Better Linux Sales Arent Enough to Halt Novells Slide

Novell's Linux business continues to grow, but overall revenue continues to decline, and Red Hat's Linux business continues to outpace Novell's efforts.

It was not the best of quarters for Linux vendor Novell Inc. When Novell announced its financial results for its first fiscal quarter, which ended Jan. 31, 2006, it reported revenue of $274 million, compared to revenue of $290 million for the first fiscal quarter 2005.

This was a decline from the previous quarter in which Novell had reported $320 million of revenue.

The net income available to common stockholders in the first fiscal quarter 2006 was $2 million or $0.00 per diluted common share.

During the comparable quarter last year, common stockholders saw $392 million, or 90 cents per diluted common share.

Of course, the bulk of that was due to a $448 million net gain related to the settlement with Microsoft in that quarter.

Still, shareholders werent happy as Novells stock rolled down over 17 percent on extremely heavy Friday trading

Not all the news was bad.

During the quarter, Novell recognized total Open Platform Solutions revenue of $56 million, which was up from $14 million in the year ago period.

This included $43 million from sales of OES (Open Enterprise Server), Novells Linux replacement for NetWare, and $13 million of revenue from other Linux products.

The year ago period did not include revenue from OES as it was introduced in the second fiscal quarter of 2005.

/zimages/2/28571.gifClick here to read more about Novells 2005 earnings.

In addition, Novell recognized $63 million of systems, security and identity management revenue, up 20 percent year-over-year.

NetWare-related revenue, to no ones surprise, continued its fall. This quarter it had declined 11 percent from the year-ago period.

Jack Messman, Novells CEO and chairman, made the best of the situation.

"We are pleased with the continued improvement in the core business this quarter," he said in a statement. "Our growth businesses of Linux, Identity and Resource Management are performing well, and we believe we will continue to see growth throughout the fiscal year."

Next Page: Losing ground.