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SUSE Linux is growth engine for Novell

Linux is alive and well at Novell Inc.

In its year-end fiscal report yesterday, the Waltham, Mass.-based company reported that open source products, primarily Linux, rose $34.8 million or 37% to $128.8 million in 2008. Fourth-quarter open source revenues rose just a whisker less or 36.1% to $35.7 million.

The increases far outstripped Novell’s other three product divisions, which are identity and security management, systems and resource management, and its workgroup division.

For the 2008 fiscal year, Novell’s total revenues were $957 million, compared with $932 million in 2007, and its net annual loss was $9 million in 2008, compared with a net loss of $44 million the previous year.

Thanks to aggressive pricing and key partnerships with companies such as Microsoft and SAP, the company’s Linux growth rates far exceeded the 22% increase in the overall Linux market, said Novell CEO Ron Hovsepian. SUSE Linux Enterprise, which grew its market share an additional 3% in 2007, added 3,000 new Linux customers this year, including many large enterprises, he said.

Hovsepian added that Microsoft has sold $195 million of the $240 million in SUSE Linux certificates it bought as part of the 2006 pact between the two companies and has purchased an additional $25 million so far this year, Hovsepian said. In 2008, Novell also has increased its independent software vendor agreements significantly, he added.

Discussing the company as a whole, Hovsepian said Novell has made great progress over the past two years, achieved all its milestones for 2008 and, in turn, stabilized and strengthened the company. While acknowledging that the current uncertain economic climate doesn’t lend to detailed forecasts, Hovsepian said Novell will continue to strive for operational improvement and long-term profitability.

Red Hat donates holiday party money to feed the poor

Despite a year of enviable revenue growth, Red Hat Inc. will not be throwing its customary all-out holiday bash this year. Due to concerns about ostentatious spending during an economic downturn, the Raleigh. N.C. software company decided to host a low-key office gathering instead of the lavish affair originally scheduled at the Raleigh Convention Center. As part of the North Carolina’s high-tech Research Triangle, Raleigh appears to be faring better than many regions but, according to news accounts, the city still has residents who are hurting financially due to the national fiscal turmoil.

Therefore, Red Hat decided to donate the money it would have spent on its annual party to charity. Following the results of an employee poll, Red Hat will send the funds to Chicago, Ill.-based Feeding America, a national organization that funds more than 200 food banks, including several in North Carolina.

Although Red Hat declined to reveal the amount of its donation, the company said the funds were enough to pay for 800,000 meals by Feeding America or 1 million pounds of food and grocery products, a Red Hat spokeswoman said.

In addition, Red Hat offices in Raleigh as well as Westford, Mass., are organizing canned food drives for the hungry; Raleigh executives have pledged a donation for every 500 cans donated at its headquarters office.

“We just felt it was the wrong time to be spending a lot of money on ourselves,” DeLisa Alexander, Red Hat’s senior vice president for people and band, told the Raleigh News & Observer. “I don’t see us going back [to big parties]. People want to work for a company that is socially responsible.”

Novell hurts itself with Red Hat swipe

In an obvious swipe at its larger rival, Waltham, Mass.-based Novell Inc. crowed this week that SUSE Linux Enterprise has surpassed all other Linux distros with 2,500 vendor-certified applications running on top of its operating system. If true, this would be quite astonishing since Raleigh, N.C.-based Red Hat Inc. has a far larger Linux market share.

Upon querying Novell’s PR agency, Andover, Mass.-based Pan Communications Inc. responded with a link to the Red Hat  Software Catalog which lists 2,166 certified software vendors, not applications, so Novell isn’t comparing apples to apples.

A Red Hat spokeswoman said, however, that there are 3,400 vendor applications certified to run on Red Hat Enterprise Linux.

This is silliness. I feel like a mom telling two toddlers to go back to their sandboxes. (Red Hat is not really at fault here since it didn’t rush forth with a counterpunch.)  I’m probably more fascinated than the competition between these two companies and their strategies than anyone else I know. But this little self-promotion was a waste of time. And Novell, with its carefully worded misleading statements, has a lot to lose: its credibility. Let’s declare the “I’m bigger than you are” nonsense all over. Let’s all get back to work.

LAMP stack story overlooks impact of cloud, reader says

My recent story on the dimming of the LAMP stack sparked a thoughtful reader response from John Locke, the manager of Seattle-based Freelock Computing. The story concluded that while an all-open source stack is still a valid concept, there are many more open source options that LAMP (Linux, Apache, MySQL and Perl, Python, PHP) is largely irrelevant.  I made a single exception for Apache, the popular Web server.

Locke argued, however, that even Apache has a growing array of alternatives such as the Lighttpd Web server, the Apache FastCGI Web interface,  the Nginx proxy server and others.

But what undercuts the LAMP stack more than the advent of additional open source options is the emergence of cloud frameworks, Locke said.

Initially, cloud computing meant renting compute power on demand from the likes of Amazon Elastic Compute Cloud (EC2). This meant renting a host virtual machine, programming the top layer, adding libraries and then when it was all done, managing the host and the virtual application, Locke said.

The problem with this model is that data centers are responsible for scaling the application up or down in response to changing volume requirements, he said. To solve this problem, Google, as well as Microsoft’s recently announced Azure platform, go beyond computing-on demand and manage the entire process with frameworks. All you do is write the application code (yes, you still need the P in LAMP), put it atop an application framework, and the framework will scale the application up and down as needed. No further involvement required. No LAMP stack required either.

Two successful examples of cloud frameworks are Salesforce.com and Facebook, he said.

The downside of frameworks, however, are loss of control and potential vendor lock-in, Locke said. The risk is less with Amazon EC2 since its controls are far more limited, he said. When writing an application for a specific vendor’s framework, however, a customer can lose portability because the provisioning and scaling mechanisms are behind-the-scenes and the source code and licensing are not necessarily readily available, he said.

The biggest challenge to LAMP as well as the Java and .NET stacks, therefore, is not the growth of additional choices but the cloud frameworks which may make all the stacks irrelevant. While handing over management and control is convenient, it also has its downside: you have to live by someone else’s rules, Locke said. Just  like a condo or regulated housing community, you’ve delegated the work, but you’ve also lost your freedom. Time will tell if you’ve made a good bet.

LinuxWorld to OpenSource World: A move in the right direction?

Same time. Same place. New name. After a 20% drop in attendance last summer, LinuxWorld is ending its decade as an independent trade show and will re-emerge next year with a new name and a broadened focus as OpenSource World. Just like last year’s LinuxWorld, OpenSource World will take place in August in San Francisco’s Moscone Center.

The change mystifies this LinuxWorld 2008 attendee. Last summer’s event clearly drew disappointing crowds, with lots of excess aisle space on the show floor and plenty of last-minute seats at keynote lectures. Melinda Kendall, IDG World Expo’s vice president and general manager of OpenSource World, confirmed recently that attendance at the 2008 show was only 8,000, a decrease from the 10,000 drawn in previous years.

Representatives of two companies who exhibited at LinuxWorld in previous years but bowed out in 2008 said they stopped attending LinuxWorld because they felt they would be more successful at reaching their respective target audiences at other events.

“Linux is mainstream now and it no longer needs a special show,” said one Linux vendor who didn’t want to be quoted by name. “The show doesn’t generate much ROI. It’s more about students than business-to-business.”

Bob Williamson, senior vice president of product management at Menlo Park, Calif.-based SteelEye Technology Inc., which won in the Best of Show category in 2007, said SteelEye has better conversations with customers at shows like VMworld, the Red Hat Summit, Novell’s BrainShare or Oracle OpenWorld where customers go to find specialized knowledge about the products they implement.

“Over the years, LinuxWorld became less and less relevant to us,” Williamson said.

The change to OpenSource World “will water [the focus] even more, he said. “By trying to cast a wider and wider net, they’ll draw people who are less and less interested in the exhibitors, and it will be harder and harder to find people to have the right conversations.”

But Kendall says that petering excitement surrounding LinuxWorld is in fact a tribute to Linux’ success in becoming a mainstream computing platform. The way to restore the buzz and boost attendance is to broaden the scope and include the emerging open source mission-critical applications, which are still very much in the early-adopter stage, she said. The broadened focus also will attract some non-Linux open source vendors who didn’t attend LinuxWorld because of the event’s name, she added.

Kendall said she hadn’t yet won exhibitor commitments from big, non-Linux vendors like Sun Microsystems or Microsoft but has received supportive comments from companies like IBM.

“We’ll continue to be the largest Linux event in the world,” Kendall said. “But also the largest show for open source buyers and sellers, which may not have been clear before.”

Kendall may be right. But there’s a danger in running trade shows for trade shows’ sake. Just as there is a danger in creating technology for technology’s sake without first checking  with users. See file under Digital Equipment Corp.

I hope I’m wrong. But I have my doubts. This seems like a move in the wrong direction.

Mono 2.0 boosts Linux compatibility with Microsoft .Net

Mono 2.0 is now available for download. An open source project sponsored by Waltham, Mass.-based Novell Inc., Mono is a Unix-based tool that enables Microsoft .Net applications to run on Linux, Solaris or Macintosh platforms.

Mono 2.0 follows two previous versions of Mono, with the first released in 2004 and the second in 2006. The latter version was used to write Moonlight, an open source plug-in to Microsoft’s Silverlight for creating interactive applications.

The key advance in Mono 2.0, a spokesman said, is that it achieves full compatibility with .Net, where the previous versions only reached partial capability with .Net. Mono 2.0 also includes a debugger, a Language Integrated Query from .Net 3.5 and a Migration Analyzer.

Michael Cote, an analyst with Denver, Colo.-based Redmonk, said the new version of Mono helps the Linux platform by enabling .Net developers to work on Windows as well as open source platforms.

“It’s great to give companies the option of using the underlying OS of their choice,” Cote said.

Mono 2.0 may be downloaded from http://www.mono-project.com.

Red Hat quarterly earnings up 29% to $164.4 million

Red Hat Inc. reported second-quarter revenues of $164.4 million, an increase of 29% in  quarterly revenue compared with a year ago, at $127.2 million. Deferred revenue rose somewhat faster, climbing 32% to $496.9 million. Quarterly profits also rose, but by a slimmer margin, rising 11% from $18.2 million for the second fiscal quarter of 2007 to $21.1 million for the second fiscal quarter of 2008.

The quarter’s revenues included two one-year sales of $5 million apiece.

Jim Whitehurst, the CEO of the Raleigh, N.C.-based company, said the higher-than-expected revenue growth was achieved against economic headwinds. The healthy earnings reflected strong renewals from the existing customer base, with old and new accounts alike responsive to an opportunity for cost savings, he said.

Sales of JBoss, Red Hat’s middleware product, grew twice as fast as those for Red Hat Enterprise Linux (RHEL), with rising sales as an embedded product to independent service vendors (ISVs) targeting the service-oriented architecture (SOA) market, Whitehurst said.

Red Hat’s recent $107 million purchase of Qumranet Inc. broadens its leadership in open source virtualization, which began with RHEL 5, continued with the Libvert virtualization layer and other tools to create a comprehensive virtualization portfolio, he said. Qumranet also gives Red Hat an entry into the early-stage virtual desktop market, he said.

CFO Charles Peters downplayed the potential adverse impact on future sales from the current turmoil in the financial sector. That vertical is now only 10% of the business, due to faster growing sales in government and telecommunications, he said. In addition, many of the financial customers are on multiyear contracts, he said.

Like RHEL, JBoss sales benefit from tighter economic times because corporations still need to deploy new functionality but have less money, Peters said.

No delays expected for SUSE/Microsoft virtualization connectors, Novell says

Some bloggers raised concerns that Microsoft would not release its Linux Integration Components on Sept. 8 as planned, concurrent with the release of its highly anticipated Hyper-V virtualization application. The components, which include special drivers for networking and storage, are expected to make Novell SUSE Linux Enterprise guests run as well on Hyper-V as Microsoft VMs and give SUSE a performance edge over rivals such as Red Hat Inc. and Ubuntu on Microsoft machines. But not to worry. Justin Steinman, Novell’s director of marketing, Open Platform Solutions, promised that the components will be available to download from prior to next Monday. Well, that one’s right down to the wire.

Strong Novell SUSE sales boost third quarter

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.

Microsoft buys $100 million more Novell SUSE Linux Enterprise certificates

Microsoft Corp. recently announced that it will buy $25 million to $100 million in additional customer support certificates for Novell SUSE Linux Enterprise software that Microsoft will, in turn, sell to its customers that want a mix of open source and proprietary software. The pact is an extension of the five-year interoperability agreement of November 2006, in which Microsoft agreed to sell $240 million of SUSE certificates in five years. (SUSE itself can be downloaded for free but customers must pay for patches and support.)

Microsoft’s SUSE certificate sales, in fact, have grown faster than expected, exceeding $157 million in the first 18 months. Novell, in turn, agreed to boost its investment in tools and customer training to help make the two systems more interoperable and user-friendly at the joint Microsoft/Novell research facility in Cambridge, Mass.

Justin Steinman, Novell’s director of product marketing for Linux and Open Source, said SUSE Linux core sales have continued to grow rapidly and the Microsoft certificate sales represent just another channel to get into the market.

Al Gillen, research vice president of system software with Framingham, Mass.-based International Data Corp., said that the extension is “positive for both companies” and reassures users that the pact “isn’t going to run out of gas” before its scheduled termination.“The market for nonsupported Linux is strong, and Microsoft is trying to penetrate that market with these certificates,” Gillen added. “Microsoft doesn’t want to compete against free Linux software, and by selling SUSE support certificates, Microsoft creates a level playing field.”

Although open source is touted as a lower-cost alternative to proprietary software, Gillen said the cost difference is insignificant when comparing the tab for acquisition and support over a five-year period.