In Larry Dignan’s report on Novell’s Linux Business Performance, I see one point that the blogosphere is going to jump on:
“Novell CFO Dana Russell noted:
Linux invoicing was $23 million, down 42%. As we have stated before, our Linux business is dependent on large deals which may result in some fluctuations of our quarterly invoicing. This quarter we did not sign any large deals, many of which have been historically fulfilled by Microsoft certificates. Today we have invoiced $199 million or 83% of our original $240 million agreement.”
Some are bound to see it Novell “sell out” coming back to bite Novell. They will note that many large deals are “subsidised” by Microsoft. Those deals are drying out. Novell now cannot depends on the subsidy and the bad will it attracted will now hurt Novell.
My view is some of the fall in sales must be attributed to the economic downturn. Using the presumption that downturn hits RedHat and Novell equally, it is therefore the differences between RedHat and Novell’s Linux business performance for the same period, after removing the effect of the downturn, that is the more important financial indicator on whether Novell is indeed sufferring from the “sell out”.
Pro-Microsoft-Novell’s people will instead point out the fact that a lot of Novell’s large deals had been coming from its Microsoft’s relationship. That validates the deal as a good deal for Novell.
Bottom line: Novell had pocketed money it would otherwise had not without the Microsoft-Novell deal. Moreover, Larry Dignan is correct that the the Microsoft-Novell’s deal had “played itself out”, it appears Novell did it in the good time, where money is awash and more free flowing.