The Motley Fool Previous Page

Mr. Softy Won't Save Novell

Tom Taulli
March 6, 2007

After an interesting deal with Microsoft (Nasdaq: MSFT  ) last November, Novell's (Nasdaq: NOVL  ) stock surged 16%. Unfortunately, the boost proved short-lived, given investors' ongoing concerns about the open-source software firm.

In its first-quarter earnings report released last week, Novell announced that revenues decreased from $240 million to $230 million. Novell also posted a net loss of $19.9 million, or $0.06 per share, compared with a profit of $1.8 million, or $0.01 per share, in the year-ago period.

Over the past few years, Novell has refocused its business on Linux, a free, popular open-source operating system collectively maintained and expanded by volunteer programmers worldwide.

Linux's growing popularity has begun to threaten Microsoft's Windows franchise, spurring Mr. Softy to tap its cash hoard for a counterattack. In last November's deal, Microsoft agreed to license Novell's software for $240 million. It also pledged an additional $94 million for sales and marketing, while another $108 million payment would protect each party from patent suits.

The deal prompted a groundswell of outrage in the o