Net income was 2 cents a share, compared with a loss of $2.89 million, or 1 cent, a year earlier, Waltham, Massachusetts-based Novell said in a statement. Revenue rose 1.4 percent to $235.7 million, matching analysts' estimates.

Chief Executive Officer Ron Hovespian slashed about 10 percent of jobs last year and focused on new Linux products, seeking to counter a drop in revenue from older software. Sales of its Linux operating system rose 31 percent to $29 million last quarter.

"The Linux numbers look pretty good," said Katherine Egbert, an analyst with Jefferies & Co. in San Francisco, who has a hold rating on the shares and doesn't own them.

Excluding some costs, profit was 6 cents a share, more than the 5-cent average estimate of analysts surveyed by Bloomberg. They projected revenue of $234.4 million for the quarter, which ended April 30.

Novell predicted annual sales of $940 million to $970 million, affirming an earlier forecast. its operating margin, profit divided by revenue, will be 7 percent to 9 percent. Analysts predict sales of $957.4 million.

Operating expenses dropped 3.7 percent last quarter to $172.9 million. the company had 4,100 employees as of October, down from 4,500 in 2006.

The company is trying to boost profit by off-loading consulting work to partners, a move that is curbing revenue growth.

Linux is a freely distributed operating system that competes with Microsoft Corp.'s Windows. Companies such as Novell and larger rival Red Hat Inc. sell business versions of Linux, as well as customer-support services.

-- Bloomberg News