $16 . . .

            Personally I was just flabbergasted when DeadRat made demands and threats to Ford - while we were in an RFQ prove out. Totally unnecessary and very stupid. This is how I remember DeadRat - although it probably was just a really bad salesdroid. I can't fathom why any company would do something like that.
            Roger Ramjet
          • ....

            Don't get me wrong. That was unique. :)

            PS. Pls. don't patent it. I don't want you to sue me. :(

            ^o^
            <br>
            n0neXn0ne
  • Due to "enterprisation" of the product.

    They pulled the rug out from under the consumer version. Where's the boxed SKU available for purchase at my local Best Buy? Now I have to download it? Maybe I don't have huge bandwidth? I can go to Amazon and buy a nice Ubuntu distro. And then there's the whole KDE vs. Gnome deal. And how about the continued issues with media players and licensing? Plenty of room for fixing that and making it a non-issue for the user. Do some deals...whatever...just get it done so we don't have to worry about it and it "just works"!!
    Techboy_z
    • "Enterprisation" killed the consumer version.

      I agree with Techboy_z. They have continued to improve the server version (I guess) but have not focused nearly enough on the consumer version. One shouldn't impact the other. I've been using SUSE Linux (and I did purchase them)from Suse Linux Pro 9.0 through SLED 10.1. And while small improvements were made steadily, I still don't have decent media playback and what's worse, my system is slow and not always stable.

      By contrast, the latest Ubuntu 8.04 and 8.10 work flawlessly, allow media playback and are FAST. No issues, it just works. I was expecting many usability improvements from Novell following their agreement with Microsoft, including media codecs and help with SAMBA. Instead, Ubuntu has a better SAMBA implementation, no media playback issues and didn't need a Microsoft agreement to get there. I also haven't paid for Ubunut (YET, however i will start now).

      While I'm currently still using SLED10.1 on my laptop, I'll be moving to Ubuntu before the end of next month. I'm tired of thinking of my 1.83Ghz Core Duo laptop with 2GB ram as a slow machine. Firefox should pop up, VMWare workstation should pop up. GEdit, Thunderbird, Banshee, FSpot and K3B should all pop up. Instead they take 7-25 seconds to load. C'mon!!!

      Honestly, I can't tell you HOW the Novell-Microsoft agreement helped ME. I really can't. And that's a problem for Novell.

      I'm running EEEBuntu on my Asus netbook and if Ubuntu on my laptop runs anywhere near as well, I'll be a lifelong user.

      Goodbye Novell. Suse was nice but just not enough and I'm tired of waiting and paying while I'm waiting.
      gigglypuff
      • to be honest

        In the past 8 years, I have tried a slew of distros, among them were two versions of SuSE and was very disappointed with the way they made my Dual Athlon 1.7 with 1G registered RAM crawl like a turtle, while RedHat 9 and FC2 and Debian, all ran flawlessly.

        I have been with Ubuntu since their first LTS release, now I'm sticking with it and won't upgrade until their next LTS release, April 2011
        tripolitan
  • RE: Novell chief: 'Our Linux performance did not meet our expectations'

    "Where's the boxed SKU available for purchase at my local Best Buy? Now I have to download it? Maybe I don't have huge bandwidth?"
    I can go to my local Barnes and Noble and pick up a Fedora, Suse or Ubuntu disk right now. If I pay attenion I can get Mint, PC/OS, Mandriva, etc... They are in the various Linux magazines on the shelf. The magazines are cheaper than a box copy. $15.00US for a UK magazine (most of the Linux magazine are from there) versus $50.00US or more for a box copy. So bandwidth is not a stopping block.
    Randy
    CannonFodderSE
  • Reverse Midas Touch

    It seems to me that Novell has had a long history of turning to crap just about anything it acquires. Remember Word Perfect and Perfect Office? Now SuSE.

    I will say that I run SuSE 9.3 Professional on one box (hardware appears too old to upgrade) and OpenSuSE 11.0 on two other boxes. Two of these are older dual Athlon CPUs, and one is an AMD quad core Phenom. I'm having no apparent performance or stability issues with them. I like the distros, KDE, and I like the SuSE online update facility.

    That said, Novell seems to be faltering with Linux. The early signs: departing original SuSE engineers, were not encouraging. Can Novell make money at anything?
    Feral Urchin
  • Novell is M$'s lapdog

    [i]This quarter we did not sign any large deals, many of which have been historically fulfilled by Microsoft certificates.[/i]

    That tells it all!
    M$ kept Novell on life support just to spread OSS FUD.
    With M$ bankrupt, Novell won't last a single week without allowance money.
    The real Linux made by Red Hat is what we need.
    Linux Geek
  • RE: Novell chief: 'Our Linux performance did not meet our expectations'

    Here we have one of the biggest linux distributors around and they even admit that linux doesn't meet their expectations, how in the world can it meet yours? Look at it this way, Novell was supposed to be the saviour of linux, the only true company that could actually make something of it, and had Microsoft to bail them out to help them make linux good but they failed. If Novell can't do it then nobody can. This is the destiny of linux, doomed for failure. When you have a mesh of patches and try to create an operating system out of it this is what you get. Another nail in the coffin..... and no tears will be shed. So long linux, you won't be missed.
    Loverock Davidson
    • did you miss a shock treatment?

      [i]...they even admit that linux doesn't meet their expectations, how in the world can it meet yours?[/i] Its been working fine for me and several million others...

      [i]Novell was supposed to be the saviour of linux...[/i] Saviour of Linux from what??

      [i]If Novell can't do it then nobody can. This is the destiny of linux, doomed for failure.[/i] mmmm RedHat is doing fine, check their stock... Fact is, Linux is growing and growing...and growing, but you can keep repeating "doomed for failure" until you feel better.
      tripolitan
      • No did you?

        [i]Its been working fine for me and several million others...[/i]

        Its not, you just think it is. Trust me, there are better operating systems out there than what linux has to offer.

        [i]Saviour of Linux from what??[/i]

        From failure! Novell was supposed to be the company that would bring linux to the masses and make this the year of the desktop. They failed.

        [i]mmmm RedHat is doing fine, check their stock... Fact is, Linux is growing and growing...and growing, but you can keep repeating "doomed for failure" until you feel better.[/i]

        Red Hat's financial status hasn't looked good since the company started. Linux is not growing, recent reports say its declining. And with a 4x higher return rate of that than its competitors proves my point.
        Loverock Davidson
        • Have you ever posted anything of interest or value? (nt)

          nt
          Economister
          • Yes, see my previous post. Have you? (NT)

            :
            Loverock Davidson
          • Ah, I see. Your reality field is badly distorted.

            nt
            Economister
  • Ive found the same thing

    Linux performance did not meet my expectations either.

    So i dont use it anymore.

    I thought after 17 years and the vast number of coders writing for linux it would be slick slick slick.

    But I constantly find it lacking in innovation, and knowing that it is based on and very similar to the very old UNIX OS and not something new and containing its own innovation and design..

    Mabey if Linux was not more interested in a ideology and was a little more interested in quality and functionality AND originality then it would meet more peoples expectations.

    Try listening to the people for a change, and provide what the market asks for and desired.

    Sure MS is not perfect, but Linux is REALLY not perfect, FOSS/Linux does not care about the user experience.

    And one day they might work out that next to NO ONE cares if they can see the source code and after all thts the only real freedom you are hawking.

    17 years and 0.85% market share, and once you get bigger or able to make some money the people who own the patents you stole to do it will come calling.
    (when its worth it, ie when you finally get some money if you do).

    0.83% market share is VERY THIN ice !!!
    Aussie_Troll