Novell prudence narrows losses

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Novell today reported its fourth fiscal quarter and annual results, talking up growth in its Linux sales and margins as having contributed to its positive outlook.

The second largest public Linux vendor said it had achieved its cost-cutting targets as a result of completing a two-year business transformation programme, which contributed to offsetting zero revenue growth.

Loss from operations for Novell’s fourth fiscal quarter of 2008, ending 31 October, was $16.3 million (£11 million), compared to $17.9 million (£12.2 million) last year including outstanding shares.

Quarterly revenue of $245 million (£167 million) remained flat compared to the same period last year and below the $250 million (£170.3 million) financial analysts had forecast.

Nevertheless, Novell's UK and Ireland director, Sean McCarry was keen to point out that fiscal 2008 product revenue increased eight per cent year-on-year - which was partially offset by a services revenue decline of 20 per cent.

He also said SUSE Linux sales grew over and above market growth rates and sales of its virtualisation offering, based on Novell’s acquisition of PlateSpin earlier this, had attracted 15 per cent more revenue.

“The fact is were taking market share in these areas,” he said. “And operating profit remains at 10 per cent, which was part of our two-year transformation goal.”

McCarry said another part of the vendor’s transformation involved consolidating its position as an enterprise infrastructure firm and work more strategically with other vendors and its local partner networks.

“I’m delighted with our SAP, Atos Origin and Microsoft relations. They have been underpinned by 33 per cent year-in-year growth in our SUSE Linux business. In addition we have 2,500 ISVs [independent software vendors] on the platform,” he continued.

“In the UK in particular, our relations with Atos Origin have driven our identity and security management solutions to being deployed with several large public sector organisations. And we’ve seen growth across finance, retail and government through our joint agreement with Microsoft.”

For the full fiscal year, its Linux platform product revenue grew 38 per cent; identity and security management was up 15 per cent; and systems and resource management also rose 15 per cent, but workgroup product revenue decreased two per cent compared to last year.

Moving forward, Novell management said it expected to improve on this year’s results, but that “in light of these uncertain economic times,” would target no less than 10 per cent non-GAAP operating margin for the full 2009 fiscal year.

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