Waltham, Mass.-based Novell Inc. reported solid revenue growth in its third-quarter earnings call yesterday, with net revenues of $245 million, up from $236 million for the second quarter of 2008 and from $237 million the third quarter of the previous year. Third-quarter operating profit this year was $1 million, compared to a $10 million operating loss the previous year.
Quarterly revenues from SUSE Linux were even stronger, however, with a 30% year-over-year growth, climbing from $25 million in the third quarter of 2007 to $32.5 million in the third quarter of 2008. Third-quarter SUSE revenues also were higher than the previous quarter’s revenues of $30.5 million. Despite the revenue gains, Novell racked up third-quarter losses of $15 million in 2008 and $4 million in 2007 due to charges from auction-rate securities and negative currency exchange rates, respectively.
Microsoft sales of SUSE certificates continue to increase throughout 2008, with $176 million or 73% of the $240 million agreement invoiced to date, according to Ian Bruce, Novell’s director of public relations. Microsoft is so far ahead of schedule in sales of the SUSE certificates, which it agreed to resell within five years of November 2006, that Microsoft recently agreed to buy up to an additional $100 million in SUSE certificates. Last year, Microsoft certificate sales gave a hefty boost to Novell revenues and boosted SUSE’s market share by 3% to 29% and Red Hat Inc.’s declined proportionately.
As Al Gillen, research vice president of system software at Framingham, Mass.-based IDC pointed out recently, the certificates give Microsoft an alternative product to offer customers who prefer Linux to Windows. And the paid-support certificates can convince customers to switch from free software to paid-support subscriptions, which “levels the playing field” with proprietary software, he said. Novell CEO Ron Hovsepian said he is “pleased” with the overall results, which he said affirms that the company is on the right strategic path and should achieve further growth and higher profit margins in 2009. Consulting services will continue to decline but product sales will increase, keeping the company on target to earn $940 million to $970 million by the end of the fiscal year, he said. Last year’s net revenues were $932 million.