Novell Reports Financial Results for Third Fiscal Quarter 2007 - Linux Platform Products revenue grew 77 percent year-over-year

- Operating results improved year-over-year



    WALTHAM, Mass., Aug. 29 /PRNewswire-FirstCall/ -- Novell, Inc. (Nasdaq:  
 NOVL) today announced financial results for its third fiscal quarter ended
 July 31, 2007. For the quarter, Novell reported net revenue of $243
 million, compared to net revenue of $236 million for the third fiscal
 quarter 2006. The loss from operations for the third fiscal quarter 2007
 was $10 million, compared to a loss from operations of $40 million for the
 third fiscal quarter 2006. The loss available to common stockholders from
 continuing operations in the third fiscal quarter 2007 was $3 million, or
 $0.01 loss per common share. This compares to a loss available to common
 stockholders from continuing operations of $17 million, or $0.05 loss per
 common share, for the third fiscal quarter 2006. Foreign currency exchange
 rates favorably impacted total revenue by approximately $4 million and
 negatively impacted the loss from operations by $1 million year-over-year.
     On a non-GAAP basis, adjusted income from operations for the third
 fiscal quarter 2007 was $12 million. This compares to non-GAAP adjusted
 income from operations of $6 million in the year-ago quarter. Non-GAAP
 adjusted income available to common stockholders from continuing operations
 for the third fiscal quarter 2007 was $16 million, or $0.05 per adjusted
 diluted common share. This compares to non-GAAP adjusted income available
 to common stockholders from continuing operations of $24 million, or $0.06
 per adjusted diluted common share, for the third fiscal quarter 2006.
     For the third fiscal quarter 2007, Novell reported $22 million of
 revenue from Open Platform Solutions of which $21 million was from Linux*
 Platform Products, up 77 percent year-over-year. Linux Platform Products
 invoicing was $38 million, up 95 percent year-over-year. Revenue from
 Identity and Security Management was $30 million of which Identity and
 Access Management was $27 million, up 2 percent year-over-year. Revenue
 from Systems and Resource Management was $35 million, up 4 percent
 year-over-year. Revenue from our Workgroup business unit declined 2 percent
 from the year-ago period to $83 million.
     "We are encouraged by our Linux performance and the market's continued
 enthusiasm for our desktop to datacenter strategy. In addition, we are
 pleased with our operating margin expansion and progress on our strategic
 initiatives," said Ron Hovsepian, president and CEO of Novell.
     Cash, cash equivalents and short-term investments were $1.8 billion at
 July 31, 2007, consistent with last quarter. Days sales outstanding in
 accounts receivable was 74 days at the end of the third fiscal quarter
 2007, down from 88 days at the end of the year-ago quarter. Total deferred
 revenue was $734 million at the end of the third fiscal quarter 2007, up
 $343 million, or 88 percent, from July 31, 2006. Cash flow from operations
 was $26 million for the third fiscal quarter 2007, compared to $36 million
 in the third fiscal quarter 2006.
     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.
     Financial Outlook
 
           Novell management issues the following financial guidance:
 
     For the full fiscal year 2007:
     --  Net revenue is expected to be between $925 million and $955 million,
         in line with prior guidance.
     --  On a non-GAAP basis, adjusted income from operations is expected to
         exceed previously stated guidance of between break-even and
         $10 million.
     --  Novell reiterates fiscal 2007 non-GAAP exit rate operating margin, as
         defined below, of between 5 and 7 percent.
     Non-GAAP exit rate operating margin is defined as an annualized run
 rate expense level at the end of the period that, when compared to the full
 fiscal year's revenue, would result in pro forma operating margin for the
 year.
     Non-GAAP Financial Measures
     We supplement our consolidated unaudited condensed financial statements
 presented in accordance with GAAP with certain non-GAAP financial measures.
 These non-GAAP measures include adjusted income from operations, adjusted
 diluted income available to common stockholders from continuing operations,
 and adjusted diluted income per common share from continuing operations
 based on an adjusted number of diluted weighted average shares. We provide
 non-GAAP financial measures to (i) enhance an overall understanding of our
 current financial performance and prospects for the future and (ii) enable
 investors to evaluate our performance in the same way that management does.
 Management uses these non-GAAP adjusted financial measures to evaluate
 performance, allocate resources, and determine commissions and bonuses. The
 non-GAAP adjusted financial measures do not replace the presentation of our
 GAAP financial results, but they eliminate expenses and gains that are
 unusual, that are excluded from analysts' consensus estimates, and/or that
 arise outside of the ordinary course of business.
     These non-GAAP financial measures exclude items such as, but not
 limited to, stock-based compensation expenses, restructuring expenses,
 asset impairments, litigation judgments and settlements, the write-off of
 acquired in-process research and development, and gains (losses) on the
 sale of business operations, long-term investments, and property, plant and
 equipment.
     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 ET August 29, 2007, 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 Novell Web site approximately two
 hours after its conclusion and will remain on the Web site until Sept. 14,
 2007. The call will also be available for telephone playback through
 midnight ET, Sept. 14, 2007. 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 10920968.
     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" within
 the meaning of the Private Securities Litigation Reform Act, 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 and Access Management and Linux
 Platform Products. 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 realize the benefits anticipated from the Microsoft
 transaction, Novell's ability to achieve its expense targets, Novell's
 success in executing its Linux Platform Products, Identity and Access
 Management, and Systems and Resource Management strategies, Novell's
 ability to take a competitive position in the Linux Platform Products,
 Identity and Access Management, and Systems 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,
 Novell's ability to integrate acquired operations and employees, and the
 other factors described in Novell's Annual Report on Form 10-K filed with
 the Securities and Exchange Commission on May 25, 2007. 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
 except as required by the securities laws.
     About Novell
     Novell, Inc. (Nasdaq:   NOVL) delivers infrastructure software for the
 Open Enterprise. Novell is a leader in enterprise-wide operating systems
 based on Linux and open source and provides the enterprise management
 services required to operate mixed IT environments. Novell helps customers
 minimize cost, complexity and risk, allowing them to focus on innovation
 and growth. For more information, visit http://www.novell.com.
     * Novell is a registered 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-to-Date
                                         Jul 31,   Jul 31,   Jul 31,   Jul 31,
                                           2007      2006      2007      2006
     Net revenue:
       Software licenses                $44,748   $45,435  $124,822  $127,600
       Maintenance and subscriptions    124,832   117,538   366,403   361,899
       Services (1)                      73,555    73,298   215,662   216,462
     Total net revenue                  243,135   236,271   706,887   705,961
 
     Cost of revenue:
       Software licenses                  5,286     4,984    13,773    13,570
       Maintenance and subscriptions     12,498    13,137    35,423    37,794
       Services                          54,281    58,537   162,973   179,396
     Total cost of revenue               72,065    76,658   212,169   230,760
 
     Gross profit                       171,070   159,613   494,718   475,201
 
     Operating expenses:
       Sales and marketing               84,591    89,703   263,367   266,871
       Product development               54,207    45,993   153,236   136,836
       General and administrative        28,647    25,605    82,581    80,172
     Total operating expenses before
      other                             167,445   161,301   499,184   483,879
 
     Income (loss) from operations
      before other operating expenses     3,625    (1,688)   (4,466)   (8,678)
 
     Other operating expenses (2)        13,780    37,904    37,342    35,599
 
     Loss from operations               (10,155)  (39,592)  (41,808)  (44,277)
 
     Other income, net                   15,446    10,781    47,246    36,602
 
     Income (loss) from continuing
      operations, before income taxes     5,291   (28,811)    5,438    (7,675)
 
     Income tax expense (benefit)         8,711   (11,683)   20,927     5,527
 
     Loss from continuing operations     (3,420)  (17,128)  (15,489)  (13,202)
 
     Income (loss) from discontinued
      operations, before income taxes         -    12,453   (10,137)   15,346
     Income tax expense (benefit) on
      discontinued operations                 -       849       (69)    2,461
     Income (loss) from discontinued
      operations                              -    11,604   (10,068)   12,885
 
     Loss before cumulative effect of a
      change in accounting principle     (3,420)   (5,524)  (25,557)     (317)
 
     Cumulative effect of a change in
      accounting principle                    -      (897)        -      (897)
 
     Net loss                           $(3,420)  $(6,421) $(25,557)  $(1,214)
 
     Loss available to common
     stockholders:
 
       Continuing operations            $(3,420) $(17,175) $(15,489) $(13,343)
 
       Net loss                         $(3,420)  $(6,468) $(25,557)  $(1,355)
 
     Loss per share available
      to common stockholders:
 
       Continuing operations             $(0.01)   $(0.05)   $(0.04)   $(0.04)
 
       Net loss                          $(0.01)   $(0.02)   $(0.07)   $(0.00)
 
     Weighted average shares            348,177   340,127   346,731   368,106
 
     (1) Services includes consulting, technical support and training services
 
     (2) See Page 8 of 13 for a detail of other operating expenses.
 
     Certain reclassifications, none of which affected net loss, were made to
     prior period amounts in order to conform to the current period's
     presentation.
 
     Stock-based compensation expense recorded in above amounts:
 
 
                                      Fiscal Quarter Ended  Fiscal Year-to-Date
                                         Jul 31,   Jul 31,   Jul 31,   Jul 31,
                                           2007      2006      2007      2006
 
     Cost of revenue                     $1,257    $1,034    $3,241    $3,019
       Sales and marketing                2,831     2,819     7,091     9,394
       Product development                2,684     1,954     7,370     6,341
       General and administrative         2,087     1,880     5,787    10,095
     Total operating expenses             7,602     6,653    20,248    25,830
     Continuing operations                8,859     7,687    23,489    28,849
     Discontinued operations                  -         -         -       263
       Total stock-based compensation
        expense                          $8,859    $7,687   $23,489   $29,112
 
 
 
                                   Novell, Inc.
                 Consolidated Unaudited Condensed Balance Sheets
                                  (In thousands)
 
                                               Jul 31, 2007      Oct 31, 2006
     Assets
 
     Current assets:
         Cash and cash equivalents                 $957,379          $675,787
         Short-term investments                     865,259           790,500
         Receivables, net                           200,831           233,986
         Prepaid expenses                            55,593            32,328
         Other current assets                        31,931            28,524
     Total current assets                         2,110,993         1,761,125
 
     Property, plant and equipment, net             180,520           184,084
     Long-term investments                                -             2,263
     Goodwill                                       415,471           424,701
     Intangible assets, net                          32,613            40,404
     Deferred income taxes                            4,387             4,770
     Other assets                                    30,156            32,376
 
     Total assets                                $2,774,140        $2,449,723
 
 
     Liabilities and Stockholders' Equity
 
     Current liabilities:
         Accounts payable                           $36,131           $44,419
         Accrued compensation                       102,080           103,710
         Other accrued liabilities                  100,352           106,837
         Income taxes payable                        48,743            49,600
         Deferred revenue                           456,253           380,979
     Total current liabilities                      743,559           685,545
 
     Deferred income taxes                            5,642             4,186
     Long-term deferred revenue                     277,642            45,992
     Senior convertible debentures                  600,000           600,000
 
     Total liabilities                            1,626,843         1,335,723
 
     Preferred stock                                      -             9,350
 
     Stockholders' equity                         1,147,297         1,104,650
 
     Total liabilities and stockholders'
      equity                                     $2,774,140        $2,449,723
 
     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-to-Date
                                          Jul 31,   Jul 31,   Jul 31,   Jul 31,
                                            2007      2006      2007      2006
 
     Cash flows from operating
      activities:
       Net loss                          $(3,420)  $(6,421) $(25,557)  $(1,214)
       Adjustments to reconcile net
        loss to net cash provided by
        operating activities:
         Stock-based compensation
          expense                          8,859     7,687    23,489    29,112
         Stock-based compensation
          modification expense               673         -     2,475         -
         Depreciation and amortization     9,690    11,530    31,163    33,908
         Changes in accounts receivable
          allowances                        (427)      243      (878)   (4,660)
         Utilization of previously
          reserved acquired net operating
          losses                              10       340     4,835     3,860
         Purchased in-process research and
          development                          -         -         -     2,110
         Net gain on sale of property,
          plant and equipment                  -    (3,778)        -    (5,968)
         Loss on sale of Japan consulting
          group                                -     8,273         -     8,273
         Executive termination benefits,
          non-cash                             -     9,409         -     9,409
         Impairment of long-term
          investments, net of gains on sale    -       128    (1,738)      626
         Gain on sale of venture capital
          funds                                -         -    (3,591)        -
         Impairment of intangible assets
          and goodwill                     3,851         -    14,699         -
         Gain on sale of discontinued
          operations, before taxes             -   (11,960)     (628)  (11,960)
         Cumulative effect of a change in
          accounting principle                 -       897         -       897
         Changes in current assets and
          liabilities, excluding the
          effect of acquisitions and
          dispositions                     6,424    19,252   300,324   (27,616)
 
       Net cash provided by operating
        activities                        25,660    35,600   344,593    36,777
 
     Cash flows from financing
      activities:
         Issuance of common stock, net     6,248     3,592    14,375    21,674
         Excess tax effects from stock-
          based compensation               1,389    (1,028)    5,452     4,258
         Payment of cash dividends on
          Series B Preferred Stock             -       (94)       (5)     (141)
         Repurchases of common stock,
          retired                              -  (132,521)        -  (400,000)
 
       Net cash provided (used) by
        financing activities               7,637  (130,051)   19,822  (374,209)
 
     Cash flows from investing
      activities:
         Purchases of property, plant
          and equipment                   (4,971)   (4,986)  (17,479)  (19,540)
         Proceeds from the sale of
          property, plant and equipment        -    17,734         -    24,992
         Proceeds from repayment of note
          receivable                           -         -         -     9,092
         Short-term investment activity  (24,913)   (1,223)  (72,333)   45,035
         Long-term investment activity         -     1,586     1,738    (1,428)
         Cash paid for equity investment
          in Open Invention Network, LLC       -         -         -    (4,225)
         Proceeds from the sale of
          Celerant, net of cash divested       -    37,922         -    37,922
         Proceeds from the sale of Salmon,
          net of cash divested                 -         -     2,749         -
         Proceeds from sale of venture
          capital funds                        -         -     4,964         -
         Cash paid for acquisition of
          e-Security, net of cash acquired     -         -         -   (71,550)
         Cash paid for acquisition of
          Redmojo, net of cash acquired        -         -    (9,727)        -
         Purchase of intangible assets      (300)   (1,159)   (1,175)   (1,159)
         Other                             3,274     3,219     8,440     7,771
 
       Net cash (used) provided by
        investing activities             (26,910)   53,093   (82,823)   26,910
 
     Increase (decrease) in cash and
      cash equivalents                     6,387   (41,358)  281,592  (310,522)
 
     Cash and cash equivalents -
      beginning of period                950,992   542,074   675,787   811,238
 
     Cash and cash equivalents -
      end of period                     $957,379  $500,716  $957,379  $500,716
 
 
 
                                        Novell, Inc.
                 Unaudited Non-GAAP Adjusted Income (Loss) From Operations
                           (In thousands, except per share data)
 
 
                                      Fiscal Quarter Ended  Fiscal Year-to-Date
                                          Jul 31,   Jul 31,   Jul 31,   Jul 31,
                                            2007      2006      2007      2006
 
       GAAP loss from operations        $(10,155) $(39,592) $(41,808) $(44,277)
 
         Adjustments:
 
           Stock-based compensation
            expense                        8,859     7,687    23,489    28,849
 
           Other operating expenses
            (income):
             Restructuring expenses
              (benefit)                    6,024         -    17,898    (1,000)
             Purchased in-process
              research and development         -         -         -     2,110
             Gain on sale of property,
              plant and equipment              -    (3,778)        -    (5,968)
             Litigation-related expense
              (income)                       450    24,000       (93)   22,775
             Loss on sale of Japan
              consulting group                 -     8,273         -     8,273
             Executive termination
              benefits, non-cash               -     9,409         -     9,409
             Impairment of intangible
              assets                       3,851         -     3,851         -
             Stock-based compensation
              review expenses              3,455         -    15,686         -
               Sub-total                  13,780    37,904    37,342    35,599
 
         Total operating adjustments      22,639    45,591    60,831    64,448
 
       Non-GAAP income from operations   $12,484    $5,999   $19,023   $20,171
         Operating Margin %                  5.1%      2.5%      2.7%      2.9%
 
 
 
                                       Novell, Inc.
                       Unaudited Non-GAAP Adjusted Net Income (Loss)
                           (In thousands, except per share data)
 
 
                                      Fiscal Quarter Ended  Fiscal Year-to-Date
                                          Jul 31,   Jul 31,   Jul 31,   Jul 31,
                                            2007      2006      2007      2006
 
       GAAP loss available to common
        stockholders from continuing
        operations                       $(3,420) $(17,175) $(15,489) $(13,343)
 
           Operating adjustments
            (detailed above)              22,639    45,591    60,831    64,448
 
           Non-operating expenses
            (income) adjustments:
             Gain on sale of venture
              capital funds                    -         -    (3,591)        -
             Impairment of long-term
              investments, net of gains
              on sale                          -       128    (1,738)      626
               Sub-total                       -       128    (5,329)      626
 
         Total pre-tax adjustments        22,639    45,719    55,502    65,074
 
         Income tax adjustments           (3,075)   (6,064)   (4,633)   (6,768)
 
         Diluted income adjustments:
           Debt interest expense               -     1,493         -     4,479
           Allocation of earnings to
            preferred stockholders             -       (98)        -      (182)
 
         Total net adjustments            19,564    41,050    50,869    62,603
 
       Non-GAAP diluted income available
        to common stockholders from
        continuing operations            $16,144   $23,875   $35,380   $49,260
 
       GAAP loss per common share from
        continuing operations             $(0.01)   $(0.05)   $(0.04)   $(0.04)
           Total adjustments detailed
            above                           0.06      0.11      0.14      0.15
 
       Non-GAAP diluted income per
        common share from continuing
        operations                         $0.05     $0.06     $0.10     $0.11
 
       GAAP weighted average shares
        from continuing operations       348,177   340,127   346,731   368,106
 
         Change in dilution from
          assumed:
           Conversion of convertible
            debt                               -    52,074         -    52,074
           Adjustments for assumed
            stock option exercises         6,622     5,601     5,835     9,980
 
       Non-GAAP diluted weighted
        average shares                   354,799   397,802   352,566   430,160
 
       Revisions were made to prior period amounts in order to conform to the
       current period's presentation.
 
 

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

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