Novell is well positioned to achieve the five milestones it has set for itself for fiscal 2008. These are:
* to generate $940 to $970m in revenue, a guidance increased from $920m
to $945m following the recent acquisition of PlateSpin, a company that
generated more than $20m in revenue in calendar 2007. The company's
focus on larger renewal contracts has paid off during the quarter (with
sales and marketing expenses slightly down), especially when it comes
to Linux. Renewal will be a key target for 2008 with more efforts
targeted at smaller deals and on up-selling not just on the renewals
themselves but into new product areas
* to achieve non-GAAP operating income margin of 7% to 9% (a
guidance that the PlateSpin acquisition has not changed): it was nearly
10% this last quarter. Gross margin was 75% up from 71% last year as a
result of the company tightening up its sales model, R&D processes
and back office operations, while refocusing on higher margin product
revenue and disinvesting from lower margin service activities. It has
now disinvested from all of its general business consulting businesses
* to, at least, match product revenue growth rate with market
growth rates for Linux, identity and access management (IDM) and
systems and resources management (SRM). It did so for Linux and IDM but
not SRM this quarter. Linux revenue was $28m, up 65%, with invoicing of
$38m in line with the run rate in the second half of 2007 but down 59%
year-on-year. Last year the company invoiced a record $92m, including
$73m related to its new partnership deal with Microsoft. To date the
company has invoiced $141m or 59% of the five-year $240m deal. IDM
revenue was $28m, up 15% with invoicing up 17% on a year-on-year basis.
This is good news. After a period of poor performance this business
unit is bouncing back owing to investment in sales and partner
specialisation. SRM revenue was $37m, up 5% with invoicing up 14%. The
recent acquisition of PlateSpin will boost revenue in this area (Novell
hired Accenture to help integrate PlateSpin into its organisation)
* to achieve Workgroup revenue of $285 to $300m. $90m were bagged
in the first quarter, up 1%, with invoicing up 3%. Besides improved
renewals execution, this better than expected result came from a good
performance of the Novell open Workgroup suite bundle as well as
collaboration products based on technology from recently acquired
Sitescape. Combined Open Enterprise Server (OES) and NetWare revenue
was $54m, down 4% with invoicing flat year-on-year. Linux-based OES 2,
launched late in the fourth quarter of fiscal 2007, is likely to boost
sales, not just slow down revenue decline as OES 1 did
* to expand relationships with one to two more global strategic
partners. More is to come in this area. Obviously the company needs to
lessen its dependence on this Microsoft big brother.
Its services business is no longer a standalone profit centre but a
support infrastructure for product revenue. As a result the company
changed the way it reports product maintenance revenue. A portion of
this revenue used to be reported in services revenue. Starting in
fiscal 2008, all maintenance revenue is included in the maintenance and
subscription revenue figure. The company no longer intends to provide
geographic revenue splits, which is a pity. It did emphasise, though,
that the strong first quarter results were led by strong growth in
EMEA, ahead of the Americas and Asia Pacific in terms of creating new
product-specialised direct and indirect sales operations.
