Novell records poor European sales

Networking software vendor Novell has blamed its restructuring and a Y2K hangover for a poor third-quarter financial performance, particularly in Europe.

Novell's third-quarter revenue dropped by almost 18 per cent to $270m, but the company said it remains confident that it can turn the poor performance around.

Andy Baldin, director of marketing for Novell Europe, Middle East & Africa (EMEA), said: "The actual revenue and performance is in line with what we expected, but is obviously not as strong as we would like. We are optimistic that the business is moving strongly and [we] have had a good response to our net services."

The company pointed to a continued weakness in packaged software sales and the after-effect of the millennium changeover. Novell's sales in EMEA fell by 30 per cent to $70m in the third quarter. It also said the reorganisation of the company around products and channel support had yet to bear fruit.

"Companies invested heavily in the Y2K [changeover] and are not investing as much in IT. We are pretty confident that companies will soon focus on their ebusiness strategies, [and] that over a period of time things will change following the reorganisation of our four business units," said Baldin.

Eric Schmidt, chief executive at Novell, said in a statement that he was disappointed by the continuing weakness of software sales, especially in Europe. "In the fourth quarter we will take additional action to ensure our expenses are in line with revenue," he said.

Baldin added that this action would include reviewing costs and business models.

The company's net services application products revenue was down three per cent to $78m, and NetWare server software revenue fell 29 per cent to $120m.

Baldin denied that the arrival of Windows 2000, which competes with NetWare, had impacted the company's performance. "Windows 2000 has opened up new opportunities for Novell and is a positive thing. People don't want to rip out and replace whole desktops - we can offer cross-platform solutions," he said.Novell refused to comment on reports at the beginning of this week suggesting that IBM was interested in acquiring the company. The news sent Novell shares soaring by nearly 20 per cent on Monday.

"It is all just rumours and speculation at the moment. I can't make any comment," said Baldin.