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June 06, 2006 | Comments: (0)

Novell: Better than it appears

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Sarah Lacy at BusinessWeek has a good article on Novell, including a short interview with Ron Hovsepian. Novell has been struggling to convince Wall Street that it's turning the corner on Linux sales. While I was there, I definitely saw an upswing in interest from corporate IT buyers. Ron Hovsepian was behind that.

Here's a choice snippet:

What is it about Novell? It never seems to get the benefit of the doubt on Wall Street?

I don't think we've earned that right. In the past five to six years, the company has not delivered, and it has made a lot of promises. I have been manically focused on delivering. I told them what we'd do first quarter, and we delivered on that. I told them on the second quarter, and we delivered on that. I would have liked it to be more on both quarters, but I am on a path with this team to deliver on commitments. It's really important to build up that credibility over time. Until they see a trend of three or four quarters where we deliver on what we said we'd get done, I don't think we've earned the right yet.

Are things at Novell better than it appears from the outside?

Absolutely. Our core Linux business grew 20% quarter-over-quarter. Why? Our strategy is different than Red Hat's. They are approaching this as an edge server play, and it's an enterprise play. [In other words, Novell sells Linux as part of large company-wide deals, not just to run on individual servers.] We are making extra investments in Linux on the desktop and [products for retail] point of sale and banking that we think are going to be very successful. Desktop revenue grew 100% last quarter. Granted it's still a small sub segment. Customers want to buy an enterprise story [that includes] servers, desktops, and all those pieces. We are focusing the company on building that strategy. Target (TGT) picked us over Red Hat, and they picked us because we had an enterprise story.

What about Red Hat? They had a great run last year, then surprised and delighted analysts again by doing the gutsy acquisition of Jboss (see BW Online, 04/11/06, "Red Hat's Red-Hot Deal"). How does that affect you?

I think it'll have a positive impact on us, but that will be seen over time. We've really focused on what we do well: dealing with mixed environments (where there's Linux and traditional software). What Red Hat did (when it bought Jboss) was poke IBM and Oracle right in the eye and said: "We're going to go after this application server market."

Novell's future depends on Ron being right about the "holistic" enterprise Linux strategy being the right one. Today, "edge servers" seem to be doing just fine for Red Hat....

Posted by Matt Asay on June 6, 2006 12:06 PM

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