Glass Half Full: Novell Begins Year with Wins and Losses

Novell's first quarter of 2009 results, which ended January 31, showed revenues of $215 million, compared with $231 million for the first quarter a year ago. This in light of $245 million results for the last quarter of 2008. The company holds the foreign currency exchange rate responsible for the loss, although it did benefit operating costs by $11 million. Another monetary exchange benefit came from operations income, which rose by $6 million from $8 million the first quarter of 2008 to $14 million so far this year.

Considering the financial base, Novell recognized a renewed upswing in their Linux product revenue. In the first three months of their fiscal year, the Open Platform Solutions revenue came to $37 million, $35 million (95%) involving Linux products, a 24% increase over the same period last year. This nevertheless shows a declining revenue rate compared to the increase in 2008 over the previous year of 38%.

The revenue for identity and security management products of $28 million was down 8% from the same period last year, with workgroup products similarly down 9% to $81 million. A cash inflow from Microsoft contributed $25 million in the first quarter.

Novell CEO Ron Hovsepian is disappointed and holds the economy responsible. Nevertheless, Novell management "reiterates its target of no less than 10% non-GAAP operating margin in the full fiscal year 2009." Hovsepian emphasizes in the press release that "We are confident about our long-term growth opportunities and remain committed to maintaining our target profitability levels."

Novell is currently pursuing some cost savings through some staff layoffs. They also cancelled their annual BrainShare conference and limited their participation in CeBIT 2009.