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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (19429)	1/29/2004 12:18:27 AM
From: Lizzie Tudor	Read Replies (3) \| Respond to of 57684

portion of an analyst report (copied from Groklaw) who thinks desktop Linux is exceeding growth expectations. This analyst estimates $40 revenue per desktop which I actually think is low. Recent diligence has enhanced our fundamental outlook for Novell, driven by overall Open Source/Linux momentum, growing enthusiasm for desktop Linux, and a clearer vision of Novell’s proprietary-to-open migration strategy. . . . This report incorporates recent information gained through customer interviews, attendance at LinuxWorld, and management feedback. Investment Considerations: Desktop Linux is gathering momentum faster than previously expected; Novell product roadmap is likely to be more “Open” than management comments indicate;. . . Aided by its stance against SCO, Novell has been readily adopted by the Open Source community and is positioned for a much larger role. Desktop Linux will affect Microsoft faster than expected. We had previously expressed skepticism with regards to Open Source software’s ability to displace Microsoft Corp. on the desktop over the next couple of years. This position was based on prior feedback from IT executives who were concerned that personnel training costs and application migration costs would largely negate any savings derived through lower license fees – even if the Linux desktop was free. However, we believe this concern is quickly being alleviated by rapidly developing Linux desktop systems that look and function almost identically to analogous programs provided by Microsoft. More importantly, corporations are looking to switch from Microsoft, not so much to save on licensing fees, but to potentially enhance the security of their IT infrastructures. This week’s MyDoom virus only serves to reinforce such thinking. While Microsoft blamed spread of the virus on users being duped, prior attacks such as Melissa, SoBig, and Slammer have already shaped the opinions of IT executives. We are receiving anecdotal evidence of corporations pursuing Linux desktop projects – and not just from biased participants like IBM Corp. . . . One hardware vendor at LinuxWorld described a project already underway by an Australian telecom service provider to migrate 200,000 desktops from Windows to Linux over the next couple of years. Security may be the reason, but the lower cost is also nice The consensus list price for various Linux desktop solutions appears to be $100 per year per client. This compares favorably to a cost of more than $450 for Microsoft’s Windows XPTM and Office XP ProfessionalTM, which may have a life span of two to three years. (This assumes OEM pricing available to large corporate customers. Windows and Office XP Professional together cost more than $700 when purchased through a national retailer such as Best Buy.) At volume, the cost of a Linux desktop may be as little as $50 per year and in some cases, such as Sun Microsystems Inc’s deal with China, software for a Linux desktop may be essentially free. For modeling purposes, we have assumed Novell will generate $40 per year per Linux desktop. Novell is the favorite for Desktop Linux While smaller vendors like Lindows Inc. may have entered the desktop Linux market first, Novell has quickly assembled the right pieces to compete. Today, various desktop Linux solutions incorporate mix-and-match software components. However, for the Microsoft Outlook-equivalent functionality, it appears that Novell’s Ximian Evolution client is the clear favorite, as it is used by several competing desktop environments. The outlook is also generally positive with regards to Ximian’s mono project. Success in these areas of functionality provides considerable leverage to Novell in pushing its own comprehensive desktop suite, including SuSE Linux. We believe Novell may also be in discussions to acquire Codeweavers, Inc., a firm whose software allows Windows applications to run on Linux. If accurate, such an acquisition would fill in yet another piece of the Windows-to-Linux desktop puzzle.