When Novell disclosed 3Q financial results today, The VAR Guy quickly spotted good news and bad news: Sales of Novell's Linux Platform Products continue to impress. But what the heck is happening with Novell's identity, access and compliance management business -- where sales fell sharply? It begs the question: Do Novell's products really belong together under one roof? Here's the scoop.

Let's start with the good news: Novell is profitable, delivering $17 million in net income for the quarter. That figure met analysts' expectations.

Linux Platform Products revenue jumped 22 percent to $38 million for the quarter. Impressive. And The VAR Guy thinks Novell is finally on the right track with SUSE Linux ISVs (independent software vendors). More than 2,000 ISVs have embraced Novell's new SUSE Appliance effort. So far, so good.

Just how well is Novell performing in the open source market? The VAR Guy will be sure to get a competitive reality check during the Red Hat Summit (Sept. 1-4, Chicago).

The Disconnect

Now, for Novell's lingering problem. As the company's open source business continues to grow the rest of Novell continues to contract.

A prime example: The VAR Guy was particularly surprised to see Novell's Identity, Access and Compliance Management business fall 16 percent to $28 million for the quarter. Security is a growing market, folks. It's among the top things businesses continue to invest in during the recession.

Perhaps there was a one-time reason for this falling security revenue. Regardless, even the mainstream media sees the issue. As MarketWatch reported:
"Novell Inc. on Thursday posted a slightly worse-than-expected decline in revenue for its fiscal third quarter, as product sales of identity and security management and systems and resource management software each fell sharply."
The ultimate question: Can Novell teach partners how to cross-sell open source and security solutions? Or is the Novell product portfolio filled with puzzle pieces that don't quite fit together?

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