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Novell Reports Third Fiscal Quarter 1998 Results: |
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PROVO, Utah August 20, 1998 Novell, Inc. (NASDAQ:NOVL) today reported revenue of $272 million for its third fiscal quarter ended July 31, 1998, compared with $262 million in the second quarter of 1998. Third quarter net income was $27 million, up $7 million from the second quarter of 1998. Earnings on a diluted basis were $0.07 per share, compared with $0.05 in the second quarter. For the first nine months of fiscal 1998, revenue was $786 million, compared with $738 million in the same period of fiscal 1997. Year-to-date net income was $60 million, compared to an ($85 million) loss for the first nine months of the prior year. Earnings per share on a diluted basis were $0.17 year-to-date, compared with a loss of ($0.25) per share, which included a ($0.10) per share loss due to restructuring, in the first nine months of 1997. Dr. Eric Schmidt, Novell chairman and CEO said: "Novell is a solidly different company today than it was one year ago -- focused on directory technology for networks, led by a new management team and delivering new products based on Internet standards. Novell's results for the first nine months of this year demonstrate how our emphasis on the delivery of new products has stabilized our revenue stream and enabled us to begin to grow revenue and improve earnings." Novell's third quarter results included $30 million in operating profit, up $16 million from the second quarter of 1998. With the addition of other income, primarily interest income, total income before taxes reached $37 million. The largest component of Novell's revenue was from directory-enabled NetWare and other NetWare servers contributing $160 million in the third quarter. Sales of directory-enabled NetWare servers were up 15 percent over the second fiscal quarter. Network services software totaled $69 million, and additional revenue, primarily from Novell network training, customer service, and consulting for network solutions, was $43 million. In its third fiscal quarter Novell posted its highest sales ever from large network accounts and OEMs, which accounted for $165 million, or 60 percent of total Novell revenue. This was up from $143 million in the second fiscal quarter. Large account sales drove this growth, led by customer decisions to deploy new or expanded NDS (Novell Directory Services) networks. This business was paced by leading firms in banking and finance, including ABN Amro Holding NV, Banc One Corp., First Union Corp. and JP Morgan. Other representative major account sales in the quarter included BT, the State of California, Telecom Italia and Wal-Mart Stores, Inc. On a geographic basis, revenue from the United States was $162 million, while the Europe, Middle East, and Africa region contributed $72 million. Revenue from Asia Pacific was $19 million, or 7 percent of the total. Novell believes it can begin to rebuild its business in Asia from this level, but the company expects improvements will come slowly. In the Americas region outside the U.S., revenue totaled $19 million in the quarter. On the balance sheet, cash and short-term investments were $1.148 billion at the end of the third quarter, up $115 million from fiscal year-end 1997 and up $63 million from second quarter 1998. Over the first nine months of fiscal 1998, the major source of cash was from operations which contributed $195 million. On June 5, 1998, Novell's board of directors authorized the company to repurchase up to 10 percent, or approximately 35 million shares, of Novell common stock over twelve months. In the third fiscal quarter, during the first few weeks following the authorization, the company spent approximately $12 million of cash to purchase and retire one million shares. In the third quarter of fiscal 1997, Novell reported total revenue of $90 million and a loss of ($0.35) per share, following company actions to significantly lower product inventories in its indirect distribution channel and restructure, including an 18 percent reduction in its workforce. Business Outlook In September Novell enters a new phase in its business with new open standards based products that are all directory-enabled. The company will begin shipping NetWare 5 based on Internet standards and the third generation of NDS, which provides for the management of IP Internet addresses. NetWare 5 will become the leading platform for new directory-enabled applications from Novell. With NDS, Novell is already the recognized leader in providing the distributed intelligence to manage and secure business networks. Novell's objective, over the longer term, is to grow its business by delivering new directory-enabled applications, from systems management to e-commerce. Another factor impacting future revenue is the increased level of Novell's deferred revenue. The backlog of deferred revenue reached $103 million at the end of quarter three, up $20 million from the prior quarter and up $39 million from the year-ago quarter. The increase in revenue deferred for future recognition reflects the strong growth in Novell's multi-product license programs for large network accounts. These programs provide software maintenance and service contracts, the revenue from which is recognized over contract periods that typically run for 24 months. About Novell Founded in 1983, Novell (NASDAQ:NOVL) is the world's leading provider of network software. The company offers a wide range of network solutions, education, and support for distributed network, Internet, and small-business markets. Information about Novell's complete range of products and services can be accessed on the World Wide Web at http://www.novell.com. Forward looking statements in this release are made under the Safe Harbor Reform Act of 1996. These statements are based on current expectations and actual results may differ materially due to risks, uncertainties, and other factors. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's 10-K and 10-Q filings, as well as the annual report.
Press Contacts:
Jonathan Cohen
Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (In thousands)
ASSETS Jul 31, 1998 Oct 31,1997
Current assets
Cash and short-term investments $1,147,925 $1,033,473
Receivables, net 231,221 234,358
Inventories 4,274 10,656
Prepaid expenses 68,168 57,685
Deferred & refundable income taxes 99,879 134,210
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Total current assets 1,551,467 1,470,382
Property, plant and equipment, net 347,624 373,865
Other assets 108,543 66,402
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Total assets $2,007,634 $1,910,649
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LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $66,498 $82,759
Accrued compensation 51,334 51,397
Accrued marketing liabilities 18,281 27,728
Other accrued liabilities 63,943 85,157
Income taxes payable 52,786 --
Deferred revenue 102,632 74,915
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Total current liabilities 355,474 321,956
Minority interests 16,969 23,276
Shareholders' equity 1,635,191 1,565,417
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Total liabilities and shareholders' equity $2,007,634 $1,910,649
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Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data)
Third Fiscal Quarter Ended Nine Months Ended
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Jul 31, 1998 Jul 31, 1997 Jul 31, 1998 Jul 31, 1997
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Net sales $272,016 $90,074 $786,308 $738,028
Cost of sales 60,839 61,671 172,999 214,817
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Gross profit 211,177 28,403 613,309 523,211
Operating expenses
Sales and marketing 93,669 97,769 293,657 341,727
Product development 54,452 69,428 170,284 209,625
General and administrative 32,970 33,711 100,002 110,959
Restructuring charges 0 55,335 0 55,335
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Total operating expenses 181,091 256,243 563,943 717,646
Income (loss) from operations 30,086 (227,840) 49,366 (194,435)
Other income, net 6,798 9,883 33,908 30,075
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Income (loss) before taxes 36,884 (217,957) 83,274 (164,360)
Income taxes 10,328 (96,312) 23,317 (78,893)
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Net income (loss) $26,556 ($121,645) $59,957 ($85,467)
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Weighted average shares:
Basic* 353,436 349,082 352,076 347,636
Diluted* 362,083 349,381 357,213 348,127
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Net income (loss) per share:
Basic* $0.08 ($0.35) $0.17 ($0.25)
Diluted* $0.07 ($0.35) $0.17 ($0.25)
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* The Company has always reported net income per share on a diluted basis. The calculation of diluted net income per share includes the effect of common stock equivalents such as outstanding stock options, while the calculation of basic net income per share does not. |
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