Novell has defended its deal with Microsoft, but avoided the question of how the deal must alter to handle changes in open source licensing.
Novell's Microsoft deal (the terms of which were revealed this week) will boost Linux use, the company claimed during a quarterly earnings call with financial analysts, where the company reported nearly a US$2.2 million loss in income during its fiscal second quarter.
Novell executives danced around questions concerning how the new GNU General Public License 3.0 - due to be completed in June - will affect the Microsoft deal., Novell CEO Ron Hovsepian also refused to elaborate on Novell's already published public statement on Microsoft's recent claims that Linux and other open source software infringes on 235 of its patents.
During its earnings call, Novell focused on the news that its revenue was up 2.6 percent to $239.2 million from $233.1 million during the same quarter a year ago, and that the revenue numbers beat Wall Street's expectations of $235 million.
Net income, however, showed a loss of $2.192 million compared to a profit of $3,342 million in the same quarter a year ago.
Despite the numbers, Novell executives remained upbeat, highlighting an increase in sales of its Suse Linux software.
Sales of Linux platform products produced $19 million in revenue, an 83 percent increase year over year. In addition, invoicing for Linux products was $29 million for the quarter, an increase of 114 percent. Novell said those increases were largely due to the strength of a wide-ranging business and technology partnership signed with Microsoft in November 2006. Microsoft helped account for $18 million of that invoicing, while non-Microsoft-influenced revenue was $11 million. The fact that Microsoft is now Novell's number one Linux reseller has already drawn criticism of the open source vendor.
"I am pleased by our results this quarter," said Ron Hovsepian, Novell's CEO. "Our Linux business delivered another strong quarter, workgroup [business unit] performed better than expected and identity [business unit] is recovering although it is still below plan.
Novell said revenue for identity and access management was up 5 percent over the same quarter a year ago.
But it was Linux and the relationship with Microsoft that Novell focused on, saying it provided a hefty bump to revenue.
"Customer deals associated with the Microsoft relationship accounted for 25 percent of the Linux platform product revenue," said Dana Russell, Novell's CFO.
Hovsepian said in the two fiscal quarters since signing the deal with Microsoft that Novell has invoiced $91 million in sales with $73 million occurring in the first quarter. He said that total was nearly 38 percent of the $240 million that was called for in the five-year deal with Microsoft.
He also said that Novell expects to have 49,000 certificates for maintenance and support, which are handed out by Microsoft, activated this year. He added, however, that going forward Novell would no longer report that number. Instead, Novell will track progress by reporting the percentage of invoicing over the life of the contract.
As part of the agreement, Microsoft had said it would distribute 70,000 coupons for Suse Linux Enterprise Server maintenance and support.
Responding to Microsoft's patent claims, Hovsepian said Novell would focus on customers and said statements it made in an open letter to the Linux community would stand as its public comment.
He also was mum on the effect of the forthcoming open-source GNU General Public License (GPL) 3.0, which could change the dynamics of the patent protection clause that is part of the agreement with Microsoft.
Novell said in a filing it made with the Security and Exchange Commission last week that there was a risk factor in the "grandfather" clause that is currently part of the working draft of the GPL 3.0, but Hovsepian refused to answer further questions about the effects of the grandfather clause on Novell's contract with Microsoft - saying any answer would be "broad speculation."
Other numbers highlighted by Novell included revenue from its Identity and Access Management business unit of $23 million, a 5 percent year-over-year increase. The company reported that revenue from Systems and Resource Management unit was $32 million, a 4 percent drop over the same quarter a year ago, and that revenue from its Workgroup business unit dropped 4 percent compared to the second quarter of 2006 to $84 million.
Novell expects net revenue for 2007 to be between $925 million and $955 million. Those numbers were adjusted to account for the recent divestment of its Salmon business consulting group.