Novell, Inc. (NDAQ: NOVL) shares moved sharply higher after the company reported better-than-expected earnings in its latest 8-K filing with the sEC. Shareholders were surprised by a swing to profitability as well as strong growth in its Linux business. Meanwhile, many are looking forward to seeing how the company will integrate its new acquisitions as potential upsell opportunities to expand revenues even further. So, what does the future hold for this once-struggling technology company?

Novell reported revenues of $231 million on net income of $8 million profit in the first quarter. This compares to revenues of $218 million on a net loss of $21 million during the same time period last year. The swing to profitability caught many investors by surprise as the company was boosted by strong performance from its Linux platform business, which grew 65 percent year-over-year. However, the majority of its revenues were still derived fromits workgroup products, which grew a modest 1 percent year-over-year.

“We are very pleased with our results this quarter. We delivered product revenue growth across all business units and continued expense control this quarter,” said Ron Hovsepian, President and CEO of Novell. “These results are indicative that our strategic initiatives are yielding tangible results and that we are on the right path to achieve long-term, sustainable profitability.”

Novell’s partnership with Microsoft is one of the main drivers for growth in its Linux platforms business. Although they are only into the second year of the deal, Novell has already earned $141 million from the arrangement - or 59 percent of what the five-year agreement stipulates. There is also a lot of opportunity for upselling inside of those relationships, which could prove to be even more of a boost in the future. And finally, Novell also sees opportunity with the launch of Microsoft’s new Windows Server 2008, which it sees as an opportunity to attack Microsoft’s installed base.

“Microsoft is managing the outward competition, but they are also managing their older installed base and the different versions that they are on,” Hovespian said. “We see that as opportunity for our company to attack that installed base. I’m sure the competitive fires will remain strong between both companies.”

The majority of today’s stock price movement, however, likely comes from Novell’s strong guidance. The company upped its guidance for 2008 with revenues now slated to be between $940-970 million compared to prior estimates of $920-945 million. Meanwhile, the company expects operating margins to be between 7 and 9 percent excluding all acquisition-related intangible asset amortization. This is far higher than what many analysts were expecting and may even be raised in the future if the company continues to see stronger growth on the heels of its Linux platforms division.

In the end, this is all great news for shareholders as Novell continues to push forward. Shareholders are not only looking towards solid growth in its Linux business but also for the results of the firm’s acquisitions of virtualization management vendor PlateSpin and open source collaboration vendor SiteScrape earlier this month. It will be interesting to see how the company integrates these businesses as more potential upsell opportunities. Combined, these factors make NOVL a stock that is definitely worth watching!

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