Novell: The Numbers Just Don't Add Up

It's time for Novell (NOVL) to change course. As Reuters noted, Novell in every quarter for more than a year has either missed analysts’ targets, made disappointing forecasts or both. Ouch.

Still, Novell’s shrinkage problem isn’t universal. The company’s SuSE Linux business is growing—really fast. Quarterly Linux revenue grew 46% to $15 million, giving the product line an estimated $60 million annual run rate. Unfortunately that’s only about 7 percent of Novell’s annual revenue—which the company says will range from $945 million and $975 million.

Translation: SuSE Linux sales just aren’t growing fast enough to offset plummeting NetWare sales.

Now here’s a rather extreme idea: Maybe Novell should steal a page from the dot-com days and spin SuSE Linux out as a tracking stock. The move would allow shareholders to see the company’s real growth business far more clearly. As for security and identity management, maybe it’s time for Novell to sell off those businesses in order to double-down on open source.

Much like Microsoft did with NT, SQL Server, Exchange Server and IIS in the 1990s, Novell should spend the next few years building a Linux applications stack rather than dabbling in security solutions.

Disclosure: Author has no position in any of the above-mentioned securities.

NOVL 1-yr chart

Comments

[scott146:]

This is really the same story that Novell has been telling us for years. I don't know why ownership doesn't split this company up by spinning off the Linux business, packaging the Netware maintenance business and sell that to some third party, and liquidate the rest. I don't know if they can get back the cost of the tower that they built in Provo, UT.

2007 Mar 15 04:54 PM