Novell Ends Year Of Many Changes - InformationWeek

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Software // Enterprise Applications

Novell Ends Year Of Many Changes

The networking company turned last year's $162 million loss into a $31 million profit.

After struggles in 2003, Novell ended its fiscal year 2004 in the black.

The Waltham, Mass.-based software vendor on Thursday said earnings for the fiscal fourth quarter, ending Oct. 31, were $13 million, or 3 cents a share, on revenue of $301 million. During the same quarter in 2003 Novell suffered a loss of $109 million, or 29 cents per share.

For the year Novell earned $31 million, or 8 cents per share, on revenue of $1.16 billion. The vendor closed its 2003 books with as loss of $162 million, or 44 cents a share, on $1.1 billion in revenue.

Chairman and CEO Jack Messman praised the continued strength of Novell's still relatively fledgling SUSE Linux business for its part in delivering sound earnings. But he admitted more investment by Novell next year would be needed in the areas of solutions, systems and people in order to make up for an continuing decline in sales of Novell's NetWare product line. NetWare revenue declined 13 percent year-over-year, the company said.

"Our key growth initiatives of Linux and identity management continued their strong performance. In particular, our Linux solutions are allowing us to reach more and more new customers at a pace not seen at Novell for many years," Messman said in a statement. "However, we still have challenges ahead. While we had a strong finish in closing fiscal year 2004, fiscal year 2005 will be another rebuilding year for Novell as we make significant investments in our solutions, systems and people to try to grow our newer businesses in order to counterbalance the continued decline in our NetWare business."

Messman said Novell's R&D spending would likely increase in 2005, as the company seeks to engineer Novell products like ZenWorks to be more attractive to non-NetWare customers. He also said a product targeted at the SMB market, which could be sold through channel partners, would need to be developed.

2004 was a notable year for Novell.

Novell Vice Chairman Chris Stone left the company earlier this month. Stone engineered Novell's aggressive Linux push and was one of the driving forces behind the company's blockbuster $210 million acquisition of SUSE Linux.

Trouble with Microsoft was also part of Novell's fiscal year as it wound down. On November 8, Novell announced an agreement with Microsoft to settle potential antitrust litigation related to Novell's NetWare operating system in exchange for $536 million in cash, which was received today. However, Novell last Friday filed a lawsuit against Microsoft charging the Redmond, Wash.-based software maker with attempting to eliminate competition from Novell's WordPerfect and Quattro Pro applications.

Novell this year also consolidated several business units.

A deal to make SUSE Linux Enterprise Server 9 software available direct on Dell servers was struck this year. And the company later launched its much-awaited Linux Desktop 9 software.

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