Novell Reports Financial Results for First Fiscal Quarter 2005

    WALTHAM, Mass., Feb. 22 /PRNewswire-FirstCall/ -- Novell, Inc.
 (Nasdaq:   NOVL) today announced financial results for its first fiscal quarter
 ended Jan. 31, 2005.  For the quarter, Novell reported revenues of $290
 million, compared to revenues of $267 million for the first fiscal quarter
 2004.  Net income available to common stockholders in the first fiscal quarter
 2005 was $392 million, or $0.90 per diluted common share. This compared to net
 income available to common stockholders of $10 million, or $0.03 per diluted
 common share, for the first fiscal quarter 2004.
     On a non-GAAP basis, adjusted net income available to common stockholders
 for the first fiscal quarter 2005 was $10 million, or $0.03 per diluted common
 share, which excludes a $448 million net gain on a previously announced legal
 settlement with Microsoft, $6 million of restructuring expense, a $2 million
 gain on a sale of property, $1 million of long-term investment impairments and
 the related adjustments for income taxes and the allocation of earnings to
 preferred stockholders. This compares to non-GAAP adjusted net income
 available to common stockholders for the first fiscal quarter 2004 of $11
 million, or $0.03 per diluted common share, which excludes the effect of
 long-term investment impairments of $1 million. Full details on Novell's
 reported results, including a reconciliation of the non-GAAP adjusted results,
 are included in the financial schedules that are a part of this release.
     In the first fiscal quarter 2005, foreign currency exchange rates
 favorably impacted total revenue by approximately $10 million year-over-year.
 Foreign currency exchange rates favorably impacted net income by $2 million
 year-over-year.
     During the first fiscal quarter 2005, Novell recognized revenue of $15
 million associated with its SUSE(R) LINUX business, including $7 million of
 recognized revenue from subscriptions to SUSE LINUX Enterprise Server. Sales
 of subscriptions to SUSE LINUX Enterprise Server totaled 21,000 units in the
 quarter.
     "Novell made steady progress on executing its strategy this quarter. We
 still have work ahead of us as we continue to reposition the company in our
 growth markets," said Jack Messman, Chairman and CEO of Novell. "Our solid
 balance sheet gives us increased financial flexibility to execute strategic
 initiatives in the future."
     On the balance sheet, cash and short-term investments were $1.7 billion at
 Jan. 31, 2005, compared with $1.2 billion at Oct. 31, 2004. Days sales
 outstanding (DSO) in accounts receivable was 59 days at the end of the first
 fiscal quarter 2005, down from 60 days in the year ago quarter.  Deferred
 revenues were $343 million at the end of the first fiscal quarter 2005, up $49
 million or 17% year over year. Cash flow from operations was $452 million for
 the first fiscal quarter 2005, up from $31 million a year ago, mainly due to
 the net $448 million Microsoft settlement payment.
     A summary of Novell's vision, mission and strategy can be accessed on the
 Novell(R) Web site at:  www.novell.com/company/ir/qresults .
 
     Conference call notification and Web access detail
     A live Webcast of a Novell conference call to discuss the quarter will be
 broadcast at 5PM ET Feb. 22, 2005, from Novell's Investor Relations Web page:
 http://www.novell.com/company/ir/qresults/ .  The domestic conference call
 dial-in number is 888-323-5254, password "Novell," and the international
 dial-in number is +1-773-756-4625, password "Novell."
     The call will be archived on the Web site approximately 15 minutes after
 its conclusion, and will be available for telephone playback through midnight,
 March 8.  The domestic toll-free replay number is 888-562-2893, and the
 international replay number is +1-402-530-7604.
     A copy of this press release is posted on Novell's Web site at:
 http://www.novell.com/company/ir/qresults/ .
 
     Legal notice regarding forward-looking statements
     This press release includes statements that are not historical in nature
 and that may be characterized as "forward-looking statements," including those
 related to future financial and operating results, benefits and synergies of
 the company's brands and strategies, future opportunities and the growth of
 the market for open source solutions. You should be aware that Novell's actual
 results could differ materially from those contained in the forward-looking
 statements, which are based on current expectations of Novell management and
 are subject to a number of risks and uncertainties, including, but not limited
 to, Novell's ability to integrate acquired operations and employees, Novell's
 success in executing its Linux strategies, Novell's ability to deliver on its
 one Net vision of the Internet, Novell's ability to take a competitive
 position in the Linux industry, business conditions and the general economy,
 market opportunities, potential new business strategies, competitive factors,
 sales and marketing execution, shifts in technologies or market demand and the
 other factors described in Novell's Annual Report on Form 10-K filed with the
 Securities and Exchange Commission on Jan. 13, 2005.  Novell disclaims any
 intention or obligation to update any forward-looking statements as a result
 of developments occurring after the date of this press release.
 
     About Novell
     Novell, Inc. is a leading provider of information solutions that deliver
 secure identity management (Novell Nsure(R)), Web application development
 (Novell exteNd(TM)) and cross-platform networking services (Novell
 Nterprise(TM)), all supported by strategic consulting and professional
 services (Novell Ngage(SM)). Active in the open source community with its
 Ximian(R) and SUSE LINUX brands, Novell provides a full range of Linux
 products and services for the enterprise from the desktop to the server.
 Novell's vision of one Net -- a world without information boundaries -- helps
 customers realize the value of their information securely and economically.
 For more information, call Novell's Customer Response Center at
 888-321-4CRC (4272) or visit http://www.novell.com . Press should visit
 http://www.novell.com/pressroom .
 
     NOTE:  Novell, Nsure and Ximian are registered trademarks; exteNd and
 Nterprise are trademarks; and Ngage is a service mark of Novell, Inc. in the
 United States and other countries. SUSE is a registered trademark of SUSE
 LINUX AG, a Novell business. *All third-party trademarks are the property of
 their respective owners.
 
 
                                  Novell, Inc.
           Consolidated Unaudited Condensed Statements of Operations
                     (In thousands, except per share data)
 
 
                                                      Fiscal Quarter Ended
                                                Jan 31, 2005       Jan 31, 2004
     Net revenue
        New software licenses                        $50,384           $54,769
        Maintenance and services                     239,744           212,338
     Total net revenue                               290,128           267,107
 
     Cost of revenue
        New software licenses                          5,269             4,922
        Maintenance and services                     106,782            89,954
     Total cost of revenue                           112,051            94,876
 
     Gross profit                                    178,077           172,231
 
     Operating expenses
         Sales and marketing                          94,009            81,769
         Product development                          48,993            50,199
         General and administrative                   28,240            26,257
         Restructuring expenses                        6,419                --
         Gain on sale of property, plant
          and equipment                               (1,589)               --
         Gain on legal settlement                   (447,560)               --
     Total operating expenses                       (271,488)          158,225
 
 
     Income from operations                          449,565            14,006
 
     Other income (expense), net                       5,035             2,477
 
     Income before income taxes                      454,600            16,483
 
     Income tax expense                               59,439             6,348
 
     Net income                                     $395,161           $10,135
 
     Net income available to
        common stockholders - basic                 $390,891           $10,135
 
     Net income available to
        common stockholders - diluted               $392,384           $10,135
 
     Net income per common share:
         Basic                                         $1.04             $0.03
         Diluted                                       $0.90             $0.03
 
 
     Weighted average shares:
         Basic                                       377,257           378,566
         Diluted                                     435,467           391,371
 
 
     Certain reclassifications, none of which affected net income, were made to
     the prior period amounts in order to conform to the current period's
     presentation.
 
                                  Novell, Inc.
                Consolidated Unaudited Condensed Balance Sheets
                                 (In thousands)
 
 
 
     ASSETS                                     Jan 31, 2005      Oct 31, 2004
 
     Current assets
         Cash and cash equivalents                 $771,844          $434,404
         Short-term investments                     886,558           777,063
         Receivables, net                           201,328           269,431
         Prepaid expenses                            30,641            25,190
         Other current assets                        29,847            28,846
     Total current assets                         1,920,218         1,534,934
 
     Property, plant and equipment, net             219,835           231,468
     Long-term investments                           57,511            55,986
     Goodwill                                       362,307           391,088
     Intangible assets, net                          59,861            48,616
     Other assets                                    28,577            29,456
 
     Total assets                                $2,648,309        $2,291,548
 
 
     LIABILITIES & STOCKHOLDERS' EQUITY
 
     Current liabilities
         Accounts payable                           $45,903           $55,956
         Accrued compensation                       105,473           126,612
         Other accrued liabilities                   89,113            98,983
         Income taxes payable                        56,560            37,077
         Deferred revenue                           343,104           374,186
     Total current liabilities                      640,153           692,814
 
     Deferred income taxes                            4,640             3,855
     Senior convertible debentures                  600,000           600,000
 
     Total liabilities                            1,244,793         1,296,669
 
     Minority interests                               6,364             6,515
 
     Preferred stock                                 25,000            25,000
 
     Stockholders' equity                         1,372,152           963,364
 
     Total liabilities and stockholders'
      equity                                     $2,648,309        $2,291,548
 
      Certain reclassifications, none of which affected net income, were made
      to the prior period amounts in order to conform to the current period's
      presentation.
 
 
                                  Novell, Inc.
           Consolidated Unaudited Condensed Statements of Cash Flows
                                 (In thousands)
 
 
 
                                                     Fiscal Quarter Ended
                                               Jan 31, 2005      Jan 31, 2004
 
     Cash flows from operating activities:
         Net income                                $395,161           $10,135
         Adjustments to reconcile net
          income to net cash provided by
          operating activities:
           Depreciation and amortization             12,895            16,152
           Stock plans' income tax
            benefits                                  4,260                --
           Utilization of previously
            reserved acquired NOLs                   29,000                --
           Gain on sale of property, plant
            and equipment                            (1,589)               --
           Impairment of investments                  1,013             1,145
           Changes in current assets and
            liabilities, excluding the
            effect of acquisitions                   10,907             3,589
 
         Net cash provided by operating
          activities                                451,647            31,021
 
     Cash flows from financing activities:
          Issuance of common stock, net               4,467            28,493
          Payment of cash dividends on
           preferred stock                             (250)               --
 
         Net cash provided by financing
          activities                                  4,217            28,493
 
     Cash flows from investing activities:
         Purchases of property, plant and
          equipment                                  (5,649)           (5,466)
         Proceeds from the sale of
          property, plant and equipment              10,421                --
         Short-term investment activity            (111,706)           45,266
         Cash paid for acquisition of
          SUSE, net of cash acquired                     --          (200,298)
         Other                                      (11,490)             (107)
 
         Net cash used in investing
          activities                               (118,424)         (160,605)
 
     Increase (decrease) in cash and cash
      equivalents                                   337,440          (101,091)
 
     Cash and cash equivalents - beginning
      of period                                     434,404           366,932
 
     Cash and cash equivalents - end of
      period                                       $771,844          $265,841
 
 
      Certain reclassifications, none of which affected net income, were made
      to the prior period amounts in order to conform to the current period's
      presentation.
 
 
                                  Novell, Inc.
                Unaudited Non-GAAP Adjusted Earnings Information
                     (In thousands, except per share data)
 
                                              GAAP                    Non-GAAP
                                           As Reported   Adjustments  Adjusted
 
 
      Fiscal quarter ended January 31, 2005
      Net revenue                            $290,128        $--      $290,128
      Gross profit                            178,077         --       178,077
      Income from operations                  449,565   (442,730) (a)    6,835
      Income before income taxes              454,600   (441,717) (b)   12,883
      Net income                              395,161   (385,095) (c)   10,066
      Net income available to common
       stockholders - diluted                 392,384   (382,547) (d)    9,837
      Diluted net income per common share       $0.90     $(0.87) (d)    $0.03
 
      Fiscal quarter ended October 31, 2004
      Net revenue                            $300,657        $--      $300,657
      Gross profit                            190,252         --       190,252
      Income from operations                   14,612      8,916  (e)   23,528
      Income before income taxes               14,860     10,317  (f)   25,177
      Net income                               13,265     10,317  (f)   23,582
      Net income available to common
       stockholders - diluted                  14,757     10,317  (g)   25,074
      Diluted net income per common share       $0.03      $0.03  (g)    $0.06
 
      Fiscal quarter ended January 31, 2004
      Net revenue                            $267,107        $--      $267,107
      Gross profit                            172,231         --       172,231
      Income from operations                   14,006         --        14,006
      Income before income taxes               16,483      1,145  (h)   17,628
      Net income                               10,135      1,145  (h)   11,280
      Net income available to common
       stockholders - diluted                  10,135      1,145  (h)   11,280
      Diluted net income per common share       $0.03      $0.00  (h)    $0.03
 
      Footnotes related to adjustments:
      (a) Reflects a gain on a legal settlement of $447.6 million,
          restructuring provisions of $6.4 million and a gain on the sale of
          property, plant and equipment of $1.6 million.
 
      (b) Reflects the items in footnote (a) and long-term investment
          impairments of $1 million.
 
      (c) Reflects the items in footnotes (a) and (b) and the related tax
          adjustments.
 
      (d) Reflects the items in footnotes (a), (b) and (c) and the related
          adjustments to the allocation of earnings to preferred stockholders.
 
      (e) Reflects restructuring provisions of $8.9 million.
 
      (f) Reflects the item in footnote (e) and net long-term investment
          impairments of $1.4 million.
 
      (g) Reflects the items in footnotes (e) and (f), for which there were no
          tax adjustments.
 
      (h) Reflects long-term investments impairments of $1.1 million, for which
          there were no tax adjustments.
 
 
 
 

SOURCE Novell, Inc.
RELATED LINKS
http://www.novell.com
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