Novell Reports Financial Results for Fourth Fiscal Quarter and Full Fiscal Year 2004
Novell, Inc. (NASDAQ:NOVL) today announced financial results for its fourth fiscal quarter ended Oct. 31, 2004.
Consolidated Unaudited Condensed Statements of Operations
Consolidated Unaudited Condensed Balance Sheets
Consolidated Unaudited Condensed Statements of Cashflows Statement of Cash Flows
Unaudited Non-GAAP Adjusted Earnings Information
- 5 percent increase in revenue from year ago period
- Strong cash flow performance
- Exceptional growth in SUSE Linux Enterprise Server business
Novell, Inc. (NASDAQ:NOVL) today announced financial results for its fourth fiscal quarter ended Oct. 31, 2004. For the quarter, Novell reported revenues of $301 million, compared to revenues of $287 million for the fourth fiscal quarter 2003. Net income available to common stockholders in the fourth fiscal quarter 2004 was $13 million, or $0.03 per diluted common share. This compared to a net loss available to common stockholders of $109 million, or $0.29 loss per common share, for the fourth fiscal quarter 2003.
On a non-GAAP basis, adjusted net income available to common stockholders for the fourth fiscal quarter 2004 was $23 million, or $0.06 per diluted common share, which excludes the effect of restructuring charges of $9 million and net investment impairments of $1 million. This compares to non-GAAP adjusted net income available to common stockholders for the fourth fiscal quarter 2003 of $19 million, or $0.05 per diluted common share, which excludes the effect of restructuring charges of $8 million, an in-process research and development charge of $1 million, investment impairments of $2 million and a $119 million charge to increase a valuation allowance for net deferred tax assets. 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.
In the fourth fiscal quarter 2004, foreign currency exchange rates favorably impacted total revenue by approximately $7 million year-over-year. Foreign currency impact to net income was not material. Accrual adjustments in the fourth fiscal quarter 2004 favorably impacted operating income by $10 million. The accruals were originally created for legal, medical and other potential liabilities. Also, reserve adjustments affecting tax expense favorably impacted net income by $6 million.
During the fourth fiscal quarter 2004, Novell recognized revenue of $12 million associated with its SUSE® LINUX business. Recognized revenue from subscriptions to SUSE Linux Enterprise Server in the quarter was $7 million, a sequential increase of 68% from the third fiscal quarter 2004. Sales of subscriptions to SUSE Linux Enterprise Server (SLES) totaled 21,000 units in the quarter. Not included in this number is the effect of three Linux-related enterprise-wide licensing deals with Fortune 100* customers. Under these multi-year agreements, these customers can deploy SLES throughout the enterprise, and the agreements were priced accordingly. We estimate that in the near term these customers may deploy in the range of 4,000 to 6,000 servers and that there is the potential for them to deploy over 25,000 servers over time.
For Novell's full fiscal year 2004, Novell reported revenue of $1.166 billion and net income available to common stockholders of $31 million, or $0.08 per diluted common share. Comparatively, revenue for the full year fiscal 2003 was $1.105 billion and net loss available to common stockholders was $162 million, or $0.44 loss per common share.
“We are pleased that our revenue and net income remain strong during our ongoing transition to a growth company against the backdrop of a challenging IT market,” said Jack Messman, Chairman and CEO of Novell. “Our key growth initiatives of Linux and Identity Management continued their strong performance. In particular, our Linux solutions are allowing us to reach more and more new customers at a pace not seen at Novell for many years. We see no slowdown to the tremendous progress made by Linux technology to date. However, we still have challenges ahead. While we had a strong finish in closing fiscal year 2004, fiscal year 2005 will be another rebuilding year for Novell as we make significant investments in our solutions, systems and people to try to grow our newer businesses in order to counterbalance the continued decline in our NetWare business.”
On the balance sheet, cash and short-term investments were $1.2 billion at Oct. 31, 2004, compared with $1.1 billion at July 31, 2004. Days sales outstanding (DSO) in accounts receivable was 78 days at the end of the fourth fiscal quarter 2004, up from 74 days in the year ago quarter. Deferred revenues were $374 million at the end of the fourth fiscal quarter 2004, up $52 million or 16% year over year. Cash flow from operations was $52 million for the fourth fiscal quarter 2004, down $1 million from a year ago.
On Nov. 8, 2004, Novell announced an agreement with Microsoft to settle potential antitrust litigation related to Novell's NetWare® operating system in exchange for $536 million in cash, which was received today. After estimated transaction costs and income tax payments, the net cash increase is expected to approximate $438 million. A gain of $448 million, the settlement less estimated transaction costs, will be included in operating income in the first fiscal quarter ended Jan. 31, 2005. Book income tax expense related to this settlement is currently estimated at approximately $80 million, which reflects the use of a portion of net operating loss carryforwards, and will be recorded in the same period. The difference between the book tax expense and the estimated $10 million taxes to be paid results from the nature of the carryforwards used.
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 will be broadcast at 5PM ET November 18, 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, December 2. The domestic toll-free replay number is 888-567-0447, and the international replay number is +1-402-998-1802.
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 Current Report on Form 8-K filed with the Securities and Exchange Commission on July 2, 2004. 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. is a leading provider of information solutions that deliver secure identity management (Novell Nsure®), Web application development (Novell exteNd) and cross-platform networking services (Novell Nterprise), all supported by strategic consulting and professional services (Novell NgageSM). Active in the open source community with its Ximian® and SUSE 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.
Novell, NetWare, Nsure and Ximian are registered trademarks; exteNd 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 business. *All third-party trademarks are the property of their respective owners.
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