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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. | August 29, 2007

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® 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 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.


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