Linux buoys up Novell earnings

Novell's Linux business is keeping the company buoyant in trying economic times, the company's third-quarter earnings indicate.

On Thursday, the software maker published its third-quarter results, which revealed that revenue from its Linux platform products had increased 22 percent, year-on-year, to $38m (£23m). However, overall revenue for the same period declined sharply to $216m, from $245m.

Year-on year revenue fell 16 percent in Novell's identity, access and compliance management business, which includes products such as Novell Identity Manager. In the same period, its revenue from systems and resource management titles such as Novell Systems Management dropped by 15 percent. The company's workgroup product revenue decreased 12 percent, compared with the same period last year, to $81m.

Novell's fortunes are tied to business purchasing trends in the current depressed economic climate, senior Canalys analyst Andy Buss noted. He said while identity and access management software is "nice for companies to have", they are not business-critical for many. However, the move to the cloud by many companies has stimulated Linux use in the datacentre, he said.

"There's a lot of infrastructure improvements, such as cloud computing, where companies are moving to x86 boxes," said Buss. "Linux is a prime candidate for this, and so people are investing in Linux support."

Buss said Novell's relationship with Microsoft was also a factor in the company remaining afloat, as increased interoperability and lack of Microsoft patent threats to Novell were attractive to businesses.

"Novell is taking prime advantage of its Microsoft relationship," said Buss. "In many cases, companies are looking at a consistent approach to apps and services in the datacentre. Microsoft supports Novell interoperability and protects it from patent litigation."

Buss added that to remain viable in the future, Novell will either have to sell off its underperforming businesses or invest in those divisions.

"Novell is increasingly seen [by businesses] as a Linux systems and services company, rather than an enterprise apps company," said Buss. "The challenge it faces is to decide whether to invest in enterprise apps to bring it up to speed or to divest."