Novell: Microsoft open source deal has halo effect

Novell: Microsoft open source deal has halo effect

Summary: Novell reported its fourth quarter results and its Linux business continues to post strong growth. However, the growth characteristics are changing.


Novell reported its fourth quarter results and its Linux business continues to post strong growth. However, the growth characteristics are changing. What used to be Microsoft-fueled growth--courtesy of an interoperability and cross-selling arrangement--is now broadening via other partnerships with companies like SAP, Dell and Lenovo.

Putting a hard number on what was dubbed a Microsoft halo effect is difficult. But Novell CEO Ronald Hovsepian touched on it during the company's conference call with analysts Wednesday:

It’s very difficult to decipher the overall halo that Microsoft has. I will tell you the other relationships, like the SAP one that I had indicated in our early rollout, we saw some up-tick there and I am tracking the Lenovo and the Dell numbers. I’m just not sharing those in public but I have looked at them and those things are directionally correct in terms of where we want to see the relationship go.

That comment followed up on more color on Novell's SUSE pact with SAP earlier in the call. Hovsepian said that SAP's selection of Novell as its preferred Linux provider has landed 15 customers who have upgraded to SUSE Linux.

Add that deal in with preloaded SUSE pacts with Dell and Lenovo and Novell has diversified amid its Microsoft deal. It's safe to say that none of those deals would have worked without Microsoft paving the way.

To be sure, Novell is still dependent on Microsoft. A year into Novell's five-year agreement with Microsoft, the company has invoiced more than half of the $240 million deal. Novell has added 4,700 customers in the last year. For the fourth quarter, Novell reported Linux product revenue of $22 million, up 69 percent from a year ago.

Despite that Linux momentum Novell remains a work in progress. It is trying to transform into a pure play software company, cut expenses on back office expenses and be more efficient with its research and development. For now it's a "show me" company. And Novell's outlook was soft as the company changes its product mix.

A few key numbers to gauge Novell:

  • The company reported a net loss of $17.9 million, or 5 cents a share, on revenue of $244 million. Based on Novell's continuing operations--it sold a consulting business--the company lost 3 cents a share. Total product revenue was up 10 percent from a year ago. Excluding various items, Novell reported earnings of $20 million, or 6 cents a share. Those results were ahead of Wall Street estimates of 4 cents a share, according to Thomson Financial.
  • Novell had $1.9 billion in cash as of Oct. 31.
  • The company also said its fiscal 2008 revenue will be between $920 million and $945 million, which was lower than expectations.

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

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • Any way you view it, this was a winning move

    for Novell. Well, other than the Linux zealots crying that is.
    • winning move.!

      from the article:[i]The company reported a net loss of $17.9 million[/i]...yup no doubt about it!
      Maybe you should give a rest to that xbox360 controller and change the game from Halo to something more like the real world.;)
      Linux Geek
      • Gawd you really are dense...

        Bah, not worth the time to explain it, its way over your head.
        • and that would made you sparse?...

          in common sense! ;)
          Linux Geek
      • It is obvious you really have

        no idea what you are talking about. I'm curious at what you do for a living, and at what burger establishment you do it at. :)
        • may be you should 'shed some light' and read the article again!

          I even bolded the quote from the article: Novell lost money again!
 there something wrong with your IE browser?
          Maybe Opera is right about standards after all. ;)
          Linux Geek
          • Would have they lost more money without MS pact?

            Or are you implying that Novell is losing more money
            since they signed the deal with MS? Unless you have some
            numbers to show us to prove something like this, all what
            I can say is that the quoted people from Novell seem to be
            happy with the deal since it helped that to get more new
            customers. That would not be the case were they financial
            performance being in worse position
        • Living? He has no need when he lives in mom's basement.

          This guy wouldn't know a clue if it walked up and slapped him along side the head.
      • It's always sad

        when people define themselves by the Operating System they use.

        Who cares.

        Linux Geek: back to your basement please.
  • Novell is learning the basics of Creative Accounting

    From the masters of deception. But
    they failed to see the horns
    underneath the Halo.

    Soon they will be ripe for the
    Ole Man
    • Shut up, Old Troll <nt>

      M.R. Kennedy
      • Microsoft & Linux Vendors Trading in Patent Fool's Gold

        Well what do you know? Microsoft seems to be
        gaining ground with their "patent
        protection" scheme. But what if they
        discover they've only bought a few bricks of
        fool's gold?
        Ole Man
    • Did not Steve Jobs know a thing or two about that?

      Novell and Apple
      have they bought the boat and barrel yet?
      Worries abound, their futures they discuss by drinks at the club
      What have they hidden within their wares?

      Who shall repent their sins?
      Novell chooses the path of Future;
      the path that is right, the path that
      is honest.

      Many will follow, as interoperability is the key,
      the key to the future, the key to success.

      But one believes in limiting choice.
      The one with the horns.
      The one who temps us with the apple.

        Use Internet Explorer or..?
        Microsoft customers upgrading their copies
        of Microsoft Office at the Microsoft
        website, but using the competition's web
        browser, are greeted with a message
        insisting on the use of MSIE for the "full
        edition" of the update. Or does it? It's all
        just a simple and unintentional
        misunderstanding, says a Microsoft
        spokesperson: The "limited edition" Office
        update offered to non-MSIE users "contains
        links to all Office updates [but] the full
        edition of Office Update has many more
        features... to experience the benefits of
        the full edition of Office Update, you'll
        need to use Microsoft Internet Explorer 4.01
        or above." Got that?
        None of this is meant to be be confusing, or
        to lure unsuspecting customers into
        switching to MSIE, says Microsoft, but the
        murky language of the message greeting
        non-Explorer users will be changed anyway
        (though the browser discrimination will
        not). It's becoming familiar pattern --
        Microsoft willfully obfuscates until they're
        caught in the act, and then slips
        shamelessly into stonewalling mode.
        As reported by CNET.

        Annexing the Public Domain
        In 1995 a virtually unknown company called
        Corbis purchased the Bettman Archives, the
        world's largest private collection of
        historical and newspaper photographs.
        Corbis, a company founded in 1989 and owned
        by Bill Gates, is also actively negotiating
        with museums worldwide for exclusive
        licenses to electronically reproduce works
        of art held in their collections. Since that
        time, the Corbis "collection" has swelled to
        over 20 million images.
        The apparent purpose is to provide Microsoft
        with access to a huge supply of exclusive
        cultural "content" for its web sites and
        multimedia CDs, and to prevent others from
        obtaining similar access. The rub is that
        Corbis now holds exclusive reproduction
        rights to images which are not copyrighted,
        but are in held in the public domain. Gates
        has seduced these museums, presumably with
        promises of future residuals, into veering
        from their missions as trustees of our
        cultural legacies, and into exploring the
        murkiest areas of "fair use" practices and
        curatorial ethics.
        Ole Man
    • You mean like Steve Jobs and back dating stocks?

      Or "look at me, I work for a dollar a year". Pfffttt...
      • Steve Jobs does not have a monopoly stranglehold

        On the industry, but that does not mean that
        he's exempt from breaking the law.

        Have a look at Bill Gates' campaign
        contributions. (Non-Americans should realize
        these are essentially legalized bribery of
        public officials.)
        Microsoft allowed the NSA (National Security
        Agency) to build in a backdoor into Windows.
        Virtually all versions in use today are
        affected. Heise link. Alternative link.
        Microsoft has been shown to have supported
        SCO's lawsuit against IBM over Linux's
        source code. Groklaw story.
        Determined to blot out the sun one square
        inch at a time, Microsoft has filed a patent
        for a program to conjugate verbs, which is
        obviously a program that has been written
        100s of times before in computer science
        departments and elementary programming
        classes. Not to mention the popular program
        Verbix, or perhaps the older Whittaker's
        Microsoft is trying to get removed a
        paragraph from a US higher education body's
        report. The paragraph encourages use of FOSS
        (free and open source software). Story.
        Microsoft violated Vermont's consumer fraud
        law and will pay them $4.7 million. Story.
        There is word that the Windows Genuine
        Advantage tool is actually spyware and
        therefore violates anti-spyware laws.
        Microsoft will be slapped with another clas
        action suit: story.
        Microsoft find clever way to commit arson
        and get away with it. Their Xbox's power
        supply seems rather flammable, according to
        these people. But Microsoft is blaming the
        power cable. One Swedish owner has informed
        me that this is a scandal in Sweden.
        Bill Gates, despite his company's getting
        over $1 billion per year in undeserved tax
        breaks from American taxpayers, has now made
        it clear that he doesn't want to employ any
        He has demanded that the H1B visa program's
        limits be dropped so that he can bring in to
        the country an unlimited number of foreignor
        workers. Link
        He has sponsored a programming content in
        India and plans to greatly expand the number
        of workers there. Link
        Microbox's Xbox 360, which clearly was
        rushed to market before the bugs were
        removed, is now widely understood among
        adult and kid gamers to have a major
        overheating problem, requiring several
        possible workarounds. Not surprisingly,
        there is now a class-action lawsuit to
        address this rather dumb mistake. Link here,
        or read MSNBC's article.
        Always trying to rake in new customers,
        Microsoft has accused Korea's third largest
        bank of piracy. The problem is, the bank's
        contract allowed for copying the software,
        and it appears M$ had been asking for too
        much money. Link.
        There were at one point something like 35
        class action lawsuits against Microsoft.
        Great company!
        Created at least these two front groups to
        lobby for its interests:
        Americans for Technology Leadership (ATL)
        Citizens Against Government Waste.
        "The antitrust settlement between Microsoft
        and the Computer and Communications Industry
        Association resulted in a $9.75M payment to
        the CCIA top official. Ed Black, CCIA
        president, received almost half of the
        $19.75M payment." Link
        Theft of $4.596 billion as "tax breaks" from
        US Taxpayers between 2001-2003, thanks to
        legally-bribed politicians, for an effective
        tax rate of only 19.4% instead of the normal
        35%. Information here.
        Supported California Proposition 64 (they
        contributed $105,000 to the effort), which
        unfortunately passed (due to fraud??). It
        prevents many just lawsuits against
        corporate criminals and was supported by
        many corporate criminals. Info here.
        Settled class action lawsuit brought by
        Californians who said Microsoft uses its
        monopoly position to overcharge for
        software. Info here.
        Microsoft lost a class action lawsuit
        brought on behalf of "permatemp" workers.
        Info here.
        Supports digital rights management which is
        a futile and increasingly Orwellian attempt
        to limit what people do with their own
        Windows XP has built-in spyware that tells
        Microsoft what you are doing with your
        computer e.g. when you do a search it tells
        their computers what you searched for.
        Outsourcer of jobs to overseas, according to
        CNN's Lou Dobbs, at a time when huge numbers
        of US tech workers are unemployed.
        Ole Man
    • You see (a$$h)Ole man?

      Not only I think you are a troll :D
      • Microsoft is a company that is desperately resisting change

        Its strategy is two-tiered. One is to
        desperately hang onto what it's got: making
        the operating system important even though
        we're moving into a world where the OS
        becomes steadily less important. At the same
        time, it is desperately looking for the next
        high-growth field that it'll make money on.
        So when the OS finally does start to
        decline, it will find a new field. It's
        targeted two areas: one is media and the
        other is services. Everything it's doing is
        going into that. It is a classic case of a
        change-hating company; it is desperately
        trying to retard change.
        PAUL SAFFO, Institute for the Future
        Ole Man
        • It seems to be working

          They are posting stelar earnings

          Its strategy is two-tiered. One is to
          desperately hang onto what it's got: making
          the operating system important even though
          we're moving into a world where the OS
          becomes steadily less important

          Oh I see, Leopard, Tiger, Linux, Sun Solaris, are not
          important, and are becoming less important according to
          you. Therefore there is no need to use any of those.

          At the same
          time, it is desperately looking for the next
          high-growth field that it'll make money on.
          So when the OS finally does start to
          decline, it will find a new field. It's
          targeted two areas: one is media and the
          other is services. Everything it's doing is
          going into that.

          So? Isn't the objective of a company to make money?
  • Sheep's companionship with the wolf is very good ... for the wolf

    Does this friendly-to-the-wolf-sheep see the outcome when it will become 'fat
    enough'? Or maybe you do believe that Gates loves competition?

    Maybe Nowell already is a part of Microsoft?

    Is the Microsoft's tactic: [b]if you can't destroy it - buy it and them destroy it[/b]?

    Do you know who paid to Palm corp. to kill the biggest threat to Microsoft - BeOS?
    Or you do belive that Palm corp. bought BeOS just because they wanted to put it
    on the shelf and forget about?

    Does it look OK that AOL bought Netscape in order to use... IE?

    Maybe it's time to jail Gates and his Co. for these and much more than these