| CEO Jack Messman talks about Novell's present and future |
Mar. 27, 2006
Novell has its ups -- the promise of its new desktop -- and its downs -- its last quarter's results -- but Jack Messman, the company's CEO is determined to see the open-source course his way.
In an interview with Linux-Watch, Messman explained where he thinks the company is today and where it, and its Linux products, are going.
Regarding the company's disappointing performance last quarter, Messman said that "We don't run the company on the quarterly basis." But, if you look closely, you'll see that "We beat the estimates last quarter. We gave them guidance that was conservative, but the stock got hit anyway."
"If you take away the unusual [stock-option expenses and a quarter of a year ago's $448 million net gain from Microsoft settling Novell's anti-trust case against it] , Novell would have posted a profit of $18 million, or 4 cents a share for the most recent quarter. This was up from $10.3 million, or 3 cents, earned a year earlier and just ahead of estimates."
Messman credits this to "an increase in Linux revenue and an increase in efficiency of operations behind the scenes." Still, he found the forst quarter Linux revenue, which was up 18 percent from the last quarter, "disappointing." While "invoicing was above industry growth rates," he thinks Novell can "continue to do better in the Linux space."
This isn't a case of the CEO just puffing up his company. Others agree with him. After the quarterly report, Soleil Securities Corp. Inc. upgraded its stock from sell to hold after reviewing Novell's results.
However, Messman has had trouble during the past 12 months with some corporate investors. The Blum Capital Partners LP investment firm and Credit Suisse First Boston both wanted Novell to make changes, big changes. While Novell agreed to some of them, such as a stock buy-back plan, Messman didn't agree to others. In any event, Novell has yet to buy back share one of its stock, because it's in a blackout period.
Messman describes this "awkward series of events. Novell has told them what we were going to be doing. We're still trying to sell the consulting business, but it's difficult to sell a people-based business. Since the employees are the company and if they walk, there's no company." Still, "Progress is being made."
As for the stock buy-back, "We had to go into a blackout period and still are." In the meantime, we have improved our margins; we've started giving more guidance. We expect to get our margins up from 5 to 12 percent by 08."
He continued, "They gave us some time to deliver. The pressure isn't off, but they've been quiet. We can deliver the value they wanted to see from us."
Looking ahead, Messman sees Novell growing from the datacenter out to the rest of the enterprise.
"As we move SUSE Linux to the datacenter, we expect to do better because we're already there. From there, we can move to edge servers where Red Hat is strong."
Still, he knows that "Some users will never move from NetWare. So, we'll probably support it forever. We can do this because OES (Open Enterprise Server, which has both NetWare and Linux) will have virtualized NetWare running on Linux. Typically, what kills a legacy operating system is that hardware vendor's stop supporting the operating system, but with the operating system as a virtual machine, that will never be a problem. This will be a strong point for keeping those customers."
In fact, "Our numbers indicate that NetWare users are continuing to grow. We don't know how Microsoft came up with its numbers (of millions of NetWare users switching to Server 2003). I can't see it. It's not coming off our books. If they (Microsoft) are doing this, they're taking their customers from the channel, or ancient NetWare 3.x customers" But, really, it's "Pure FUD as far as I'm concerned."
Thinking of the channel, Messman said, "Historically, we went through channel. We believed that our channel partners were our customers. They are very important to us, but we now know we need to market to users as well."
Messman also sees Microsoft's stumbling introduction of Vista as opening the door for Novell's forthcoming SLED (SUSE Linux Enterprise Desktop) 10.
"People tell us that the more they learn about Vista, the more they see that switching to it isn't a migration; it's a conversion."
Messman also said, Vista's "hardware costs are significantly higher. This gives us an opportunity to get customers to consider SLED. We know that most of them aren't going to move. They're stuck in their ways. But, Linux will capture a fair share of the desktop business."
In other matters, Novell is still locked in a lawsuit with Microsoft over WordPerfect. That case continues "at a snail's pace." As for it's case with SCO concerning the ownership of the Unix intellectual property, Messman is sure Novell is in the right. Even so, "SCO continues to muddle through. If they run out of money, someone will provide the cash for them to continue."
While seeing the cases to a close may take years, Messman thinks he may still be at the helm come that day.
"I've been around the company a long time, and I love it. I'm in good health and I see nothing like retirement on the horizon. If the board ever decided I should leave, I'd go. But I enjoy the business, and have no plans to leave.
-- Steven J. Vaughan-Nichols
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