* Do we have cause to worry about the viability of Novell?
Longtime NetWare users have always lambasted the company’s marketing efforts, while generally applauding the organization’s engineering department. Users agreed that Novell made the finest software products and, after a few drinks, were ready to call it the world’s largest software vendor – if you only counted products no one had ever heard of.
Frequently overlooked in discussing Novell’s strengths and weaknesses were the financial departments. But whenever someone was forced to stop and think about the penny-pinchers and pencil-pushers, it was generally agreed that Novell’s finance department did a good job. Novell always had a good-sized war chest of loot ready to sweep in and buy up a promising technology company or even some without much promise. Even the WordPerfect fiasco (Novell bought the company for about $1 billion, then sold it to Corel for approximately $125 million) didn’t reflect poorly on the financial people (it was just one more marketing debacle).
So it came as a great shock to me that no sooner had I written last week’s newsletter about Novell’s first-quarter earnings and Wall Street’s reaction then I heard that the company needed to restate its earnings. It seems that $6 million revenue reported as new license sales actually came from maintenance agreements. This doesn’t change the bottom line, and everything I said about the earnings last week is still valid, but as Novell watcher Bill Snyder said on TheStreet.com: “…the money simply moves from one bucket to another, but because license revenue is a key indicator of new business, while maintenance revenue reflects ongoing payment from current clients, the shift is disturbing” (see editorial link below). Stock buyers and sellers continued to watch the price of Novell securities drift lower.
Novell is on a new path for an existing technology-driven public corporation as it attempts to leverage open-source (and free) software into a profitable future. It’s very important that stockholders are happy with Novell’s progress, or big changes could again be occurring in the executive offices. There’s also the possibility of a hostile takeover attempt if the stock price drops much further.
As technology buyers, it’s worrying enough that the company is cutting adrift old, familiar products as it moves to new – but as yet untested in the marketplace – replacements. If, on top of that, you also have to worry about the viability of the company or the management who is setting the course, then many of you might be tempted to throw in the towel and contribute to the ever-swellings coffers in Redmond.
