* Novell's latest quarterly results
Novell announced its quarterly financials last week and, as usual, I don’t agree with most of the Wall Street sentiments about the company. Except that, this time, I’m the one who likes the results. Imagine that!
In light of the reaction from the brokers and analysts, shares of Novell dropped 17% (to $6 and some change) while shares of rival Red Hat increased 8% to close at almost $30. That makes little sense to me.
Novell did acknowledge that revenue was down in the latest quarter ($278 million vs. last year’s $297 million) but net income was up ($3 million vs. last year’s $16 million loss). Combined revenue from OES and NetWare-related products declined 16% from the year ago period.
So what’s to be happy about?
Lower revenue coupled with higher net income means less reliance on selling products and more on selling services, which is Novell’s long range plan. It also means that expenses – especially those associated with the acquisition binge of recent years – are finally coming under control. There also seems to be a feeling that Novell is finally planning its product mix better and will offer a cohesive – and comprehensive – slate of applications and services that are either “best of breed,” or close to it.
Which is why I don’t understand the status of Red Hat. Both companies offer an enterprise-class Linux server operating system. That’s a wash. But when you look at identity services, security services, collaborative services (i.e., GroupWise), productivity services (Novell Open Workgroup Suite) and everything else, I can’t see where anyone could consider Red Hat either a better solution or a better organization.
Maybe, as with most of Novell’s problems, it all comes down to marketing in the end. Readers are constantly telling me what they see wrong with Novell’s marketing and it may not be simply the product marketing (which we’re all aware of) that’s at fault. After all, much of the Wall Street. success or failure of an organization is caused by how it is marketed to the analysts at the brokerage houses. The Wall Steet Journal headlined its story about Novell’s quarterly return with “The Little Engine That Can’t” which is pretty telling.
Still, even though Novell stated that its next quarterly results would also probably be lean (and the Street interpreted that as another reason to sell off the stock), I’m old school enough to realize that income, not revenue, is what you should look for in a company – and Novell has (I think) turned the corner on income.
