Poor profits puts Novell future in doubt

Novell's third quarter results narrowly beat expectations last week, but falling profit and turnover has heightened speculation the firm will be taken over or split into separate companies.

Novell's third quarter results narrowly beat expectations last week, but falling profit and turnover has heightened speculation the firm will be taken over or split into separate companies.

In its third quarter ended 31 July, Novell reported turnover of $270m, a decline from the $327m reported for the same quarter last year.

Sales in the US fell to $160m, down 12 per cent from the corresponding period last year, while sales in the Europe, Middle East & Africa (EMEA) region plummeted by 30 per cent to $70m. Profit fell to less than $9m from almost $50m.

Andy Baldin, Novell's director of marketing for EMEA, said the company would look to cut operational costs and increase advertising over the next quarter. He also said it would consider options to "maximise shareholder value", but would not comment on rumours of a potential takeover by IBM that boosted the firm's share price last week.

"Fears surrounding the millennium bug pushed last year's figures artificially high, but we are confident of increasing profitability over the next five months," he said.

IDC analyst Bernard Schipper said the results were a little better than expected, but only because original estimates had been changed.

"It looks like Novell has no idea what to do in its current situation. It is making general statements and a takeover has to be seen as a strong possibility. Novell's market value would definitely benefit from such a move," he said.

Novell also faces a new challenge to its existing customer base following Microsoft's release of Services for NetWare 5, which provides tools to assist Novell NetWare users to migrate to Windows 2000.

"We aim to take thousands of Novell customers on board," said Nick McGraph, Microsoft Windows product marketing manager.

Baldin said Novell had no plans to offer its customers any additional incentives in light of the Microsoft release.