Updated from March 2Novell's ( NOVL) first-quarter sales dropped by 5.5%, but the Linux software provider was still able to eke out small upside surprises on the top and bottom lines. But second-quarter guidance was shy of expectations, and on Friday shares fell $1.36, or 14%, to $8.17. Net income available to common-stock holders in the January quarter was $2 million, or break-even on a per-share basis. That compares with $392 million, or 90 cents a share, a year ago, when the bottom line was swelled by a one-time $448 million gain related to a legal settlement with Microsoft ( MSFT). Revenue was $274 million, slipping from $290 million in the first quarter of fiscal 2005. Excluding items, adjusted net income available to common-stock holders was $18 million, or 4 cents a share. On the same basis, analysts polled by Thomson First Call were looking for a 3-cent profit on revenue of $269.3 million. Stock-based compensation, now expensed by the company, totaled $13.7 million. The first-quarter results were a bit better than the company's own guidance. Novell had set the bar at a profit of 2 cents or 3 cents a share on sales ranging from $260 million to $270 million. Guidance for the second quarter, however, was on the light side. Novell said it expects a profit of 2 cents or 3 cents on sales ranging from $272 million to $282 million. Wall Street was expecting a 4-cent profit and $282.2 million in revenue. New businesses for Novell, including its version of Linux and its Open Enterprise Server, grew strongly in the first quarter, up from $14 million a year ago to $56 million. Even so, Novell continues to lag far behind Red Hat ( RHAT), its major rival in the Linux business.