Novell, Inc. was a leading network operating system provider in the 1980s and early 1990s. However, in the mid-1990s, Novell lost market share in the network operating system market. To counter this loss of market share, Novell made a strategic decision to go open (i.e., to make use of open standards and open source business strategies). Novell employs a subscription strategy, selling subscriptions to its Linux desktop operating system called SuSE. Novell has subsequently successfully handled the changeover from being a proprietary network operating system provider to being a leader in Linux and open source solutions. For example, a comparison of the financial results of Novell’s fourth quarters of 2004 and 2005 shows an increase of 418% in Linux revenue to US$61 million. Novell has demonstrated that open source business strategies are feasible and profitable.
Key Terms in this Chapter
Business model: A business model (also called a business design) is the mechanism by which a business intends to generate revenue and profits ( http://en.wikipedia.org/wiki/Business_model ).
Ubuntu: A South African ethic or ideology focusing on people’s allegiances and relations with each other. The word comes from the Zulu and Xhosa languages ( http://en.wikipedia.org/wiki/Ubuntu ).
Profitability Ratios: A group of ratios that shows the combined effects of liquidity, asset management, and debts on operating results ( http://dwc.hct.ac.ae/courses/badm300/glossary/glosp.htm ).
Earnings: Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business ( http://en.wikipedia.org/wiki/Earnings ).
Liquidity Ratios: Ratios that show the relationship of a firm’s cash and other current assets to its current liabilities ( http://dwc.hct.ac.ae/courses/badm300/glossary/glosl.htm ).
Turnover: In accounting, the number of times an asset is replaced during a financial period ( http://www.investopedia.com/terms/t/turnover.asp ).
Earnings Per Share (EPS): The earnings returned on the amount invested initially ( http://en.wikipedia.org/wiki/Earnings_per_share ).
Business Strategy: Business strategy or strategic management is the process of specifying an organization’s objectives, developing policies, and plans to achieve these objectives, and allocating resources in order to implement the plans ( http://en.wikipedia.org/wiki/Business_strategy ).
Free Cash Flow: Measures a firm’s cash flow remaining after all expenditures required to maintain or expand the business have been paid off ( http://en.wikipedia.org/wiki/Free_cash_flow ).