Novell spent most of the 1990s as a one-hit wonder, searching for growth opportunities beyond NetWare. Fast forward to the present, and Novell is experiencing deja vu. This time, Novell’s one-hit wonder is SUSE Linux. Skeptical? Check out Novell’s latest quarterly results.
First, the good news: Novell’s quarterly net income actually beat Wall Street’s expectations by a penny per share. But net income was down 36 percent and revenue was down 7 percent compared to the corresponding quarter last year, according to the Associated Press. In stark contrast, Red Hat’s revenue and net income both rose significantly during that company’s most recent quarter.
Admittedly, a head-to-head comparison of Novell and Red Hat financials isn’t really fair. Red Hat doesn’t have Novell’s legacy baggage. Plus, Red Hat also has two popular open source product lines (Red Hat Linux and JBoss middleware) compared to Novell’s singular hit: SUSE Linux.
What Happened to Identity and Security?
Sure, Novell bet a portion of its business on security and identity management. But The VAR Guy has always been a bit confused by the move. He wishes Novell would focus instead on building its own SUSE Linux application stack.
People buy applications, not operating systems. Didn’t Novell get the memo?
In recent quarters Novell’s security and identity management had been growing. But not this time around. Check out the stats:
- Novell reported $37 million of product revenue from Open Platform Solutions, of which $35 million was from Linux Platform Products, up 24% compared to the same period last year. (Translation: Nice growth, SUSE team.)
- Product revenue from Identity and Security Management was $28 million, of which Identity, Access and Compliance Management (formerly called Identity and Access Management) was $26 million, down 8% compared to the same period last year. (Translation: Um, this sounds pretty bad.)
- Product revenue from Systems and Resource Management was $40 million, up 9% compared to the same period last year. (Translation: Not bad.)
- Workgroup product revenue of $81 million decreased 9% compared to the same period last year. (Translation: No surprise here, since this is a declining business for Novell.)
Novell needs to whip its security and identity management business into shape. Quick: Can any VARs actually name products from that Novell business unit?
Anyone? Anyone?
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Novell is making a mistake by trying to have it both ways. They are open source with suse linux but closed source with everything else. Hello? suse linux is your fastest growing business. repeat that model with all of your other products especially groupwise and virtualization and platspin. the var guy is on the mark when he says novell needs a software stack on top of suse.
James: Ironically, our site editor asked Novell a few weeks ago whether Novell planned to open source GroupWise. Sounded like it was a “wait and see” decision… …
After time spent beating my head against the way trying to get PAM, LDAP, Kerberos, and Samba to play nice, I’m convinced that SMBs in my area that would pay real good money for _simple_ integrated identity and access management on linux. Building that and making it free software seems like a no brainier. Lots of people would get exposed to your solutions, and you would be building a useful tool that could generate cash.
I’m consistently disappointed in Novell’s handling of Suse. I run Linux on my desktop at work, where we run a classical Novell shop (i.e., netware servers, eDirectory, groupwise, zenworks, etc). You know why I have to keep a virtual winxp instance running? You know whose software requires me to do that? I’ll give you three hints: (1) it ain’t Microsoft’s (2) it ain’t Adobe’s (3) the company’s name starts with a big red N.
We’re migrating to groupwise 8 in the coming months, I’m interested in seeing whether the cross-platform client still lags behind the windows client in features. I’m betting it does. If Novell wants SLED to do anything, it needs to make SLED the best possible client for Novell services that it can. Allowing it to remain a second-rate client to their own services is just pathetic.
Alan: Sorry to hear about your concerns but The VAR Guy does value your expertise. Please let us know how the GroupWise 8 deployment goes, and please let us know if Novell starts to address your concerns.
To Novell’s credit, they are active in online forums such as this and The VAR Guy has seen them respond to customer concerns. But it sounds like you’re feeling some pain. Let us know if Novell addresses it.
‘People buy applications, not operating systems. Didn’t Novell get the memo?’
I didn’t get the memo either. As a VAR I sell everthing the small business needs: T1/Wireless Broadband, Email Hosting, Web Hosting, Servers, Workstations, Switches, Battery Backup, Office Productivity Software, Firewalls, domain names, off-site backup, co-location, monitoring, etc. Oh, I also sell network operating systems. Why? Because my customer needs it and buys what O/S I recommend, from me, the reseller. Granted, it is a small part of the deal, but I do sell NOS’s and I make sure to get a good margin on the NOS sale. I also sell groupware and I look for a groupware package that I can make a high margin on, to sell and recommend to my customer.
I am unable at this time to recommend Novell’s O/S, as I am unable to sell it at the street price and make any money. I can’t recommend Groupwise either, because there is more money selling competitor’s solutions, and it too, is hard to sell at street and make any money on. So if I am not selling their two BIG products, why would I as a VAR want to investigate the other product offerings they have and whether or not I can make any money selling these solutions at the street price.
‘Can any VARs actually name products from that Novell business unit?’
How much money do I get for drilling on the web and coming up with the list? I think one of the products is Tuxedo.
In my opinion, it was much better selling Netware than Linux, but the margins there deteriorated a good decade ago for the small VAR….
HurdyGurdy: Thanks for the analysis. You’ll find Tuxedo over at Oracle these days, in the BEA Systems department.
The VAR Guy is still impressed with SUSE Linux’s momentum. But yes, the company has plenty of challenges on multiple fronts. And Novell needs to promote its most successful channel partners… because The VAR Guy doesn’t hear much from them.
TheVarGuy,
‘And Novell needs to promote its most successful channel partners… because The VAR Guy doesn’t hear much from them.’
I would suggest you call the four online resellers that Novell recommends you buy your software from: CDW, Insight, softchoice, softmart.com, as they claim it is faster and easier to buy from these folks, than anyone else.
http://www.novell.com/products/buyonline.html
And no doubt these online retailers will sell the Novell software to you at close to any small reseller’s cost from disti. You and I have confirmed this.
I would start there, as I haven’t had a good Novell success story in over 10 years.
theVarGuy,
‘And Novell needs to promote its most successful channel partners… because The VAR Guy doesn’t hear much from them.’
I would suggest you start by calling the four online retailers that Novell recommends to purchase your software from: CDW, Insight, softchoice and softmart.com. As Novell recommends these resellers over all others because it is faster and easier to buy from them. And you can buy your Novell at a price close to what it costs a small VAR from disti. You and I have already confirmed this.
Sorry, but I haven’t had a good Novell success story for over a decade.