Novell Reports Financial Results for Fourth Fiscal Quarter and Full Fiscal Year 2005 Net Revenue Grows Seven Percent to $320 Million, Linux Subscriptions More Than

Triple to 65,000, and Identity Solutions Grow 35 Percent Year Over Year



    WALTHAM, Mass., Dec. 1 /PRNewswire-FirstCall/ -- Novell, Inc.
 (Nasdaq:   NOVL) today announced financial results for its fourth fiscal quarter
 and fiscal year ended Oct. 31, 2005.  For the quarter, Novell reported revenue
 of $320 million, compared to revenue of $301 million for the fourth fiscal
 quarter 2004.  Net loss available to common stockholders in the fourth fiscal
 quarter 2005 was $5 million or $0.01 loss per diluted common share. This
 compared to net income available to common stockholders of $15 million, or
 $0.03 per diluted common share, for the fourth fiscal quarter 2004.
     On a non-GAAP basis, adjusted net income available to common stockholders
 for the fourth fiscal quarter 2005 was $33 million, or $0.07 per diluted
 common share, which excludes restructuring charges of $38 million, impairments
 of investments and intangible assets of $2 million and adjustments for income
 taxes, debt interest expense and the allocation of earnings to preferred
 stockholders. This compares to non-GAAP adjusted net income available to
 common stockholders for the fourth fiscal quarter 2004 of $25 million, or
 $0.06 per diluted common share, which excludes restructuring charges of $9
 million and net investment impairments of $1 million.
     For the full fiscal year 2005, Novell reported revenue of $1.198 billion
 and diluted net income available to common stockholders of $378 million, or
 $0.86 per diluted common share, including a $448 million net legal settlement
 with Microsoft. Comparatively, revenue for the full fiscal year 2004 was
 $1.166 billion and diluted net income available to common stockholders was
 $31 million, or $0.08 per diluted common share.
     During the fourth fiscal quarter 2005, Novell recognized Linux* platform
 revenue of $61 million, which was up 418 percent from the year ago quarter.
 Linux platform revenue included $46 million from sales of Open Enterprise
 Server (OES) and $15 million of revenue from other Linux products and
 services. Sales of stand-alone subscriptions to SUSE(R) Linux Enterprise
 Server (SLES) totaled 65,000 subscriptions in the quarter, excluding
 subscriptions sold under enterprise-wide licensing deals, up 137 percent
 sequentially and 216 percent on a year over year basis. For the full fiscal
 year 2005, Novell reported Linux platform revenue of $148 million, up 278
 percent from fiscal 2004.
     During the fourth fiscal quarter 2005, Novell recognized $84 million of
 Identity-driven computing revenue, up 35 percent year over year.
 Identity-driven computing revenue for the full fiscal year 2005 totaled $258
 million, an increase of 14 percent year over year.
     "We are very pleased with the strong finish we had in this fiscal year,"
 said Jack Messman, Chairman and CEO of Novell. "Our quarterly revenue and
 profitability on a non-GAAP basis were the highest Novell has achieved for
 several years. We've made steady progress over the past two years in
 transforming Novell, including hiring key executives, restructuring our field
 operations and focusing our business on the Linux and Identity markets. While
 we are not yet fully complete in that transformation and we still have
 operational hurdles ahead of us, we enter fiscal year 2006 better prepared to
 take advantage of our growth opportunities in Linux and Identity."
     Cash, cash equivalents and short-term investments were $1.7 billion at
 Oct. 31, 2005, up from $1.6 billion at July 31, 2005. Days sales outstanding
 (DSO) in accounts receivable was 81 days at the end of the fourth fiscal
 quarter 2005, up from 77 in the year ago quarter. Deferred revenue was $406
 million at the end of the fourth fiscal quarter 2005, up $32 million or eight
 percent from the prior year. Cash flow from operations was $58 million for the
 fourth fiscal quarter 2005, up from $52 million in the fourth fiscal quarter
 2004.
     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.
     With regard to the previously announced common stock repurchase plan,
 Novell has not repurchased any of its common stock to date because it has been
 continuously subject to self-imposed trading blackouts since the share
 repurchase program was announced on Sept. 22, 2005.
 
     Financial Outlook
     Novell management provided the following financial guidance:
 
     -- Net revenue for the first fiscal quarter 2006 is expected to be between
        $260 and $270 million.
     -- Net income per diluted common share for the first fiscal quarter 2006
        is expected to be between $0.02 and $0.03, excluding an estimated $0.03
        per share expense from adoption of the new stock-based compensation
        accounting standard.
     -- The previously announced restructuring is expected to negatively impact
        revenue by approximately $40 to $50 million in the full fiscal year
        2006, excluding continued expected revenue declines in Novell's legacy
        Workgroup businesses.
     -- Novell is targeting operating margins between 12% and 15% for fiscal
        year 2008.
 
     A summary of Novell's vision, mission and strategy can be accessed on the
 Novell(R) Web site at:  http://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 5:00 PM EST Dec. 1, 2005, from Novell's Investor Relations Web
 page:  http://www.novell.com/company/ir/qresults/ .  The domestic conference
 call dial-in number is 866-335-5255, password "Novell," and the international
 dial-in number is +1-706-679-2263, 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
 ET, Dec. 14.  The domestic toll-free replay number is 800-642-1687, and the
 international replay number is +1-706-645-9291. Replay listeners must enter
 conference ID number 2116994.
     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 Identity-driven computing and Linux and Platform 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 and
 identity and resource management strategies, Novell's ability to take a
 competitive position in the Linux and identity and resource management
 industries, 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 Post-Effective Amendment No. 5 to Form S-3 filed with
 the Securities and Exchange Commission on Oct. 14, 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. delivers Software for the Open Enterprise.(TM) With more than
 50,000 customers in 43 countries, Novell helps customers manage, simplify,
 secure and integrate their technology environments by leveraging
 best-of-breed, open standards-based software. With over 20 years of
 experience, more than 5,000 employees, 5,000 partners and support centers
 around the world, Novell helps customers gain control over their IT operating
 environment while reducing cost. More information about Novell can be found at
 http://www.novell.com .
 
     NOTE:  Novell and SUSE are registered trademarks, and Software for the
 Open Enterprise is a trademark of Novell, Inc. in the United States and other
 countries.  * Linux is a registered trademark of Linus Torvalds. All other
 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     Fiscal Year Ended
                                    Oct 31,  Oct 31,       Oct 31,    Oct 31,
                                     2005     2004          2005        2004
     Net revenue
        Software licenses           $78,111  $61,994     $213,803     $234,037
        Maintenance and services    242,192  238,663      983,893      931,880
     Total net revenue              320,303  300,657    1,197,696    1,165,917
 
     Cost of revenue
        Software licenses             7,630    6,857       21,600       23,478
        Maintenance and services    100,088  103,548      421,519      392,201
     Total cost of revenue          107,718  110,405      443,119      415,679
 
     Gross profit                   212,585  190,252      754,577      750,238
 
     Operating expenses
         Sales and marketing        100,426   96,785      388,846      365,319
         Product development         53,798   46,703      200,630      195,864
         General and administrative  31,858   23,236      122,026      102,437
         Restructuring expenses      37,951    8,916       59,106       22,903
         Acquired in-process
          research and development       --       --          480           --
         Gain on sale of property,
          plant and equipment            --       --       (1,589)      (1,977)
         Gain on settlement of
          potential litigation           --       --     (447,560)          --
     Total operating expenses       224,033  175,640      321,939      684,546
 
 
     Income (loss) from operations  (11,448)  14,612      432,638       65,692
 
     Other income, net               11,756      248       33,504        9,282
 
     Income before income taxes         308   14,860      466,142       74,974
 
     Income tax expense               5,260    1,595       89,420       17,786
 
     Net income (loss)              $(4,952) $13,265     $376,722      $57,188
 
     Deemed dividend related to
      beneficial conversion feature
      of preferred stock                 --       --           --      (25,680)
     Preferred stock dividends          (91)    (125)        (466)        (416)
     Allocation of earnings to
      preferred stockholders             --       --       (3,667)        (274)
 
     Net income (loss) available to
        common stockholders -
        basic                       $(5,043) $13,140     $372,589      $30,818
 
     Net income (loss) available to
        common stockholders -
        diluted                     $(5,043) $14,758     $378,159      $30,818
 
     Net income (loss) per common
      share:
         Basic                       $(0.01)   $0.03        $0.98        $0.08
         Diluted                     $(0.01)   $0.03        $0.86        $0.08
 
 
     Weighted average shares:
         Basic                      382,279  376,367      379,499      381,100
         Diluted                    382,279  438,317 *    440,585 *    390,879
 
 
     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.
 
 
     * Fiscal year 2005 and the fourth fiscal quarter 2004 diluted weighted
       average shares includes 52 million potential common shares related
       to convertible debt which are not included in the current quarter
       calculation because they are anti-dilutive.
 
 
                                   Novell, Inc.
                  Consolidated Unaudited Condensed Balance Sheets
                                  (In thousands)
 
 
 
     ASSETS                                    Oct 31, 2005      Oct 31, 2004
 
     Current assets
         Cash and cash equivalents                 $818,738          $434,404
         Short-term investments                     843,666           777,063
         Receivables, net                           293,627           269,431
         Prepaid expenses                            30,777            27,000
         Other current assets                        29,745            28,846
     Total current assets                         2,016,553         1,536,744
 
     Property, plant and equipment, net             212,377           231,468
     Long-term investments                           54,340            55,986
     Goodwill                                       395,509           391,088
     Intangible assets, net                          56,421            48,616
     Deferred income taxes                            1,384                --
     Other assets                                    25,274            29,456
 
     Total assets                                $2,761,858        $2,293,358
 
 
     LIABILITIES & STOCKHOLDERS' EQUITY
 
     Current liabilities
         Accounts payable                           $45,445           $55,956
         Accrued compensation                       113,760           126,612
         Other accrued liabilities                  131,105            98,983
         Income taxes payable                        56,869            37,077
         Deferred revenue                           405,751           374,186
     Total current liabilities                      752,930           692,814
 
     Deferred income taxes                            4,537             3,855
     Senior convertible debentures                  600,000           600,000
 
     Total liabilities                            1,357,467         1,296,669
 
     Minority interests                               8,555             8,325
 
     Preferred stock                                  9,350            25,000
 
     Stockholders' equity                         1,386,486           963,364
 
     Total liabilities and stockholders'
      equity                                     $2,761,858        $2,293,358
 
 
     Certain reclassifications 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  Fiscal Year Ended
                                           Oct 31,  Oct 31,   Oct 31,  Oct 31,
                                            2005     2004      2005     2004
 
     Cash flows from operating activities:
       Net income (loss)                 $(4,952)  $13,265  $376,722   $57,188
       Adjustments to reconcile net
        income (loss) to net cash
        provided by operating activities:
         Depreciation and amortization    13,953    14,536    56,261    53,482
         Change in accounts receivable
          allowances                       1,514    (3,154)   (7,838)   (4,923)
         Income tax benefits related to
          stock plans                     (2,367)       --    13,799        --
         Utilization of previously
          reserved acquired net
          operating losses                    --        --    29,600        --
        (Gain) loss on sale of property,
          plant and equipment                 --       328    (1,589)   (1,639)
         Impairment of intangible assets   1,521        --     1,521        --
         Impairment of investments           192     1,400     1,300     3,848
         Acquired in-process research
          and development                     --        --       480        --
         Changes in current assets and
          liabilities, excluding the
          effect of acquisitions          48,392    25,128    30,158    11,250
 
       Net cash provided by operating
        activities                        58,253    51,503   500,414   119,206
 
     Cash flows from financing activities:
       Issuance of common stock, net       6,073    10,178    22,108    58,162
       Issuance of convertible preferred
        stock                                 --        --        --    50,000
       Issuance of senior convertible
        debentures                            --        --        --   600,000
       Payment of issuance costs on
        senior convertible debentures         --        --        --   (14,850)
        Payment of cash dividends on
         preferred stock                    (216)       --      (591)     (292)
       Repurchase of common stock, held
        in treasury                           --        --        --  (125,000)
 
       Net cash provided by financing
        activities                         5,857    10,178    21,517   568,020
 
     Cash flows from investing activities:
       Purchases of property, plant and
         equipment                       (10,613)   (7,473) (30,781)   (26,997)
       Proceeds from the sale of
        property, plant and equipment         --     2,811   10,421      4,951
       Long-term investment activity       1,633    (1,414)     281     (9,399)
       Short-term investment activity   (228,162) (199,981) (74,370)  (393,495)
       Cash paid for acquisition of
        Salmon, net of cash acquired          --        --       --     (5,322)
       Cash paid for acquisition of
         SUSE, net of cash acquired           --        --       --   (200,298)
       Cash paid for acquisiton of
        Tally and Immunix, net of
        cash acquired                         --        --  (33,829)        --
       Purchase of intangible assets          --        --  (15,500)        --
       Other                               5,940     5,142    6,181     10,806
 
       Net cash used in investing
        activities                      (231,202) (200,915)(137,597)  (619,754)
 
     Increase (decrease) in cash and
      cash equivalents                  (167,092) (139,234) 384,334     67,472
 
     Cash and cash equivalents -
      beginning of period                985,830   573,638  434,404    366,932
 
     Cash and cash equivalents -
      end of period                     $818,738  $434,404 $818,738   $434,404
 
     Certain reclassifications 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)
 
 
                                        Fiscal Quarter Ended  Fiscal Year Ended
                                           Oct 31,  Oct 31,    Oct 31, Oct 31,
                                             2005     2004      2005     2004
 
     GAAP diluted net income (loss)
      available to common stockholders     $(5,043) $14,758 $378,159   $30,818
 
       Pre-income tax adjustments:
         Microsoft settlement                   --       -- (447,560)       --
         Canopy settlement                      --       --       --   (18,566)
         Restructuring expenses             37,951    8,916   59,106    22,903
         Gain on sale of property, plant
          and equipment                         --       --   (1,589)   (1,977)
         Impairment of intangible assets     1,521       --    1,521        --
         Acquired in-process research and
          development                           --       --      480        --
         Integration costs                      --       --       --       372
         Impairment of investments             486    1,401    1,594     3,848
           Sub-total                        39,958   10,317 (386,448)    6,580
 
       Income tax adjustments:
         Tax adjustments, net               (1,569)      --   (4,232)   (1,163)
         Cumulative tax effect of the
          Microsoft settlement              (1,700)      --   70,560        --
 
       Diluted net income (loss) adjustments:
         Debt interest expense               1,493       --       --     1,974
         Preferred stock dividends              --       --       --       416
         Preferred stock beneficial
          conversion feature                    --       --       --    25,680
         Allocation of earnings to
          preferred and minority
          stockholders                        (391)      --    2,991       275
 
     Non-GAAP diluted net income
      available to common stockholders     $32,748  $25,075  $61,030   $64,580
 
 
     GAAP diluted net income (loss) per
      common share                          $(0.01)   $0.03    $0.86     $0.08
       Adjustments detailed above             0.08     0.03    (0.72)     0.08
 
     Non-GAAP diluted net income per
      common share                           $0.07    $0.06    $0.14     $0.16
 
 
     GAAP diluted weighted average shares  382,279  438,317  440,585   390,879
 
       Change in dilution from assumed:
         Conversion of convertible debt     52,075       --       --    17,122
         Conversion of preferred stock          --       --       --     3,388
         Stock option exercises              8,304       --       --        --
         Restricted stock and stock-based
          compensation changes                 403       --       --        --
 
     Non-GAAP diluted weighted average
      shares                               443,061  438,317   440,585  411,389
 
     Certain reclassifications were made to the prior period amounts in order
 to conform to the current period's presentation.
 
 
 

SOURCE Novell, Inc.
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