Novell will do more deals similar to its recent marketing and licensing pact with Microsoft, the company's CEO said yesterday.

Talking to analysts, Ron Hovsepian said the planned changes stopped short of a full restructuring at Novell but the company wanted to embrace partnerships and move away from selling its open-source software directly to small and medium-size companies.

For its fourth quarter, the company reversed its net loss but its net revenue continued a year-long slide, as Novell continued to struggle with converting corporate customers from its legacy NetWare operating system to SuSE Linux.

Its recent controversial deal with Microsoft probably won't help that in the short term. That deal is expected eventually to contribute about $300 million to Novell's bottom line but the company only expects to make $20 million in revenue from it next year, leaving its net revenue and profits for 2007 basically unchanged from this year.

Hovsepian said Novell and Microsoft had started jointly marketing this month and noted that there are "several Linux deals that are accelerating due to the new partnership with Microsoft". Novell hopes to sign at least one or two more partnerships with similar first-tier vendors as it reassigns and lays off direct salespeople, especially those not working on Global 2,000 corporate accounts, Hovsepian said.

Novell plans to invest $20 million next year in the sales model switch, said Hovsepian, who resisted suggestions from analysts to sell or shut down some of Novell's less profitable software units.

Novell internally has "had hard, ugly conversations", Hovsepian said. "We could take the quick earnings hit [from selling off product lines]. But if we want to achieve 12 percent to 15 percent profitability in 2008, making these investments is absolutely the right path."

Hovsepian insisted that reaction in the open-source community to the Microsoft-Novell deal was "mixed".