As ongoing challenges in the economy continue to pressure companies to control operating costs, is it any surprise that IT managers are continuing to deploy economical IT solutions like Linux in their data centers? In June, open-source leader Red Hat (NYSE: RHT) reported bang-up results for its second fiscal quarter, and yesterday, Wind River (Nasdaq: WIND) also reported a strong Q2, attributable in part to demand for its Linux solutions.
Not to be left out, Novell (Nasdaq: NOVL) noted particular strength in its Linux business when it reported results late last week for the quarter that ended in July. Revenue for Novell's Linux Platform Products of $31 million for the quarter rose 30% year over year, and billings of $51 million climbed 36%.
Of course, much of the company's success in Linux appears to be the result of its nearly two-year-old deal with Microsoft (Nasdaq: MSFT). Under that agreement, Mr. Softy purchased $240 million of prepaid certificates, which are given to customers who can then deploy Novell's operating system for free.
To date, Novell has invoiced $176 million, or 73%, of the original allotment of certificates. Novell and Microsoft are so pleased with the results that they've committed to an additional $100 million of certificates.
You have to wonder how much Novell would have sold if the products weren't essentially free to the end user. For Novell's shareholders, though, that's irrelevant. In an environment in which customers are looking for any means to reduce operating expenses, even as IT demands escalate unabated, those free certificates must look mighty appetizing.
So as long as customers are deploying Linux and turning to open-source software, Novell should enjoy ongoing demand for its open-platform solutions. The demand will probably continue for quite a while, and that's good news for all players in this field.
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