Linux-Turbo muss noch zünden
Linux Lifts Novell
Taesik Yoon, Forbes Growth Investor 09.06.07, 3:42 PM ET
Due in part to stronger than expected earnings reports, technology stocks have held their own in what has been an increasingly volatile market environment.
Novell (nasdaq: NOVL - news - people ) is among these stocks. Yet its marked strength over the past several weeks suggests something more--or more appropriately, the return of something that's been missing for quite a number of years.
And that's investor faith. Faith that the company's current Linux-focused operating strategy may finally be the one that brings real, consistent growth back to the firm.
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NOVL develops proprietary mixed source and open source software products designed to improve the performance and interoperability of information technology (IT) infrastructures. The Americas generated 57% of revenues for the first nine months of fiscal 2007. Operations are segmented by solutions provided.
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The workgroup category accounted for 45.4% of revenues. It provides employee-level computing, networking and collaboration solutions designed to operate within existing mixed-source environments. Products include GroupWise, Netware and Open Enterprise Server.
Identity and security management accounted for 21.2% of revenues. Solutions are designed to protect IT infrastructures from unauthorized access without compromising operational effectiveness. Systems create and assign digital identities to IT resources, track usage and report the information for auditing, billing and compliance purposes.
Systems and resource management produced 18.4% of revenues. The ZENworks product line allows customers to set business and IT policies to automate the management of servers, desktops, laptops and hand-held devices.
Open platform solutions accounted for 12.3% of revenues for the first nine months of fiscal 2007. The segment offers operating systems, network services and workgroup computing software solutions based on the Linux open source operating system. The SUSE Linux enterprise computing platform allows for high interoperability between open source and proprietary systems.
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Finally, business consulting produced 2.7% of revenues. It provides IT consulting, training, testing, certification programs and technical support. NOVL has key partnerships with other software providers including IBM (nyse: IBM - news - people ), Microsoft (nasdaq: MSFT - news - people ), Oracle (nasdaq: ORCL - news - people ), Hewlett-Packard (nyse: HPQ - news - people ) and SAP (nyse: SAP - news - people ). These partnerships help ensure software interoperability and lead to joint marketing and sales initiatives.
Increased competition and weaker than expected acceptance of new software offerings contributed to weak operating results for much of the past decade. To help drive growth, NOVL dedicated its focus on broadening and accelerating worldwide adoption of Linux. It also implemented a design approach to enterprise infrastructure solutions, which consisted of creating open standards-based discrete software products that are easy to implement without dependence on proprietary software.
Recent results indicate that this approach is beginning to bear fruit. Fiscal Q3 net revenues rose 3% year-over-year to $243.1 million. Thanks to a 77% surge in Linux platform products, open platform solutions revenues jumped 47.2% to $22.1 million. This offset slight declines in the company's larger segments. The adjusted operating profit margin more than doubled year-over-year to 5.13%. Because year-ago results were boosted by a tax benefit, adjusted net income fell 32.4% to $16.13 million, or five cents per share, but was still ahead of expectations.
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A significant investment risk includes competition from larger rivals who can offer a more extensive portfolio of IT solutions. However, we believe NOVL's dedication to Linux will continue to drive growth in the near-term term. Deferred revenues are up $343 million from a year ago and $34 million sequentially to $734 million. The adjusted operating profit margin is already within the 5% to 7% target exit for fiscal 2007.
Partnership activity remains strong and includes a recent collaboration with IBM to support that company's WebSphere Application Server Community Edition as part of SUSE Linux Enterprise Server.
Finally, the U.S. District Court in Utah recently upheld NOVL's ownership of Unix copyrights. This could lead to more business for the company by allaying concerns of those who may have been hesitant to switch to Linux (which is based on Unix) out of fear of having to pay potential royalties to the plaintiff.
The quantitative model employed by the Forbes Growth Investor identified the stock right before its recent earnings-related pop. It continues to rank NOVL favorably, suggesting there is much upside left over the near-term.
http://www.forbes.com/2007/09/06/novell-linux-unix-pf-ii-in_…