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Novell Reports Second Fiscal Quarter 2000 Revenue and Earnings |
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PROVO, Utah May 23, 2000 Novell, Inc. (NASDAQ:NOVL) today reported total revenue of $302 million and earnings on a diluted basis of $0.09 per share for its second fiscal quarter ended April 30, 2000. The results included a one-time $35 million royalty from Caldera, Inc. which contributed $0.07 per share to earnings. During its second quarter in fiscal 1999, the company reported revenue of $316 million and earnings on a diluted basis of $0.11 per share. For the first six months of fiscal 2000, Novell reported revenue of $618 million and net income of $76 million, or $0.22 per share on a diluted basis. In fiscal 1999, the company reported revenue of $601 million and net income of $68 million or $0.19 per share. As announced on May 2, 2000, second quarter revenue was lower than anticipated due to a decline in traditional packaged software sales in the worldwide reseller channel. The revenue decline reflected a drop in market demand for packaged software to roughly half the level of the previous four quarters. Several factors contributed including diminished channel support from Novell. Training and launch activities for Windows 2000 and new Linux offerings consumed significant reseller attention during the quarter. Novell is experiencing no real market loss to Windows 2000. The lack of support from Active Directory for the Windows NT installed base is increasing customer assessments of Novell's cross-platform eDirectory. Novell's Net services site-license business grew to $193 million in the second quarter, up 7 percent over the prior year period, and up 10 percent sequentially from the first quarter of fiscal 2000. This part of Novell's business addresses enterprise, government and education markets and includes significant contributions from channel resellers, but does not involve sales of packaged product. Novell chairman and CEO, Eric Schmidt said, "Novell's packaged software revenue decline is an unintended consequence of our focus on new products in new markets. Clearly we need to be better in addressing the multiple, and often diverse markets, products and channels that we require for growth. We are making changes in management, market focus and channel execution." Over the next six to nine months, the company intends to return to more effective training, demand generation, and field support for its indirect channels. It also will continue to target new contributions to growth from its entry into the Internet infrastructure market and through its support for Windows 2000, NT, Solaris and Linux solutions. On a product line basis, Net services applications grew 9 percent year-over-year to $79 million in the second fiscal quarter. Service, education and solutions consulting revenue was up 26 percent to $56 million. The revenue decline from packaged software sales meant that NetWare server software, which is the principal component of reseller sales, was down 32 percent year-over-year to $115 million. The NetWare decline was solely in packaged product. That portion of NetWare revenue from site-licenses was up, both from upgrades and new purchases. It accounted for $95 million of the revenue from this product line, up 8 percent. Product revenue from older pre-directory products declined to $17 million. The one-time Caldera royalty added another $35 million. On a geographic basis, United States revenue, without the benefit of the Caldera royalty, was $142 million in the second quarter, down 16 percent year-over-year. The Europe, Middle East, and Africa region declined 20 percent to $84 million. In Asia Pacific, revenue of $24 million was down 7 percent. Revenue in the Americas region outside the U.S. was up 4 percent to $17 million. On the balance sheet, cash and short-term investments were $647 million at the end of the first quarter, compared with $895 million at the October 1999 fiscal year-end. Cash flow from operations in the quarter was $49 million. Deferred revenue from maintenance associated with Novell's site-license business was $168 million, up 27 percent year-over-year. During the quarter, the company spent $212 million to repurchase 6.9 million shares of Novell common stock. Over the last three fiscal quarters, the company spent a total of $500 million to purchase and retire approximately 20 million shares of common stock. This press release contains forward-looking statements about changing markets, market strategies, products, distribution channels, Net services, expanding sales in the company's traditional market and anticipated demand for new offerings from markets that Novell is entering. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. The risks and uncertainties include the following: business conditions and the general economy; changes in distribution choices and channel partners; competitive factors; sales and marketing execution; shifts in technologies or market demand. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's fiscal 1999 report on Form 10-K, as well as in its annual report and Form 10-Q filings. About Novell Novell, Inc. (NASDAQ:NOVL), is a leading provider of Net services software that delivers services to secure and power all types of networks -- the Internet, intranets, and extranets; wired to wireless; corporate and public -- across leading operating systems. Novell's Net services software provides the foundation for one Net -- a single global network that supports new applications and forms of business. Worldwide channel, consulting, education and technical support programs, along with strategic alliances, combine Novell Net services software with third-party products and services to form complete Net solutions. For information on Novell's complete range of products and services, contact Novell's Customer Response Center at (888) 321-4CRC (4272), or visit Novell's Web site at www.novell.com. Press may access Novell announcements and company information on the World Wide Web at www.novell.com/pressroom. In addition, detailed comparisons between Novell products and competitive offerings from other vendors are available on the Web at www.novell.com/advantage.
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