Novell Linux revenue soars as global server revenue plummets

It wasn't the best of quarters for Novell, but the company continues to find a way forward with Linux, which grew 25 percent in the most recent quarter.

The bad news is that global server revenue is down 25 percent in the last quarter, according to IDC, with Microsoft Windows server revenue down a whopping 29 percent.

The good news? Novell reported Thursday that its Linux Platform revenue climbed 25 percent year over year in the midst of one of the worst recessions in history. Talk about Linux swimming against the economic current.

Well, it's good news for some. Microsoft, of course, won't take any comfort in Novell's numbers, especially as recent Eclipse survey data suggests that Linux is eating into its Windows server and client businesses, with 43 percent of Eclipse developers citing Linux as their preferred deployment platform (versus Microsoft's 41 percent).

It wasn't the best of quarters for Novell, either. Net revenue was down to $216 million from $236 million a year earlier, though cost cutting resulted in $16 million in net income. Novell's problem is that outside its Linux Platform and Identity Management businesses, which both grew, its other lines of business stumbled -- Workgroup was down 14 percent, while Systems and Resource Management dropped 2 percent.

Novell reported $37 million in Linux Platform Products revenue, up 25 percent compared to the same period last year. While not on par with Red Hat's continued growth -- 18 percent last quarter on a higher revenue base, -- Novell's execution on its Linux Platform business, in particular, is impressive.

Workgroup, of course, continues to deliver the biggest chunk of revenue ($79 million in the current quarter), but is also the biggest drag on Novell's brand. Workgroup is a constant reminder of the old Novell: NetWare, GroupWise, etc. I understand the reasons for keeping that revenue, even declining revenue, on the books, but it comes at a high cost to Novell's credibility.

With $1 billion in cash or short-term assets, Novell could conceivably buy relevance in this market, as it has tried in the past with its Sitescape acquisition, but thus far it has failed and throwing more money at this line of business won't likely help. Novell is an enterprise server company. Its desktop-related business is a distraction.

Novell's Linux performance, however, suggests a way forward for the company. It's called open source, and perhaps Novell's own flavor of open source (hybrid source) could be a winning strategy against Red Hat and Microsoft.

Follow me on Twitter @mjasay.

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