Novell Earnings Falter as It Preps Workload Management Vision

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It has been a tough year for a lot of vendors in the IT space and for Novell (NASDAQ: NOVL), it’s been no exception.

But even as it posts a widening quarterly loss, the company’s executives aren’t easing up on the pace going into 2010. Instead, they described plans to expand Novell’s Linux business as well as a new strategy to cash in on what they see as enterprises’ need to better manage their workloads across physical, virtual and cloud-based environments.

For its fiscal fourth quarter of 2009, Novell reported a decline in both revenue and net income.
Net revenue for the fourth quarter came in at $216 million, a drop of 12 percent from the $245 million it reported during the fourth quarter of 2008.

After a $279 million charge for impairment, the company saw a loss of $255.7 million, or $0.74 per share — far steeper than its fourth-quarter 2008 loss of $16.3 million, or $0.05 per share.

Minus one-time items, Novell’s earning came in at $0.11 per share, ahead of analyst consensus of earnings of $0.07 cents on revenue of $216 million, according to Thomson Reuters.

For the full year, Novell’s net revenues were $862 million, down from the $957 million reported in 2008. Full-year net losses totaled $257 million, in contrast with earnings of $5 million in 2008.

While the financial picture remains gloomy for Novell, there are some bright spots. In particular, for the full year, Novell reported a 21 percent increase over 2008 product revenues from its Linux Platform Products, which include the SUSE Linux Enterprise Server and Desktop platforms.

During the investor conference call to discuss Novell’s financial performance, Novell CEO Ron Hovsepian noted that his company is continuing to press forward in its alliance with Microsoft. The original 2006 deal included a provision whereby Microsoft would resell up to $247.5 million worth of Novell’s SUSE Linux Enterprise Server (SLES) subscriptions.

Hovsepian reported that nearly all of that initial $247.5 million has been used and that the two partners are now moving into a new round of investment. In August 2008, Novell and Microsoft inked a deal for up to $100 million in additional Novell SLES subscriptions. According to Hovsepian, Novell is now starting to tap into those additional funds.

Workload management

However, for Hovsepian, the real thrust moving forward isn’t just about a Linux platform strategy.

Instead, he described a vision that would see Novell unifying elements of its overall portfolio together under a workload management strategy. It’s a plan that aims to tie together enterprise workloads across physical, virtual, and cloud environments.

“I believe there is a new market for solutions that address the risks and challenges for computing securely across multiple environments,” Hovsepian said. “This need plays to the strengths of Novell — identity and security, systems and resource management, and our new SUSE Appliance program.”

“We can enable customers to build, secure, manage and measure workloads in a policy-driven and compliant manner on any platform,” Hovsepian said.

The SUSE Appliance program is an effort through which Novell enables users to build their own Linux-based software appliances.

Such approaches have proven a useful starting point for other firms looking to grab a larger slice of the enterprise IT budget. Rival Linux appliance vendor rPath is now also taking an approach of expanding beyond just appliances to using the same mechanisms to manage entire datacenter workloads.

In addition to its Linux appliance program, Novell also has security and management assets that it can bring to an complete solution to handle overall workload management.

Among those assets are a pair of acquisitions that Novell made over the last two years. In February 2008, Novell acquired virtualization management vendor PlateSpin for $205 million. In October of that year, Novell also bought business service management (BSM) vendor Managed Objects.

“With our PlateSpin workload management solutions, our business service management solutions, and our Novell’s endpoint management solutions, we have the tools that discover, optimally manage, migrate, and measure workloads,” Hovsepian said.

“Our current product portfolio, recent innovations, and development pipeline are focused to support our intelligent workload management strategy,” he added. “This is a very exciting market opportunity and Novell has a unique set of assets to leverage into a leadership position.”

Hovsepian promised to provide more details in upcoming news next week.

Article courtesy of InternetNews.com.