Novell's $290 million in revenue in its most recent quarter fell short of expectations. David Patrick, vice president and general manager of Novell's Linux, open-source platforms and services group, spoke about the company's prospects as it tries to shift its customer base from NetWare to the open-source Linux operating system.
Q: Software licensing revenue was down in the third quarter. What happened? A: More and more of our business is moving to subscription. [SuSE Linux Enterprise Server], Linux -- most of these products are subscription-based, so the model for us is less licence, more subscription.
Q: Have you seen much traction with Linux on the desktop? A: It's now bigger than Macintosh. And it is growing. We see Linux on the desktop as the longer road. The shorter-term opportunities are in Web infrastructure, IT infrastructure, Web servers, database servers, database hosting and these types of things.
Q: For those server workloads, most of the momentum has come from users moving from Unix. Will you need to get Windows Server users to make a switch in order to have a successful Linux business? A: When you look at the server market, Microsoft doesn't dominate the way it does on the desktop environment. It's the leader, but Linux and Unix also have significant penetration. If you look at the total market, it's not just about taking share from Windows, because there's significant share already by Linux and declining share by Unix. Windows is not a data centre operating system.
Q: But Microsoft has been pushing Windows as a data centre operating system. A: Sure. That's their growth. They're moving into the data centre. But that's not their roots. We're all moving up into the data centre together.
Q: Will your main focus be the data centre workload that was traditionally Unix-based? A: We're talking about some pretty big numbers here. Today, Linux- and Unix-related products around the data centre, according to IDC, is somewhere near a $6 billion market. We certainly would like to have a piece of that market. We believe that if we effectively move in and handle data centre workloads, then ultimately we will be able to have an anchor business there that will move to Linux.
You have to assume, with Microsoft talking about things like virtualisation recently, that they see Linux has a significant opportunity to move into that market. And we're both going to be going after it.
Q: Are you also going to try to get back some of Microsoft's stronghold in file-and-print, messaging, Web and application servers? A: Novell certainly has a target on the workgroup market. It's a market we've been in a long time with NetWare. Our first goal is to move our customer base from NetWare over to Linux, but then ultimately we would like to participate in a larger piece of the workgroup market, too. That's why we've announced projects like Hula, which is open-source collaboration running on Linux. We're fully building our print-and-file capabilities into Linux.
Q: Is it realistic to expect to get back NetWare users who switched to Windows? A: The encouraging thing we're getting is the reasonably strong acceptance of Linux in our core customer base. Remember, we only shipped OES [Open Enterprise Server, which gives customers a choice of running Novell services on Linux or NetWare] in March. We saw our first full quarter of business this quarter at $31 million, and 65% said they were buying OES for Linux. As we're successful in moving them over, that builds market validation for our strategy that we want to then leverage for the customers. But our initial stages really have been focused on our customer base. You need success stories.
Q: How do you expect to see the breakdown among your different areas of focus with Linux? A: We're focused on Linux in data centre workloads, workgroup computing around OES and desktop. We think the opportunity in terms of percentage of market penetration is probably highest today in the data centre workloads and application hosting and then moving to workgroup and then moving to the desktop over the long run.
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