Novell reports third quarter fiscal 2003 results
Novell, Inc. (NASDAQ:NOVL) today announced financial results for its third fiscal quarter ended July 31, 2003. For the quarter, Novell reported revenue of $283 million, compared to revenue of $282 million for the third fiscal quarter 2002, and $276 million for the second fiscal quarter 2003. Net loss in the third fiscal quarter 2003 was $12 million, or $0.03 per share. This compared to net income of $10 million, or $0.03 per share, for the third fiscal quarter 2002.
For the first nine months of fiscal 2003, Novell reported revenue of $819 million and a net loss of $53 million, or $0.14 per share. For the first nine months of fiscal 2002, the company reported revenue of $834 million and a net loss of $155 million, or $0.43 per share.
On a non-GAAP basis, adjusted net income for the third fiscal quarter 2003 was $7 million, or $0.02 per share, which excludes a $26 million restructuring charge, a $24 million charge for impaired intangible assets, $8 million in charges for impaired investments, a gain on the sale of real estate of approximately $25 million, and the related tax effects of these items. This compares to non-GAAP adjusted net income for the third quarter last year of $13 million, or $0.04 per share, which excludes a $3 million charge for purchased in-process research and development. 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.
During the quarter, Novell made decisions to lower its annual operating expense by approximately $100 million, primarily through a workforce reduction of 10 percent, or approximately 600 positions. The majority of the reductions were made by quarter end, lowering total employment worldwide to approximately 5,700. Novell expects this workforce reduction to account for approximately $75 million of the anticipated savings in operating expense, with the full benefit from the reduction being gained in the first fiscal quarter 2004. An additional $25 million in annualized savings is expected from lower levels of non-salary related operating expense.
"We are encouraged by our third quarter results," said Jack Messman, Novell chairman, president and chief executive officer. "We took significant steps to improve Novell's business performance through cost-cutting measures intended to enhance our profitability beginning in our current fourth quarter. Novell also continued to gain major new contracts based on the importance customers place on secure identity management and application integration solutions. The combination of these new solutions, our continued investment in NetWare® development, expanding support for open standards and Linux, and the growing importance of secure Web services, strengthens Novell overall.
"In the third quarter, Novell also made important announcements regarding our Linux initiatives and the significant growth opportunities we see from this market," Messman continued. "Novell is not diminishing support for its NetWare product line. We are adding Linux. Novell plans to deliver a full range of solutions to help customers maximize the value of investments in Linux and open source. We are very pleased with positive customer and industry response which included decisions by Dell Computer, Hewlett-Packard and IBM to offer Novell's Linux solutions to their customers."
In June, the company announced Novell® Nterprise™ Linux Services with file, print, messaging, directory and management services as an integrated package that runs on Linux. Beta testing began in late July. It is due to ship from Novell and its partners by calendar year-end.
Novell added to its Linux initiative on August 4, days after the close of its third quarter, by acquiring Ximian, Inc., the leading provider of desktop and server solutions that enable enterprise Linux adoption. Ximian, a small private company with approximately 70 employees, becomes a product business unit within Novell. Novell and Ximian share an objective to drive Linux adoption among enterprise level decision makers for mission critical applications.
Among the larger contracts for software and services in the quarter, Novell Nsure™ identity management and Nterprise™ solution customers included the State of South Carolina, Pemex, the EnCana Corporation, the State of Georgia and the Kuala Lumpur Stock Exchange.
During the third fiscal quarter, identity management and secure Web services software had strong growth, up 34 percent year-over-year to total $26 million in the third quarter. Novell brings these solutions to market under the Nsure and exteNd brands. Cross-platform services software, marketed under the Nterprise brand, declined six percent year-over-year to $144 million. Total software license and maintenance revenue was down one percent year-over-year to $170 million.
Revenue from worldwide services branded as NgageSM, including IT consulting and other customer services, declined three percent year-over-year to $76 million. Celerant management consulting revenue was up 16 percent year-over-year to $37 million.
By geography, revenue in the third fiscal quarter from the United States was $129 million, down 10 percent from the same period in the prior year. The Europe, Middle East and Africa region contributed $113 million in revenue, up 11 percent year-over-year. Revenue from Asia Pacific, including Japan, was $23 million, up 15 percent year-over-year. Canada and Latin America contributed $17 million, up two percent year-over-year, as revenue growth in Canada was offset by declines in Latin America.
On the balance sheet, cash and short-term investments were $739 million at the end of the third fiscal quarter, compared with $636 million at the October 2002 fiscal year end. Novell received approximately $124 million in cash during the quarter from a previously announced sale of real estate. Cash flow from operations during the quarter was a positive $5 million. For the trailing four quarters, cash flow from operations was a positive $35 million. Days sales outstanding in accounts receivable (DSO) was 70 days, up from 61 days in the prior quarter. Deferred revenue was $296 million, up 23 percent year-over-year. Both the increases in DSO and deferred revenue largely reflect the timing of renewal billings for prepaid software maintenance that will be recognized in future periods. Maintenance revenue is associated with Novell's large network site license business.
A summary of Novell's vision, mission and strategy can be accessed on the Novell 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 with financial analysts will be broadcast at 5 PM EDT August 21 from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. Until September 4, an audio replay of the call will be available from the same page. A telephone replay of the conference call will be available after 7:30 PM EDT August 21, through September 4, at 888-446-2545. 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 the company's 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 integrate acquired operations and employees, Novell's ability to deliver on its one Net vision of the Internet, Novell's ability to take a competitive position in the Web services 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 2002 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.
Novell, Inc. (Nasdaq: NOVL) delivers Software for the Open Enterprise™. 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.
Novell and NetWare 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.* All third-party trademarks are the property of their respective owners.