Novell plans more licensing deals

Novell on Tuesday said it plans to seek out more deals similar to its recent marketing and licensing pact with Microsoft as it embraces partnerships and moves away from selling its open-source software directly to small and midsize companies.

Ron Hovsepian, Novell's CEO for the past five months and president since November 2005, said in a conference call with analysts that the planned changes stopped short of a full restructuring at Novell, which has undergone several leadership and corporate changes in the last several years.

For its fourth quarter, the Waltham, Mass.-based company reversed its net loss from the prior year. However, its net revenue continued its year-long slide, as Novell continued to struggle with converting corporate customers from its legacy NetWare operating system to SuSE Linux.

And its recent controversial deal with Microsoft probably won't help much in the short term. That deal is expected eventually to contribute about $300 million to Novell's bottom line overall, but the company only expects to record about $20 million in revenue from it next year, leaving its net revenue and profits for 2007 basically unchanged from 2006.

For its quarter, which ended Oct. 31, Novell reported revenue of $245 million, down 15% from $288 million in the same period a year earlier. The company earned $25 million compared with a net loss of $6 million a year earlier.

For the full year, Novell reported revenue of $967 million and net income available to common stockholders from continuing operations of $21 million. That was down from $1.039 billion in revenue and $373 million in net income available to common stockholders from continuing operations of the previous year, when the company's financial figures were boosted by an earlier $440 million legal settlement with Microsoft.

In the fourth quarter, Novell reported $13 million in revenue from Linux platform products, which includes SuSE Linux Enterprise Server (SLES). That figure was up 32% year over year. But revenue from Open Enterprise Server (OES) and NetWare fell 25% from the previous year.

Open Enterprise Server is a server operating system that provides a NetWare-like interface for existing NetWare customers while running either a NetWare or SuSE Linux kernel. OES is meant to be a bridge product to help NetWare users transition fully to SLES.

The company said in a conference call that combined OES and NetWare revenues should continue to fall 15% to 20% year over year in fiscal 2007.

Novell predicts 2007 net revenue of between $945 million and $975 million. On a non-GAAP basis, adjusted income from operations is expected to be between break-even and $10 million.

That includes about $13 million Novell expects to receive in fiscal 2007 from the five-year, $68 million patent agreement with Microsoft for Novell's intellectual property, as well as between $4 million to $7 million in subscription revenue Novell hopes to earn from Microsoft customers who sign up for SuSE Linux subscriptions.

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