Novell Grows Its Linux Business

So far, so good for Novell.

For its first-quarter 2008 results, Novell reported growing income and revenues with a strong year-over-year showing from its Linux platform business. With Microsoft’s Windows Server 2008 set to enter the market, Novell’s CEO is optimistic that the company can continue to grow its business even further.

Novell reported first-quarter 2008 net revenue of $231 million, which was up from $218 million in the first fiscal quarter of 2007.

First-quarter net income totaled $16.8 million, ($0.05 cents per share), which is a turnaround from the net loss of $19.9 million ($0.06 cents per share) it reported for the first quarter of 2007.

Novell’s biggest year-over-year gains came from its Linux Platform Products group, with $28 million in revenue — a 65 percent year-over-year gain.

The company’s workgroup products continued to garner the lion’s share of Novell’s revenues, at $90 million for the first quarter of 2008 — though this represented only a meager 1 percent year over year gain.

On a conference call discussing the financial results, Novell CEO Ron Hovsepian was quick to note that Novell’s Linux business had a great quarter. Part of Novell’s continued Linux success comes from its partnership with Microsoft which began in November 2006.

“Our partnership with Microsoft continues its momentum,” Hovsepian said. He added that, although barely into the second year of the deal, Novell has earned $141 million from the arrangement — roughly 59 percent of what the five-year agreement stipulates.

Hovsepian also said he sees continued upside potential from customers that come as a result of the Microsoft partnership.

“We absolutely are seeing upselling opportunities inside those relationships,” Hovespian said. “As we add thousands of new customers, we’re making sure we focus the teams to expand relationships inside those customers.”

Novell’s CEO was also optimistic about his firm’s Linux prospects in the face of Microsoft’s new Windows Server 2008 release. Hovespian said he expects that Microsoft initially will be targeting its own installed server base to get those users to upgrade.

“Microsoft is managing the outward competition, but they are also managing their older installed base and the different versions that they are on,” Hovespian said. “We see that as opportunity for our company to attack that installed base. I’m sure the competitive fires will remain strong between both companies.”

The news comes on the heels of several big purchases for Novell. Earlier this week, the company announced plans to acquire virtualization management vendor PlateSpin for $205 million. Novell also bought open source collaboration vendor SiteScape earlier in the month.

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