There are positives and negatives to take away from Novell's earnings call. On the negative side, the company's restructuring costs may jump as high as $70 million, up from the $25 to $35 million the company had originally suggested. Also, Novell reported a net loss in the quarter of $17.9 million, or 5 cents a share, versus a year-ago profit of $21.2 million, or 5 cents a share.
That's the bad news.
But on the positive side revenue increased roughly 5% to $244.9 million, up from analyst expectations of revenue of $242.2 million. More importantly, Linux revenue was up 69% (both for the quarter and for the year), to $22 million in the quarter and $77 million for the year. That's nothing to cry about.
Novell is making more money on a stronger revenue mix, in other words, but needs to control costs. Costs are manageable - it's growth that has been hard for the company. So seeing positive signs there means the company is turning itself around, albeit slowly.
Put in this perspective, even Novell's 2008 guidance (which disappointed investors) of $920 million to $945 million, versus current analyst expectations of $982.2 million, could be positive. If more of that revenue derives from Linux bookings, that's a very good thing for Novell and for Linux.
I say "for Linux" because I'm increasingly convinced that Novell's revenue is not coming at the expense of Red Hat. Not on the whole, anyway. Talking with some of Novell's customers, I actually think it may be succeeding to pull in some Linux customers who otherwise would not (yet) have made the jump. Looking at Red Hat's ballooning earnings, it's hard to see any adverse impact from Novell's success (same with Oracle's reported Linux customer wins).
We may well be witnessing the customer and the market winning in a non-zero sum game for the vendors. At least for now.