Novell Reports Financial Results for Second Fiscal Quarter 2004

    WALTHAM, Mass., May 24 /PRNewswire-FirstCall/ -- Novell, Inc.
 (Nasdaq:   NOVL) today announced financial results for its second fiscal
 quarter ended April 30, 2004. For the quarter, Novell reported revenues of
 $294 million, compared to revenues of $276 million for the second fiscal
 quarter 2003. Net income in the second fiscal quarter 2004 was $10 million.
 After consideration of a $26 million deemed dividend related to the beneficial
 conversion feature of preferred stock and related preferred stock cash
 dividends associated with IBM's investment in Novell, the net loss available
 to common shareholders was $0.04 loss per share. This compared to a net loss
 of $29 million, or $0.08 loss per share, for the second fiscal quarter 2003.
     On a non-GAAP basis, adjusted net income for the second fiscal quarter
 2004 was $14 million, or $0.03 per share, which excludes the effect of the
 preferred stock deemed dividend of $26 million, restructuring charges of
 $5 million, investment impairments of $1 million and a $2 million gain on a
 sale of property, plant and equipment. This compares to a non-GAAP adjusted
 net loss for the second fiscal quarter 2003 of $7 million, or $0.02 loss per
 share, which excludes primarily $25 million in charges from adjustments to
 facility-related restructuring and merger liabilities, and impaired
 investments. 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.
     For the first six months of fiscal 2004, Novell reported revenue of
 $561 million and net income of $21 million. After considering the impact of
 the preferred stock deemed and cash dividends, the net loss available to
 common shareholders in this period was $0.01 loss per share. For the first six
 months of fiscal 2003, the company reported revenue of $536 million and a net
 loss of $41 million, or $0.11 loss per share.
     "In the quarter, Novell showed continued improvement in its financial
 performance during what is still a challenging market environment for the IT
 industry," said Jack L. Messman, Novell chairman, president and chief
 executive officer. "We are encouraged that NetWare(R)-related revenue in the
 quarter declined only 2% from the year ago period, or a 5% decline after
 adjusting for foreign currency effects. This figure compares to the prior
 year's decline rate in NetWare-related revenue of 12%, after adjusting
 for foreign currency effects. We believe this slowing of the rate of
 NetWare-related revenue decline reflects a favorable response from our
 customers to our Linux* strategy."
     In the second fiscal quarter 2004, foreign currency exchange rates
 positively impacted total revenue by approximately $12 million and had a
 negative impact on net income of less than $1 million year over year. Also in
 the quarter, G&A expenses were lower due to a reduction of $5 million in legal
 reserves relating to favorable developments in current litigation matters.
     On the balance sheet, cash and short-term investments were $636 million at
 the end of the second fiscal quarter 2004, compared with $605 million at the
 end of the prior quarter. This increase in cash and short-term investments
 includes the $50 million preferred stock investment by IBM and negative cash
 flow from operations of $28 million, which was due primarily to an increase in
 current accounts receivable. Days sales outstanding (DSO) in accounts
 receivable increased to 67 days at the end of the second fiscal quarter 2004,
 up from 60 days in the prior quarter. Deferred revenues were $296 million at
 the end of the second fiscal quarter 2004, up $29 million or 11% year over
 year.
     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 EDT May 24, 2004, 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,
 June 7. The domestic toll-free replay number is 800-216-3035, and the
 international replay number is +1-402-220-3757.
     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 for the 2003
 fiscal year. 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(TM)), Web application development
 (Novell exteNd(TM)) and cross-platform networking services (Novell
 Nterprise(TM)), all supported by strategic consulting and professional
 services (Novell NgageSM). Active in the open source community with its
 Ximian(R) and SUSE(R) 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, NetWare and Ximian are registered trademarks; exteNd, Nsure
 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 company. *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   Fiscal Year-to-Date
                                        Apr 30,   Apr 30,   Apr 30,   Apr 30,
                                          2004      2003      2004      2003
     Net revenue
        New software licenses            $60,306   $64,465  $115,075  $125,503
        Maintenance and services         233,250   211,502   445,588   410,435
     Total net revenue                   293,556   275,967   560,663   535,938
 
     Cost of revenue
        New software licenses              6,087     5,962    11,008    11,184
        Maintenance and services         100,355   102,809   190,310   195,151
     Total cost of revenue               106,442   108,771   201,318   206,335
 
     Gross profit                        187,114   167,196   359,345   329,603
 
     Operating expenses
         Sales and marketing              93,646   101,737   175,415   200,042
         Product development              52,031    48,354   102,230    91,276
         General and administrative       24,215    30,939    50,472    58,284
         Restructuring                     4,737     8,675     4,737     8,675
         Gain on sale of long-lived
          asset                           (1,977)       --    (1,977)       --
     Total operating expenses            172,652   189,705   330,877   358,277
 
 
     Income (loss) from operations        14,462   (22,509)   28,468   (28,674)
 
     Other income (expense), net             375   (12,475)    2,852   (18,664)
 
     Income (loss) before taxes           14,837   (34,984)   31,320   (47,338)
 
     Income tax expense (benefit)          4,454    (6,372)   10,802    (6,838)
 
     Net income (loss)                    10,383   (28,612)   20,518   (40,500)
 
     Deemed dividend related to
      beneficial
        conversion feature of preferred
         stock                           (25,680)       --   (25,680)       --
 
     Preferred stock dividends              (102)       --      (102)       --
 
     Net loss available to
        common shareholders             $(15,399) $(28,612)  $(5,264) $(40,500)
 
 
     Net loss per common share:
         Basic                            $(0.04)   $(0.08)   $(0.01)   $(0.11)
         Diluted                          $(0.04)   $(0.08)   $(0.01)   $(0.11)
 
 
     Weighted average shares:
         Basic                           384,528   368,746   382,317   368,411
         Diluted                         384,528   368,746   382,317   368,411
 
 
      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                                      Apr 30, 2004      Oct 31, 2003
 
     Current assets
         Cash and short-term investments           $636,134          $751,852
         Receivables, net                           214,731           232,492
         Prepaid expenses                            28,732            23,005
         Other current assets                        28,389            23,204
     Total current assets                           907,986         1,030,553
 
     Property, plant and equipment, net             248,448           255,526
     Long-term investments                           52,936            50,948
     Goodwill                                       401,969           213,300
     Intangible assets, net                          50,057            10,800
     Other assets                                     6,298             6,526
 
     Total assets                                $1,667,694        $1,567,653
 
 
     LIABILITIES & STOCKHOLDERS' EQUITY
 
     Current liabilities
         Accounts payable                           $53,405           $50,258
         Accrued compensation                       100,816           101,164
         Other accrued liabilities                  102,606           117,073
         Income taxes payable                        37,911            35,493
         Deferred revenue                           296,115           322,470
     Total current liabilities                      590,853           626,458
 
     Deferred income taxes                           16,458                --
 
     Total liabilities                              607,311           626,458
 
     Minority interests                               6,712             6,725
 
     Preferred stock                                 50,000                --
 
     Stockholders' equity                         1,003,671           934,470
 
     Total liabilities and stockholders'
      equity                                     $1,667,694        $1,567,653
 
 
      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   Fiscal Year-to-Date
                                        Apr 30,   Apr 30,   Apr 30,   Apr 30,
                                          2004      2003      2004      2003
 
     Cash flows from operating
      activities:
         Net income (loss)               $10,383  $(28,612)  $20,518  $(40,500)
         Adjustments to reconcile net
          income (loss) to net
          cash (used) provided by
          operating activities:
           Gain on sale of fixed assets  (1,977)        --    (1,977)     (365)
           Depreciation and
            amortization                  10,940    17,732    27,092    34,984
           Loss on impaired investments      750    13,723     1,896    24,523
           Changes in assets and
            liabilities                  (48,380)  (29,205)  (44,792)  (22,129)
 
         Net cash (used) provided by
          operating activities           (28,284)  (26,362)    2,737    (3,487)
 
     Cash flows from financing
      activities:
          Issuance of common stock, net   20,558     5,900    49,051     7,047
          Issuance of preferred stock     50,000        --    50,000        --
          Payment of preferred stock
           dividend                         (102)       --      (102)       --
 
         Net cash provided by financing
          activities                      70,456     5,900    98,949     7,047
 
     Cash flows from investing
      activities:
         Expenditures for property,
          plant and equipment             (6,547)   (7,925)  (12,013)  (21,777)
         Proceeds from the sale of
          property, plant and equipment    1,977        --     1,977       785
         Short-term investment activity  (45,213)   93,849        53   (72,802)
         Cash paid for SUSE LINUX             --        --  (211,468)       --
         Cash received from SUSE LINUX        --        --    11,170        --
         Other                            (4,758)   (2,760)   (4,865)      771
 
         Net cash (used) provided by
          investing activities           (54,541)   83,164  (215,146)  (93,023)
 
     (Decrease) increase in cash and
      cash equivalents                   (12,369)   62,702  (113,460)  (89,463)
 
     Cash and cash equivalents -
      beginning of period                265,841   311,822   366,932   463,987
 
     Cash and cash equivalents - end of
      period                             253,472   374,524   253,472   374,524
 
     Short-term investments - end of
      period                             382,662   251,873   382,662   251,873
 
     Cash and short-term investments -
      end of period                     $636,134  $626,397  $636,134  $626,397
 
 
      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 April 30, 2004
      Net revenue                            $293,556       $--       $293,556
      Gross profit                            187,114        --        187,114
      Income (loss) from operations            14,462     2,929  (a)    17,391
      Income (loss) before taxes               14,837     3,679  (b)    18,516
 
      Net income (loss)                        10,383     3,408  (c)    13,791
 
       Net income (loss) available to
       common shareholders                    (15,399)   29,190) (d)    13,791
      Diluted net income (loss) per common
       share                                   $(0.04)    $0.07  (d)     $0.03
 
      Fiscal quarter ended January 31,
       2004
      Net revenue                            $267,107       $--       $267,107
      Gross profit                            172,231        --        172,231
      Income (loss) from operations            14,006        --         14,006
      Income (loss) before taxes               16,483     1,145  (e)    17,628
      Net income (loss)                        10,135     1,145  (e)    11,280
      Diluted net income (loss) per common
       share                                    $0.03     $0.00  (e)     $0.03
 
      Fiscal quarter ended April 30, 2003
      Net revenue                            $275,967       $--       $275,967
      Gross profit                            167,196        --        167,196
      Income (loss) from operations           (22,509)   10,792  (f)   (11,717)
      Income (loss) before taxes              (34,984)   25,265  (g)    (9,719)
      Net income (loss)                       (28,612)   21,809  (h)    (6,803)
      Diluted net income (loss) per common
       share                                   $(0.08)    $0.06  (h)    $(0.02)
 
 
      Footnotes related to adjustments:
 
      (a) Reflects restructuring charges of $4.7 million, a gain on the sale of
          a long-lived asset of $2.0 million and integration costs related to
          SUSE of $0.2 million.
 
      (b) Reflects the items in footnote (a) and investment write-downs of $0.8
          million.
 
      (c) Reflects the items in footnotes (a) and (b), and the necessary
          related tax adjustments.
 
      (d) Reflects the items in footnote (a), (b) and (c), the beneficial
          conversion feature of $25.7 million and preferred stock dividends of
          $0.1 million.
 
      (e) Reflects investment write-downs of $1.1 million.
 
      (f) Reflects adjustments to prior restructuring reserves of $8.7 million
          and merger reserves of $2.1 million.
 
      (g) Reflects the items in footnote (f), investment write-downs of $13.7
          million and a loss from the acquisition of minority interest shares
          of $0.8 million.
 
      (h) Reflects the items in footnotes (f) and (g), and the necessary
          related tax adjustments.
 
 
 
 

SOURCE Novell, Inc.
RELATED LINKS
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