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May 31, 2008

In Novell's second-quarter report for fiscal 2008, the company reported increased Linux business revenues that helped it post a profit for its overall operations. The company commented that the Linux platform has been good for its sales.

Novell's CEO Ron Hovsepian landed a low blow against Linux rival Red Hat and its desktop Linux business. Revenue at Novell for the second quarter hit $236 million, an incremental gain over the net revenue of $232 million reported for the second fiscal quarter last year.

Novell reported second quarter 2008 net income of $6 million from continuing operations, which is an improvement of the second quarter 2007 net income loss of $1 million.

Including its Linux product, it was Novell's open platform business unit that helped to power growth in the second quarter. Novell reported a year-over-year revenue increase of 31 percent hitting $29 million.

During the call Hovsepian responded to a question about how much of Novell's progress is due to Red Hat exiting the desktop market. "I wouldn't attribute any of it to them exiting the market because technically, they would have had to put a product out there to enter the market, which they never got done," Hovsepian responded.

Red Hat doesn't have a mass market commercially supported consumer desktop Linux offering, and Novell lacks plans to develop one as well. "We'll stay focused on the enterprises and the larger plays versus any consumer or anything like that," Hovsepian said. "We're not going to go chase that market."

For its part, Red Hat never exited the desktop Linux market, though a blog post by Red Hat earlier this year has been misinterpreted that way by many.

Overall, Red Hat continues to develop the Linux desktop for both its Fedora and Red Hat Enterprise Linux users.

Competitive issues aside, the big challenge facing all Linux vendors today is the current economic slowdown affecting the U.S. economy. It's a macroeconomic picture Hovsepian is cautious about, but he is upbeat about Novell's prospects for the rest of the year.

"Our installed base is in some insular spots, so when I look at both our growth businesses, they tend to be either catalysts for expense savings or compliance or risk-based," Hovsepian said. "Customers need to do those types of things."

Source: Novell Inc.

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