02.27.09

Novell CEO Loots the Company: Receives Huge Bonuses for Failed Business

Posted in Finance, GNU/Linux, Novell, OpenSUSE, Ron Hovsepian, SLES/SLED at 2:02 pm by Dr. Roy Schestowitz

breaking the bank

Novell’s poor results are a subject that we covered last night. Talks about layoffs have begun to materialise. For example, we have:

For the quarter, Novell’s sales fell by 7 per cent to $214.9m and were hurt by a dramatic drop off in software license sales, which fell by 29.7 per cent to $28.3m. Services sales at the company fell even more dramatically, down 31.7 per cent to $27.8m, while maintenance and subscription sales helped offset declines a little by growing 5.8 per cent to $158.8m. Net income fell by 36.5 per cent, to $10.7m, and what is immediately clear is that if Microsoft had not extended its SUSE Linux coupon deal with a $100m extension last year and agreed to kick in $25m this quarter, Novell would be at a loss. Quite literally.

[...]

That’s exactly what Novell has said publicly it would do. But that is a net employee headcount change. The number of employees let go could be higher in one division or department if the company was also hiring in other divisions or departments. Novell has not said this is what has happened, but the persistent rumors of larger layoffs could be the result of such hiring and firing practices.

Ron Hovsepian, Novell’s president and chief executive officer, said that software license and services sales were both below expectations, and in a conference call with Wall Street analysts, he said that “the pipe fell apart” in the last two to three weeks of the quarter and warned that it could happen again.

[...]

Looking ahead, Hovsepian said that Novell was “investigating all opportunities to lower costs,” and that might mean more layoffs. (He did not use the L-Word).

Here is another new report.

Novell could axe jobs on falling demand

[...]

The company, based in Waltham, Massachusetts, should have a better idea of whether it needs to reduce its workforce later this quarter, Russell said today in an interview.

Hovsepian smiles

Wealth for the Hovsepians

An ongoing outrage right now is to do with those people who receive huge bonuses and public money even in the form of stimulus/bailout (i.e. public looting). They expect a form of socialism to rescue them from their own corruption. That only applies to managers of course — those who are managing themselves in unaccountable, private, unregulated tyrannies. They reward themselves for the utter failures which they are collectively responsible for.

Ron Hovsepian too is an example of this trend. According to this news report:

Information technology icon Novell, Inc. (NDAQ: NOVL ) fared poorly even in this economy: down more than 50% over the last 12 months. This didn’t stop CEO Ronald Hovsepian from getting compensation valued at almost $7 million for the year, with nearly $3 million of that in cash.

Who in their right minds are giving bonuses to failing/failed executives that are buying small, irrelevant companies while sacking employees (largely GNU/Linux engineers to begin with)? Here is additional information about Hovsepian’s personal gain, which has always seemed a tad suspicious, not just unfair.

We happen to have studied this and found out that Novell’s management recently embarked on luxurious vacations in Mexico just before dropping ‘the bomb’ (delivering the results). Novell is no exception in today’s tough economy, but some of its moves are outright irrational. Even its own employees are disturbed by it. For example, says one person: “Look at what Hubert Figuiere hinted at in his blog post as to Novell’s rudderless position. Acquisitions in Novell’s state and in the current climate and laying off employees? WTF?”

SUSE Down Sharply

Novell continued to deny large-scale layoffs, but as we stressed strongly, the company can't be believed. In fact, it already mentions this as a possibility (see Russell quote above). Novell’s layoffs are inevitable because its business diminishes too quickly and even SUSE — supposedly Novell’s area of great growth — is “down sharply”. ZDNet’s editor states:

Novell’s fiscal first quarter results were a mixed bag and Linux invoices fell sharply as the company failed to sign big deals.

They are dependent on Microsoft of course, by their own choice.

Matt Asay’s analysis is good (he used to work at Novell and he has friends there). The headline is alarming though.

Novell puts Linux on sale as earnings disappoint

[...]

That should be Novell’s concern, not Microsoft’s. If Microsoft feels any compunction to assist Novell, it’s certainly not to help prop up Linux, but rather to try to hurt Red Hat. This isn’t the basis for sound, long-term strategy.

And guess what? It’s not working.

[...]

That environment hasn’t been good for Novell’s overall business, but it’s helping fuel Red Hat’s. Perhaps Novell should be looking to Red Hat, not Microsoft, for clues as to how to rejuvenate its business. The industry could use Novell as a stronger Linux player. Microsoft won’t be the source of that strength.

So the big winners here are probably Novell’s rivals in the GNU/Linux universe. Those are the companies which don’t pay Microsoft for GNU/Linux and don’t market themselves using software patents and intimidation.

Here is yet another article about the end of BrainShare [1, 2, 3], which symbolises Novell’s demise.

Next month would have marked the one time in the year thousands of technology professionals make the trek to Salt Lake City to figure out whether Novell has the wherewithal to be the world’s most successful blend of open source and proprietary technology. Except that this year, for once, the global economy as a whole is actually doing worse than sales of Open Enterprise Server. There won’t be a BrainShare 2009, and who knows about next year. We’re bracing for what gets cut next.
I found BrainShare an extremely worthy event the last time I went there, but the industry, suffice it to say, will survive its loss.

More Financial News

Associated Press (via Forbes) has the report “Novell profit drops 36 pct, still beats Street” and MarketWatch published “Novell’s first-quarter net income slides to 3 cents a share” (also in Fox Business). Reuters just states that “Novell Q1 earnings fall.” Novell must tell its investors what it intends to do next. This debate is private.

No Value

“Our partnership with Microsoft continues to expand.”

Ron Hovsepian, Novell CEO

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