Novell credits Microsoft, SAP, and HP for Linux sales leap

By Jacqueline Emigh | Published May 30, 2008, 2:05 PM

Giving credit to industry deals with Microsoft, SAP, and Hewlett-Packard, Novell reported a year-over-year sales jump of 31 percent for its Linux software in its quarterly financial results yesterday.

"Overall, product revenue was up 7 percent year over year, driven by our three growth businesses: Linux, identity, and systems management," said Novell CEO Ronald Hovsepian, in a conference call held with financial analysts to discuss Novell's results for its second fiscal quarter of 2008, which ended on April 30.

Sales stepped up 13% for identity management and security products, to a total of $27 million, and 15% to a total of $41 million for Novell's systems management business. Workgroup product revenue, though, dropped one percent to $92 million.

However, Novell also cut operating expenses to $173 million from $180 million, Overall revenues climbed to $236 million from $232 million, bringing a profitable quarter for the company.

In the world Linux market, Novell is topped in sales only by Red Hat Software.

"We had some very exciting partner developments," Hovespian said during Novell's second quarter financial call. Novell embarked on an extensive Linux/Windows interoperability deal with Microsoft in late 2006 that has drawn considerable industry controversy.

"Our partnership with Microsoft continues to expand," the CEO told the analysts yesterday. "We [have] announced an incremental investment in the China market to focus on converting unsupported Linux users to SUSE Linux Enterprise...We also expanded our technical collaboration agreement to simplify and standardize the management infrastructure needed for efficient Windows Linux management. To date, we have invoiced $157 million, or 65 percent, of the original five-year, $240 million agreement."

The CEO also noted that, in a "deepening" relationship with German-based SAP, SAP recently announced the selection of SUSE Linux Enterprise Server as the only Linux distribution to run SAP Business All-in-One, a software solution targeted at SMBs.

"The SMB markets is a critical market for both SAP and Novell. We are also working with SAP to optimize additional SAP applications on SUSE Linux Enterprise," he contended.

Also during the call, Hovsepian cited HP's decision to pre-load SUSE Linux Enterprise Desktop on its 2133 Mini-Note PC for the education market.

"HP [now] joins Dell and Lenovo in shipping PCs preloaded with SUSE Linux Enterprise," he said.

Meanwhile, numbers released by analyst group IDC this week show growth for both Linux and Windows servers during the first quarter of the 2008 calendar year.

According to IDC's report, Microsoft's sales of Windows-based servers jumped 4.2% year-over-year to $5.1 billion. Windows-based servers constituted 39.2% of all server revenue for the quarter.

Overall sales of Linux servers grew 8.4% to $1.8 million, to represent 13.7% of all server revenues. Unix-based servers, on the other hand, fell 0.8% to $4.0 billion in total spending, to account for only 30.6% of quarterly server revenues.