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Novell reports improved earnings on Linux momentum

Novell is turning into an open-source company....whether it wants to be one or not.

At some point, Novell is going to look at its quarterly numbers and realize that open source is its biggest bright spot, and its old businesses like Workgroup are dying on the vine. With 65 percent year over year growth in its Linux business, Novell might actually become a true open-source company Linux grows and other product lines die.

It was a solid quarter for Novell, which swung to a profit, and looks to be a great year as the company has revised upwards its guidance for the year: Net revenue is expected to be between $940 million and $970 million, exceeding previously stated guidance of between $920 million and $945 million.

But it's the Linux business that is Novell's best performer:

For the first fiscal quarter 2008, Novell reported $30 million of revenue from Open Platform Solutions of which $28 million was from Linux Platform Products, up 65 percent year-over-year. Revenue from Identity and Security Management was $32 million, of which Identity and Access Management was $28 million, up 15 percent year-over-year. Revenue from Systems and Resource Management was $37 million, up 5 percent year-over-year. Workgroup revenue of $90 million was up 1 percent year-over-year.

$90 million is nothing to sneeze at but 1 percent growth is not worth writing home about. Novell may not want to characterize itself as an open-source company. That's fine. As it stands, it's certainly not. But it's also no longer an email and collaboration company.

Novell should focus on what it does best, and sell off its Workgroup division.