Okay, the headline is a bit dramatic. But the Sun-MySQL business combo makes The VAR Guy wonder: Will Novell wake up and start buying open source application providers … or is Novell doomed to repeat the exact same mistakes it made in the 1990s? Alas, Novell in 2008 looks a lot like Novell from a decade ago. That’s not good. Here’s why.
In the early 1990s, Novell NetWare held nearly 70 percent of the network operating system market. But that market share plummeted because NetWare missed out on the huge server application wave. While Microsoft positioned Windows NT Server to run SQL Server, Exchange Server, Oracle, Lotus Notes and more, Novell was clueless about the application space. Anybody else remember Novell’s IntraNetWare and Novonyx embarrassments? Ouch.
Here we go again. While Red Hat — and now Sun — expand from the operating system layer into the (A) middleware layer or (B) application layer, Novell once again is an also-ran. SuSE Linux is a nice platform with decent growth prospects, but operating systems are yesterday’s news. Novell needs to move up the software stack — fast — to stay relevant.
Similar to how Microsoft built its BackOffice business in the 1990s, Novell needs its own suite of server applications for SuSE Linux. Sun beat Novell to the punch with the MySQL acquisition. Stellar move by Sun, since MySQL is the de facto database for most Web 2.0 and open source application deployments. Big setback for Novell, since much of the application market begins with databases.
Of course, Novell still has room to maneuver. Plenty of open source application providers remain independent. But you’ve got to wonder if anyone running an open source company would be willing to sell to a Novell that has so tightly hitched its wagon to Microsoft.
Perhaps Novell could sell itself — though such statements have been made about the company ever since former CEO Ray Noorda retired in 1994. Rumored buyers over the years have included Sun, IBM and Oracle, just to name a few. But The VAR Guy doesn’t see that happening. Alas, open source continues to represent a small fraction of Novell’s overall revenue. Novell also has a nice footprint in the endpoint security market and the identity management sector. But there again, sales are a fraction of Novell’s overall revenue.
Novell ain’t dead yet. But the flesh wounds are starting to add up. It’s time for the company to get in the applications game.
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It’s more than flesh wounds. They’re still losing ground to red hat.
Nice one. You are right on the point. Not dead, but its beginning of the end once again.
“Perhaps Novell could sell itself”
I would prefer that Novell sell SuSE while leaving all of the Microsoft-Novell agreement obligations firmly in place at Novell. That way SuSE can get clear of the mess that Novell has created and Novell can use the money received from the SuSE sale to pursue their great and glorious destiny as a Microsoft lap dog.
———————
Steve Stites
Any Novell defenders out there? (Bueller? … Bueller?)
WRONG!!!
Again… yet another server OS geek!
The battle is for the Desktop, servers? who cares? and Novell won that battle against Redhat with SLED, Novell also have his own stack… Mono, Gnome Developers, KDE developers, etc… and more! even in virtualization products, you all use Novell development products in your Linux boxes. Because today’s Novell is more interested in the Desktop.
Anyway… you have not see the point yet… this SUN’s MySQL is not going to survive the only one that it’s going to laugh at last is PostgreSQL, the *only* 100% Open Source database.
Igor: Interesting perspective. But Novell is playing catch-up to Canonical/Ubuntu on the desktop, The VAR Guy believes. And the potential profit margins are far higher in server applications. Novell trails its Linux rivals on both the server and desktop, The VAR Guy believes.
Duh- MS applications sitting on MS virtual servers on SLES w/ redundancy on virtual MS Servers. And MS sells it for em…. Nice on the Server side.
As for the Desktop- an MS app server + Sled as a VPN/terminal Client is pretty much all you need.
I wouldn’t count Novell down quite so fast, especially if you consider the compliance and Identity management world as well.
Yours- Bueller
An interesting perspective by VARGuy, but maybe a bit premature. My work with GNU/Linux outside the USA - particularly in South America - shows some benefit of Suse Linux for Novell due to previous “international” touch of the German firm.. However many installations are moving to RedHat, simply because organizations, companies and governments in that region do not want problems and reprisals from any entity so tightly entangled with Microsoft if they are attempting to move to “truly” open standards via Free/Open Source software.
[…] at the Var Guy’s site, a dramatic headline is used which asks: Did Novell Just Die? Perhaps Novell could sell itself — though such statements have been made about the company ever […]
i wish novell relieved us from their presence after going to bed with m$…
Wow. FUD at its very worst. Nothing said in this is true. NOTHING. I mean it’s so absolutely wrong. If the english language were wrong it would make things complete. So… the real question is why the Novell bashing? I mean if you do not like their contributions to FOSS, go after the FOSS developers. Shoot them. That’ll help bring this whole movement to an end… which apparently is VAR Guy’s real goal here. I can’t imagine what else is motivating absolute junk like this.
Novell lives and dies by its Linux business. This isn’t the old Novell. You can try to say it’s the old Novell, but if their Linux business dies, they die. It’s that simple. They have had their share of struggles since making their acquisition of SUSE a few years ago… when they bet the entire farm on Linux.
But so far, it’s just Chris vs. the “well informed” VAR Guy. Let’s take a look at some numbers.. shall we?
Novell’s annual revenue for 2007: $932,499,000
Not too shabby. Let’s look at the almighty Red Hat, ok?
Red Hat’s annual revenue for 2007: $400,624,000
(Red Hat and Novell have radically different calendar years,
so I’d estimate that Red Hat is probably more like a
$450 - 500 million run rate company today)
Not bad either. Now, I know that VAR Guy will point the millions and millions of people using Netware out there (folks, you can stop laughing now)… Novell is a pretty big company, that had a very large business that was decimated by Microsoft down to this marginal almost $1 billion dollar run rate company you see today. Novell has more work to do, that’s for sure. But they’re not dying…. at least the numbers don’t show it.
Linux (you know that thing) revenue for Novell was up 69% in their Q4. Was a lot of that fueled by the pushing of Linux by Microsoft to Microsoft customers? Yes. No doubt about it. Since VAR Guy doesn’t use Windows anywhere, and I’m guessing that everyone reading this isn’t familiar with Windows either, it’s actually considered to be commonplace than Linux (believe it or not). The fact that Novell architected a deal which funnels Microsoft money towards marketing and selling Linux is interesting… although controversial to those who are apparently unaware of what Windows is.
But you say… Novell sold us out. They’ve killed the GPL, killed FOSS… uhhh… last time I checked, none of those things have happened at all. In fact, the only thing Novell did was try to shield their customer base from a large gorilla company that (like Intel) has no problem in eating their own children (customers). You can try to slice and dice that to try to mean what you want it to mean, but I do urge you to look at the truth rather than mere blogs.
Red Hat, yes, they are focused on a revolution. Absolutely. Red Hat doesn’t have any interest in bringing a platform forth that doesn’t integrate with Windows. It’s just not interesting to them.
Novell believes (maybe they’re wrong) that while Linux is increasing in marketshare, that we’re a very long ways off from totally destroying Microsoft, and even so, due to past lawsuits and such against Microsoft (by Novell… you know, Novell, the guys you hate), Novell can’t be the arm of Microsoft’s death anyhow. So Novell figures the best thing to do to expand Linux’s reach into the enterprise is to pitch it as a necessary piece in an entire enterprise (figuring that Linux will grow inside an enterprise once it gets there). You say, “Hey!, I’m an enterprise!” Are you? Great! It’s always good to see members of the Fortune 100 posting their Linux success stories, and I’m certain that a good detailed post will help encourage us all.
I addition to working for one of the Fortune 10 (I think we’re in the top 10… pretty sure) and a founding team member for one of the most successful software companies in the world, I’m also a Linux consultant on the side. I deal with Novell and Red Hat deployments both. I’m only stating this to help position my credibility over VAR Guy. I’ve been in the Unix business for 25 years. Unix is my life… and now Linux is my life.
Look… if it’s all about going after Unix, fine. But it’s not. There’s a bigger world out there. Novell, today, has a better position to place Linux inside the enterprise. And IMHO, in the long run, that’ll do more to help the “revolution” than anything else.
With that said, I do cheer anytime that Red Hat releases good results. Again, this is about Linux after all. I’d rather have just Red Hat, if it all must go to them, than nothing at all.
Ubuntu? Maybe someday. But right now, they’re not even a blip inside any enterprise that I know (not even the mid sized ones).
But… hey.. if that all changes… fine. Ubuntu is Linux too… and it’s Debian roots gives everyone a great warm fuzzy (but will cause similar hatred towards Ubuntu one day that Novell is receiving now).
Chris: Comparing Novell’s top-line to Red Hat’s top-line revenue is a bit of a joke. Generally speaking, Red Hat is growing far faster and generates stronger profit/net income growth. And saying Novell will “live or die” with Linux is dangerous. Companies that live or die with a single cash cow product usually wind up milking that product for all its worth right until the end.
However, The VAR Guy respects you for voicing very strong opinions and he realizes there are two sides to every story.
The market certainly is big enough for two — or more — major Linux providers. But Novell needs to kick things up a notch in several areas. Otherwise they are doomed to be an also-ran, or worse.
Ya know VARGuy, I followed your link about Sun beating Novell to the punch on purchasing Novell, and all I saw was an article by you talking about Sun’s purchase of MySQL. There was no indication that Sun and Novell were in a bidding war for MySQL. Well, if you believe that Sun somehow outsmarted Novell, well I guess they did the same thing to Red Hat, Mandriva, Canonical, IBM, and particularly Oracle. Did Oracle just die? Why should this only be Novell’s shame? Novell’s business was not heavily dependent on MySQL. Indeed, why does Novell need to buy MySQL when it can just as easily resell it’s own support contracts to MySQL customers? The GPL opens everything, and if a customer is not satisfied with Sun’s response to stuff, they can go to someone else.
I’m sorry VARGuy, but this particular article was a bit of a waste of cyberspace. It would have been more useful if you outlined say an idea of how Novell would benefit from an acquisition, and what would be a realistic expectation of business.
Sun paid a $1 billion dollars for MySQL. If I recall correctly, one way to value a company is to take gross sales and multiply be three or four times. Does anyone know if MySQL had $250 million dollars worth of sales, or $333 million for that matter? So far, Marten Mickos is the one who made money. If Sun manages to make $1 billion dollars PROFIT via software sales via hardware and software as a direct result new business from MySQL, then I’d say they did a brilliant thing. If they don’t, then it was a very dumb move. We’ll only know in time - which tells us what this acquisition truly is - a gamble. I just hope they don’t do to MySQL what they did to another company - Cobalt.
One final word - and that’s about Ubuntu. Canonical is a long way from providing a true end to end comprehensive enterprise level of support. It takes more than just a distro that you call a server for business. You need engineers, call centres, and formal relationships with hardware suppliers to insure that the hardware product mix will work with your software right out of the box. That’s not to say that Canonical cannot become that - but Mr Shuttleworth is going to have to spend a bit more cash to build that infrastructure. There’s a reason why IBM does have a preference to use Novell’s Linux offerings as opposed to Red Hat’s - and that is support. How business managers and Directors Of Operations view risk and cost is completely different from how a tech views it. When a computer is down - the cost is more than just what it costs to replace the item - it’s also all the people made idle from that computer or service going down. That alone can be more than the cost of a comprehensive support contract - for a multinational, or a bank - what costs them more is not the support contract - it’s not actually being in business. Any large business that is serious about uptime and redundancy will also factor in the what if - what if our people can bring the system up - whose backing up our IT staff? Novell has far more experience than Canonical, or Red Hat for that matter in the area of support structure. Trust me, CXO’s, directors, or IT Managers who are responsible for IT and who are in command of budgets are going to look at what value can be added as a service for x number of dollars - not just “why did Novell sign with Microsoft”. In this game, you still have to think with your head, not just your heart.
Joe: You actually made The VAR Guy’s day with your post. It’s always nice to see healthy debate from readers rather than outright flames.
You asked if Oracle and Red Hat just died because of the Sun-MySQL deal. Actually, no. Red Hat has a healthy, growing business and has expanded into middleware. And Oracle is thriving in the application market and has successfully diversified beyond its database.
Now, it’s time for Novell to show that same ability to diversify beyond Linux. If that means pushing deeper into endpoint security rather than applications, fine. But move faster, Novell.
On a closing point: Thanks for engaging in a healthy debate rather than a flame war.
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Great comments all. Re what can Novell do? (and in full disclosure, we’re a Novell OEM for our FileEngine SMB server appliance,)
Didn’t they embrace XEN? Virtualization is pretty cool, right?
They’re doing an integrated/viable desktop right? At least schools and call centers like that.
They’re publishing an enhanced Open Office Suite right?
And they did a deal with Microsoft - my customers actually LIKE that.
Database company acquisitions are OK. But I don’t see their missing a deal for MySQL as a death knell.
Kim Brand
Founder/CEO
FileEngine
[…] Did Novell Just Die? | The VAR Guy […]
Joe Almeida:
Looking *only* at your financial comment, Java stock today is valued near its revenue numbers I think. By adding any company that would be able to add non negligible profits to the bottom line, Java would be poised to double or triple it’s stock price (and maybe more as per your 3-4X rule of thumb). That is the real bottom line for Sun stockholders. In particular, profits may accumulate increasingly over quarters (something wall street loves) since there would be initial costs from the deal that would disappear and be replaced by cost savings as well as an improving profits and maybe even further synergies improvements.
Also, the $1 billion is around 10% of Sun’s value; thus, the stock price would need to go up by approx 10% (to first approx) or $1 billion to end up back even. Using a “rule of thumb” of a P/E of 30-60, Sun would only have to produce as profit 1/60th - 1/30th of that $1 billion to generate the $1 billion in market cap and end up where they started. This by the way is below $50 million. So with %50 million additional in yearly profits, Sun already is in the black. Factoring future growth potential, synergies, etc, one has to conclude that mysql will more than pull its own weight and as well perhaps help sun triple or quadruple in price.
Mikos also certainly stands to gain from further Java growth, so I think they were thinking with their heads and not hearts.
[Update: I was going to post this last night, but did not finish it. This morning Sun is up 10% as mid day approaches. This is insignificant in a very real sense since it may come back down and go back up etc many times; however, this price certainly seems like a time to take a chance on Sun if you are willing to hold for 1 to 5 years (depending on how things pan out) and if you think Sun will stay in the black for some time (they may have cleaned house enough and be on their way up, but who knows).]
[…] news comes at a particularly embarrassing time for The VAR Guy. A few weeks ago, he slammed Novell for failing to have a clear open source application strategy amid Sun’s buyout of MySQL. […]