Novell Reports Second Fiscal Quarter 2001 Results
Novell, Inc. (NASDAQ:NOVL) today reported total revenue of $241 million for its second fiscal quarter ended April 30, 2001, and a loss of $0.48 cents per share, largely reflecting a $142 million write-down of equity investments against its second quarter results.
Novell, Inc. (NASDAQ:NOVL) today reported total revenue of $241 million for its second fiscal quarter ended April 30, 2001, and a loss of $0.48 cents per share, largely reflecting a $142 million write-down of equity investments against its second quarter results. Excluding the write-down, the company posted a loss of $0.03 per share for its second fiscal quarter 2001.
"Today's announcement reflects fall-out from the Internet sector, as well as the continued decline in enterprise IT spending. Also, transition issues in our move to solution selling inhibited the company's performance," said Novell® chairman and chief executive officer, Eric Schmidt. "We plan to return to profitability by the end of fiscal 2001 through job reductions, and additional savings in the areas of travel, advertising and recruiting costs.
"Despite our disappointing overall performance, there is increasing evidence that Net services based on scalable directories will provide the strategic foundation for IT solutions over the next several years. By early 2002, we intend to complete Novell's move to selling Web-based solutions and return to overall revenue growth."
The write-down of impaired equity investments in Novell's investment portfolio relates to what the company believes are other than temporary declines in market value of these investments. These investments include a $100 million investment in marchFIRST, as well as $42 million for other equity investments in both public and non-public Internet companies.
The results for the second fiscal quarter compare to revenue of $302 million, and diluted earnings per share of $0.09 in the same period a year ago. In the second fiscal quarter of last year, the company's results included a one-time $35 million royalty payment which contributed $0.07 per share to earnings.
For the first six months of fiscal 2001, Novell reported revenue of $486 million and a net loss of $159 million, or $0.50 per share. Excluding the write-down and the accounting change in the first quarter, the net loss for the first six months of 2001 was $6 million, or $0.02 per share. In fiscal 2000, the company reported revenue of $618 million and net income of $76 million or $0.22 per share.
Review of Q2 Performance
In Novell's second fiscal quarter, the company's large network site-license business was up sequentially from the first quarter by five percent to $173 million, or 72 percent of total revenue. Novell's traditional packaged software license sales for smaller networks continued its decline, down from the first quarter by 25 percent, to $35 million, or 14 percent of total Novell revenue.
Sequentially, total revenue in the second fiscal quarter of 2001 declined two percent from the first quarter of fiscal 2001.
>>> Revenue by product category: Net Management Services revenue declined three percent sequentially from the first fiscal quarter to $181 million in the second fiscal quarter. Net Directory Services revenue was $8 million, flat with the first fiscal quarter 2001. Net Content Services, which represents revenue from Volera, Inc., the new Novell subsidiary company, was also flat at $2 million in the second fiscal quarter. Customer service, education and consulting revenue was $50 million, up three percent sequentially from the first fiscal quarter 2001.
>>> Revenue by geography: During the second fiscal quarter 2001 revenue in the United States declined four percent from the first quarter of fiscal 2001, to $133 million. Revenue in other regions was up slightly from the first to second fiscal quarter. In the Europe, Middle East and Africa region, revenue was $71 million, Asia Pacific revenue was $21 million and revenue from Canada and the Americas was $16 million.
>>> Expenses: Operating expenses were up $4 million to $197 million. The increase was accounted for by the timing of normal wage increases, and separation and funding costs associated with the creation of Volera as a new majority-owned subsidiary operating company of Novell.
>>> Other income (loss), net contributed a loss of $132 million, due to the write-down of investments and a decline in interest income. In the first fiscal quarter of 2001, Novell reported $18 million in other income.
On the balance sheet, cash and short term investments were $639 million at the end of the second quarter, compared with $698 million at the October 2000 fiscal year-end. Cash flow from operations for the quarter was a negative $2 million largely due to the company's loss. Novell was precluded from repurchasing shares of its stock during the quarter because of the pending acquisition of Cambridge Technology Partners.
The company expects to return to profitability through planned job reductions, and additional savings in the areas of travel, advertising and recruiting costs. Before the end of May, the company plans a job reduction of approximately five percent from within its worldwide workforce of 5,200 full-time and contract employees.
Novell is on track for completing its acquisition of Cambridge Technology Partners during Novell's third fiscal quarter. Integration planning is underway within and between both companies. Cambridge will bring an eSolutions oriented talent and knowledge base to Novell. Novell intends to enhance its ability to support sales of Web-based solutions by other IT services organizations and systems integration partners, as well as, through its own sales organization.
Conference Call Notification with Web Access Detail
A live Web cast of a Novell conference call to discuss the fourth fiscal quarter results with financial analysts will be broadcast at 5 p.m. EDT May 22, on the Quarterly Results page at Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. Through midnight, May 29, an audio replay of the call will be available on the Quarterly Results page of Novell's Investor Relations Web page at: http://www.novell.com/company/ir/qresults/. A telephone replay of the conference call will be available after 6:30 p.m. EDT May 22, through midnight, May 29. To access the playback dial: 888-566-0787.
Forward Looking Statements
This press release contains forward-looking statements that involve a number of risks and uncertainties, as well as assumptions about changing markets, marketing efforts, near and long-term objectives, potential new business, strategies, new methods of distribution, Net services, anticipated demand for new offerings from markets that Novell is entering, future business performance and outlook. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. The risks and uncertainties include the following: business conditions and the general economy; changes in distribution choices and channel partners; competitive factors; sales and marketing execution; shifts in technologies or market demand. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's fiscal 2000 report on Form 10-K, as well as in its annual report and Form 10-Q filings.
Novell, Inc. (NASDAQ:NOVL), is the leading provider of Net services software that delivers services to secure and power all types of networks the Internet, intranets, and extranets; wired to wireless; corporate and public across leading operating systems. Novell's Net services software provides the foundation for one Net a single global network that supports new applications and forms of business. Worldwide channel, consulting, education and technical support programs, along with strategic alliances, combine Novell Net services software with third-party products and services to form complete Net solutions.
For information on Novell's complete range of products and services, contact Novell's Customer Response Center at (888) 321-4CRC (4272), or visit Novell's Web site at http://www.novell.com. Press may access Novell announcements and company information on the World Wide Web at http://www.novell.com/pressroom. In addition, detailed comparisons between Novell products and competitive offerings from other vendors are available on the Web at http://www.novell.com/competitive.
Novell is a registered trademarks of Novell, Inc. in the United States and other countries. All third party trademarks are the property of their respective owner.
|Consolidated Unaudited Condensed Balance Sheets|
|ASSETS||Apr 30, 2001||Oct 31, 2000|
|Cash and short-term investments||$ 638,607||$ 698,193|
|Receivables, net *||138,882||196,672|
|Deferred & refundable income taxes||55,473||60,109|
|Other current assets||19,303||23,644|
|Total current assets||881,821||1,007,359|
|Property, plant and equipment, net||276,291||290,104|
|LIABILITIES & SHAREHOLDERS' EQUITY|
|Accounts payable||$ 75,837||$ 85,050|
|Accrued marketing liabilities||12,876||13,632|
|Other accrued liabilities||55,887||59,644|
|Income taxes payable||15,136||39,043|
|Total current liabilities||423,392||455,078|
|Total liabilities and shareholders' equity||$1,569,023||$1,712,346|
|* Receivables, net include trade receivables less allowances. All other non-trade receivables are included in other current assets.|
|Consolidated Unaudited Condensed Statements of Income|
|(In thousands, except per share data)|
|Fiscal Quarter Ended||Year-to-Date|
|Apr 30, 2001||Apr 30, 2000||Apr 30, 2001||Apr 30, 2000|
|Net sales||$ 240,755||$ 302,349||$ 485,790||$ 618,392|
|Cost of sales||66,192||83,742||132,054||162,469|
|Sales and marketing||118,206||125,392||239,953||239,048|
|General and administrative||23,779||24,728||45,001||43,921|
|Total operating expenses||196,548||210,368||389,005||401,154|
|Income (loss) from operations||(21,985)||8,239||(35,269)||54,769|
|Other income, net||(132,191)||34,845||(114,360)||50,586|
|Income before taxes||(154,176)||43,084||(149,629)||105,355|
|Net income before accounting change||(151,311)||31,020||(148,037)||75,855|
|Cumulative effect of accounting change, net of tax||-||-||(11,048)||-|
|NET INCOME (LOSS)||$ (151,311)||$ 31,020||$ (159,085)||$ 75,855|
|Net income (loss) per share:|
|Before cumulative effect of accounting change||$ (0.48)||$ 0.09||$ (0.46)||$ 0.23|
|Cumulative effect of accounting change||-||-||(0.03)||-|
|$ (0.48)||$ 0.09||$ (0.50)||$ 0.23|
|Before cumulative effect of accounting change||$ (0.48)||$ 0.09||$ (0.46)||$ 0.22|
|Cumulative effect of accounting change||-||-||(0.03)||-|
|$ (0.48)||$ 0.09||$ (0.50)||$ 0.22|
|Weighted average shares:|
|Note: Certain reclassifications, none of which affect net income, have been made to prior period's amounts in order to conform to the current year's presentation.|