Novell posts profit, beats estimates

30-05-2008

by Emmet Ryan

Networking software firm Novell has beaten analysts' expectations with its second quarter results.

Novell reported revenue of USD236 million for the quarter ending 30 April, up USD4 million from last year and ahead of the average estimate of USD233 million. The networking software firm posted profits of USD6 million, as opposed to losses of USD3 million for the same period in 2007. This equated to earnings per share of USD0.02, up from a loss per share of USD0.01.

Linux sales played a key role in boosting the firm's earnings. Of the USD30 million revenue Novell earned through Open Platform Solutions, USD29 million came from Linux. Product revenue from identity and security management was USD31 million, up 13 percent while product revenue from systems and resource management was USD41 million, up 15 percent year-on-year.

"Our business continues to gain momentum, with strong product revenue growth in Linux, identity and systems and resource management," said Ron Hovsepian, president and chief executive of Novell. "We are encouraged by our results and remain confident we will achieve our financial objectives for fiscal 2008."

The boost in profits will be welcome news to Novell shareholders. The business will likely now look to build its profitability in other facets of its operation in order to continue this swing back to profitability. At Novell's annual BrainShare conference in March Hovsepian told ENN the firm was looking to grow its business through developments on the compliance front.

He said incidents like the Bear Stearns crisis have taken decisions on compliance out of the IT shop and into the chief executive's office. With businesses likely to take a closer look at how IT can aid such developments the opportunity is ripe for Novell to make serious gains.

The continued success of Novell is by no means a certainty though. As last year's figures showed the benefits of the networking software firm's alliance with Microsoft took a long time to trickle through to the balance sheet. Core businesses like Linux have however been boosted over time by this arrangement. Should Novell keep its business steady on these fronts then the potential for further growth in coming quarters is promising.