Novell continues to move forward

Implications: 1.  Microsoft continues to drive Novell's growth. 2.  Novell buys more growth in the virtualization space. 3.  Windows Server 2008 is a ripe opportunity for Novell.

Analysis: Novell saw shares move higher after the company reported better than expected earnings.  We all were surprised by the profitability as well as jump in its Linux business.   We also are curious to see how the recent acquisitions will help Novell push revenue higher.   So is this real?  Can we expect more?

The swing to profitability caught many investors by surprise as the company was boosted by strong performance from its Linux platform business, which grew 65 percent year over year. However, most of the revenues come from traditional product lines.

Microsoft still drives growth for Novell's Linux platform business. In the  second year of the deal, Novell earned $141 million from the arrangement -  Can you say upsell?  Novell will focus heavily in this area.  Novell also sees opportunity with the launch of Microsoft’s new Windows Server 2008, which is another opportunity.

“Microsoft is managing the outward competition, but they are also managing their older installed base and the different versions that they are on,” Hovespian said. “We see that as opportunity for our company to attack that installed base. I’m sure the competitive fires will remain strong between both companies.”

I see solid growth in the Linux business but also the firm’s acquisitions of virtualization management vendor PlateSpin and open source collaboration vendor SiteScrape earlier this month. It will be interesting to see how the company integrates these businesses as more potential upsell opportunities.