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Novell Sees Disappointing NetWare, Linux Sales In 1Q

Novell saw sluggish sales of NetWare, Linux and services in its 2005 fiscal first quarter, but CEO Jack Messman said he's optimistic that new Linux products and a new sales model will stimulate growth going forward.

The Waltham, Mass.-based software vendor on Tuesday reported revenue of $290 million, a 9 percent year-over-year gain, for the quarter ended Jan. 31. NetWare sales fell 14 percent, while Suse Enterprise Linux Server 9 subscriptions rose by 21,000 during the quarter, a 4 percent sequential increase. During the quarter, the company recognized revenue of $15 million associated with Suse business overall, but only $7 million from new subscriptions.

Novell posted a first-quarter profit of $395.2 million, or 90 cents a share, which includes $448 million from the company's legal settlement with Microsoft. Excluding that settlement, Novell's earnings were $10 million, or 3 cents per share, the same as a year earlier.

Novell executives attributed the slowdown in NetWare sales to the impending release of Open Enterprise Server (OES), which the company launched last week at LinuxWorld, and lackluster Suse Linux business amid Microsoft price cuts and possible customer use of unpaid Linux licenses.

"We didn't have as good a performance of NetWare as I would have liked," Messman said Tuesday during a conference call with financial analysts on Novell's first-quarter results. "There's no single reason why NetWare licenses declined by as much as they did, but [many] Novell customers are waiting to have a look at OES before renewing their maintenance contracts."

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