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Novell defends SUSE Linux revenue performance

Hovsepian also told Computer Business Review that he has put the Waltham, Massachusetts-based company’s EMEA sales force on warning that he expects to see improvement by the end of the year, as the company tries to placate frustrated Wall Street investors and analysts.

The company recorded revenue of $13m associated with Linux platform products and other open platform products in the first quarter of 2006, ended January 31, which compared to $15m from its SUSE Linux business (including $7m from SUSE Linux Enterprise Server) in the first quarter of 2005.

With the SUSE Linux business Novell acquired in early 2004 having generated revenue of $12m in the third quarter of 2004, its first as part of the company, recent revenue figures do not indicate a growing business, and suffer in comparison with rival Red Hat Inc’s most recent quarterly revenue of $73.1m.

Hovsepian maintained that the business has not lost momentum, however, pointing to reduction in revenue from the retail channel being offset by corporate revenue growth. SUSE’s momentum was in the retail market, what we’ve had a chance to do was redirect that to the server and to the enterprise.

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While SUSE’s Professional distribution provided it with a popular product among enthusiasts and technical users, Hovsepian maintained that revenue channel was not sustainable in the long-term and was better served by the openSUSE community project.

With the SUSE Linux 10 code now available as a free download the company is prepared to take a retail hit that is balanced by enterprise growth with the SUSE Linux Enterprise Desktop and Server products.

The bigger market over time is with the [SUSE Linux Enterprise Desktop product we outline last week, Hovsepian maintained. While my [Linux revenue] number might be flat in total it outgrew the market in Europe last year.

The performance of the Linux business is also difficult to judge given Novell’s Open Enterprise Server product, which contains both SUSE Linux Enterprise Server and NetWare and was responsible for revenue of $43m in the first quarter of 2006.

During his opening remarks at the company’s BrainShare user event in Salt Lake City this week, Novell’s chairman and CEO Jack Messman said two-thirds of the company’s Open Enterprise Server customers were deploying on Linux.

Hovsepian joined Novell in June 2003 as president of its North American operations and is credited with turning around the company’s North American operations before also taking responsibility for EMEA as president of worldwide field operations in May 2005.

Hovsepian was subsequently promoted to the position of president and COO in November 2005 and tasked with completing Novell’s complex transformations to Linux. With North America having made the change to a centralized model and specialized support engineers, the same is being rolled out across EMEA.

First-quarter results saw North America increase revenue from $129.0m to $133.8m, but EMEA and Asia Pac continued to disappoint, with revenue down from $95.6 to $88.8m in EMEA and from $21.6m to $19.7m in Asia Pac.

My patience is the end of the year, said Hovsepian on how long the EMEA and Asia Pacific businesses have to implement the changes, although he noted that the plan for EMEA is slightly different. Unlike America when I came into America I inherited a plan the team isn’t being patent and neither am I, he said. The difference is I asked EMEA to focus more on profitability than revenue.
This article is from the CBROnline archive: some formatting and images may not be present.

CBR Staff Writer

CBR Online legacy content.