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Novell Reports Financial Results for Second Fiscal Quarter 2008

  • Product revenue increased 7% year-over-year
  • Improved operating margin year-over-year
  • WALTHAM, Mass. | May 29, 2008

    Novell, Inc. (NASDAQ: NOVL) today announced financialresults for its second fiscal quarter ended April 30, 2008. For the quarter, Novell reported net revenueof $236 million. This compares to net revenue of $232 million for the second fiscal quarter 2007.Income from operations for the second fiscal quarter 2008 was $2 million, compared to a loss fromoperations of $12 million for the second fiscal quarter 2007. Income from continuing operations inthe second fiscal quarter 2008 was $6 million, or $0.02 per share. This compares to a loss fromcontinuing operations of $1 million, or $0.00 loss per share, for the second fiscal quarter 2007.Foreign currency exchange rates favorably impacted revenue by $8 million, unfavorably impactedoperating expenses by $9 million and negatively impacted income from operations by $1 million yearover-year.

    On a non-GAAP basis, income from operations for the second fiscal quarter 2008 was $16 million.This compares to non-GAAP income from operations of $9 million in the year-ago quarter. Non-GAAP income from continuing operations for the second fiscal quarter 2008 was $21 million, or$0.06 per share. This compares to non-GAAP income from continuing operations of $16 million, or$0.05 per share, for the second fiscal quarter 2007.

    For the second fiscal quarter 2008, Novell reported $30 million of product revenue from OpenPlatform Solutions of which $29 million was from Linux* Platform Products, up 31% year-over-year.Product revenue from Identity and Security Management was $31 million of which Identity andAccess Management was $27 million, up 13% year-over-year. Product revenue from Systems andResource Management was $41 million, up 15% year-over-year. Workgroup product revenue of $92million was down 1% year-over-year.

    “Our business continues to gain momentum, with strong product revenue growth in Linux, Identityand Systems and Resource Management,” said Ron Hovsepian, President and CEO of Novell. “Weare encouraged by our results and remain confident we will achieve our financial objectives for fiscal2008.”

    Cash, cash equivalents and short-term investments were $1.4 billion at April 30, 2008, down from$1.8 billion in the year-ago quarter, primarily due to the acquisition of PlateSpin and the repurchase ofa portion of our debentures. Days sales outstanding in accounts receivable was 66 days at the end ofthe second fiscal quarter 2008, up from 64 days at the end of the year-ago quarter. Total deferredrevenue was $702 million at the end of the second fiscal quarter 2008, up from $700 million at the endof the year-ago quarter. Cash flow from operations was a negative $18 million for the second fiscalquarter 2008. This compares to negative cash flow from operations of $29 million in the second fiscalquarter 2007.

    During the quarter, Novell repurchased a portion of its outstanding 0.5% senior convertible debenturesdue 2024. To date, $135 million of cash has been used for these activities. Novell has notrepurchased any shares of common stock under the share repurchase program that it announced onMay 13, 2008.

    Full details on Novell's reported results, including a reconciliation of the non-GAAP results, areincluded in the financial schedules that are a part of this release.

    Financial Outlook

    Novell management reiterates the following financial guidance:

    For the full fiscal year 2008:
    • Net revenue is expected to be between $940 million and $970 million.
    • Non-GAAP operating margin is expected to be between 7% and 9%, excluding all acquisitionrelated intangible asset amortization.

    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 ETMay 29, 2008, from Novell's Investor Relations Web page:
    http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is866-335-5255, 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 willremain on the Web site until June 13, 2008. The call will also be available for telephone playbackthrough midnight ET, June 13, 2008. The domestic toll-free replay number is 800-642-1687, and theinternational replay number is +1-706-645-9291. Replay listeners must enter conference ID number45769805.

    A copy of this press release is posted on Novell's Web site at: http://www.novell.com/company/ir/qresults/.

    Non-GAAP Financial Measures

    We supplement our consolidated unaudited condensed financial statements presented in accordance withGAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted incomefrom operations, operating margin, income from continuing operations, net income, income per share fromcontinuing operations and net income per share both of which are based on an adjusted number of dilutedweighted average shares. We provide non-GAAP financial measures to enhance an overall understanding ofour current financial performance and prospects for the future and enable investors to evaluate ourperformance in the same way that management does. Management uses these same non-GAAP financialmeasures to evaluate performance, allocate resources, and determine bonuses. The non-GAAP financialmeasures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gainsthat are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinarycourse of business, such as, but not limited to, stock-based compensation expenses, acquisition-relatedintangible asset amortization, 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 businessoperations, long-term investments, and property, plant and equipment.

    Legal Notice Regarding Forward-Looking Statements

    This press release includes statements that are not historical in nature and that may becharacterized as “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act, including those related to future financial and operating results, futureopportunities, the benefits and synergies of the company's brands, strategies and acquisitions, andthe growth of the market for Linux Platform Products, Identity and Access Management, andSystems and Resource Management. You should be aware that Novell's actual results could differmaterially from those contained in the forward-looking statements, which are based on currentexpectations of Novell management and are subject to a number of risks and uncertainties,including, but not limited to, Novell's ability to transform its business through the implementationof its strategic plan, Novell's ability to realize the benefits anticipated from the Microsofttransaction and other transactions, Novell's ability to realize the benefits anticipated from itsrestructuring plan, and the expected charges to be incurred and payments to be made under therestructuring plan, Novell's ability to achieve its expense targets, Novell's success in executing itsLinux Platform Products, Identity and Access Management, and Systems and ResourceManagement strategies, Novell's ability to take a competitive position in the Linux PlatformProducts, Identity and Access Management, and Systems and Resource Management industries,business conditions and the general economy, market opportunities, potential new businessstrategies, competitive factors, sales and marketing execution, shifts in technologies or marketdemand, Novell's ability to integrate acquired operations and employees, and the other factorsdescribed in Novell's Annual Report on Form 10-K filed with the Securities and ExchangeCommission on December 21, 2007. Novell disclaims any intention or obligation to update anyforward-looking statements as a result of developments occurring after the date of this pressrelease except as required by the securities laws.

    About Novell

    Novell, Inc. (Nasdaq: NOVL) delivers the best engineered, most interoperable Linux platform and a portfolio of integrated IT management software that helps customers around the world reduce cost, complexity and risk. With our infrastructure software and ecosystem of partnerships, Novell harmoniously integrates mixed IT environments, allowing people and technology to work as one. For more information, visit www.novell.com.

    * Linux is a registered trademark of Linus Torvalds. All other third-party trademarks are the property of their respective owners.


    Press Contacts

    Ian Bruce
    Novell, Inc.
    Telephone: +1 781 464-8034
    Email: ibruce@novell.com



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