Bonum Certa Men Certa

Financial Games: Novell's Main Strength?

Lots of companies do this, but it's no excuse

This issue is one that we wrote about earlier today. Critically, we also wrote about the buybacks earlier this month, along with head-changes, offshoring, etc.



“Novell embellishes its case and offers a fantastic story because investors sometimes enjoy good news more than honesty.”Things are not going too well at Novell, but like most companies -- no matter the circumstances -- it manages to deceive the press. Novell embellishes its case and offers a fantastic story because investors sometimes enjoy good news more than honesty. Let's just pretend that the massive looming layoffs are non existent, okay?

To repeat the gist of this story, Novell cut off 10% of its staff last year [1] (more axing to come soon) and it counts as "Linux sales" transitions from its old O/S/es to GNU/Linux [2] (e.g. OES). In other words, Novell is seems to be cooking the books and innocent folks like Matt Asay are buying it, much like the rest of the mainstream press. You can spot sheep when you see the likes of the Wool Street Journal promoting the blue- and white-collar chaps (blue chips for white sheep).

Novell is a partner of Microsoft now [3], so wanting it to succeed would be risky. In fact, relying on it would be risky too.

References below are from yesterday's news alone. ____

[1] Novell moves into black in 2d quarter

Chief executive Ron Hovsepian slashed about 10 percent of jobs last year and focused on new Linux products, seeking to counter a drop in revenue from older software. Sales of its Linux operating system rose 31 percent to $29 million last quarter.


[2] Novell financials beat estimates again

The company said it showed healthy growth in its core business units around the Linux operating system, identity/access management software and systems management tools.


[This confirms what was said earlier about layoffs and cannibalisation. Linux sales are the main thing the company really raves about with actual figures, implying that the rest isn't too good (not enough to harp about).]

[3] Foolish Forecast: Novell Swings for the Fences

Don't be fooled by the massive cash flow margins in 2007. It's a mirage, generated by a cross-licensing and cross-promotion agreement with Microsoft that landed Novell a one-time $348 million payment. Without it, the trailing free cash flow margins would have stayed positive but in the lower single digits.

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