August 23, 2002 - Novell, Inc. today reported revenue of $282 million and earnings of $0.03 per share for its third fiscal quarter ended July 31, 2002. Excluding the impact of a $3 million charge for purchased in-process research and development, the company posted earnings of $0.04 per share for its third fiscal quarter 2002.
"Novell revenue and earnings in the third quarter benefited from better than anticipated business in Europe, and several large licenses for Web-based employee provisioning solutions in North America," said Novell chairman and chief executive officer Jack L. Messman. "We were very pleased with the improvement in software revenue in the quarter. NetWare, GroupWise and all of our newer Net services software products showed sequential growth. With the progress we are making, and the benefit of an improving IT market, we expect Novell to achieve overall year-over-year growth in 2003."
The results for the third fiscal quarter compare to revenue of $249 million for the same period in fiscal 2001. In the prior year, the company reported a third quarter loss of $0.06 per share, which included charges for restructuring, integration and impaired investments. When these charges were excluded, earnings for the third fiscal quarter 2001 were $0.04 per share.
For the first nine months of fiscal 2002, Novell reported revenue of $834 million and a net loss of $155 million. When asset impairments, restructuring charges and a gain on the sale of real estate are excluded, net earnings for the first nine months of 2002 were $30 million. For the first nine months of fiscal 2001, the company reported revenue of $735 million and a net loss of $178 million.
Review of Q3 Performance
>>> Revenue allocated by business segment: Novell's software product
segment accounted for $206 million, or 73 percent of total revenue. Within this segment, Net Management Services revenue was $158 million. Net Directory Services revenue was $13 million. Customer service and education revenue was $35 million. Novell's consulting segment contributed $74 million, or approximately 26 percent of revenue. The Volera segment, providing content delivery network software, accounted for an additional $2 million.
>>> Revenue allocated by business category: Large network
>>> site-licenses
led with $170 million, or 60 percent of revenue. Packaged software license sales for smaller networks totaled $26 million, or nine percent of total Novell revenue. Consulting services, product support and education revenue, not included in site-licenses, was $80 million, for 28 percent of total revenue. OEM royalties contributed two percent of total revenue.
>>> Revenue by geography: During the third fiscal quarter 2002,
>>> revenue
from the United States was $143 million. The Europe, Middle East and Africa region contributed $102 million in revenue, Asia Pacific $20 million, and Canada and the Americas $16 million.
>>> Expenses: Operating expenses were down $11 million from the second
quarter to $164 million. Setting aside the impact of a second quarter restructuring and the third quarter in-process R&D charge, ongoing operating expenses were up $6 million from the prior quarter to $161 million.
>>> Other income, net, primarily from investment income, contributed $7
million.
>>> On the balance sheet, cash and short-term investments were $607
million at the end of the quarter, compared with $705 million at the October 2001 fiscal year-end. Cash flow from operations for the quarter was a positive $36 million. Goodwill grew by $116 million from the prior quarter following the acquisition of SilverStream Software. Deferred revenue from pre-paid maintenance associated with site-licenses was up $28
million to $240 million from the prior quarter. Days sales outstanding
(DSO) were up sequentially by eight days from the quarter before to 66 days, due to increased deferred revenue and SilverStream receivables added to Novell's balance sheet in the last month of the quarter.
Business outlook
For its fourth fiscal quarter, ending October 31, 2002, Novell's results will reflect additional revenue and costs associated with its recent SilverStream acquisition. We expect total revenue to be up approximately $10 million above third quarter levels. Due to the additional costs associated with SilverStream, earnings per share in the fourth quarter, excluding any extraordinary items, could be down slightly from the third quarter. The company's ability to achieve sequential improvements in revenue and earnings is dependent on success from its new solutions selling effort, and improved performance from its IT services business.
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 SilverStream acquisition, future opportunities for the combined company, and the growth of the market for Web services 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 SilverStream's operations and employees, Novell's ability to deliver on its one Net vision of the Internet, Novell's ability to take a competitive position in the Web services 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 Annual Report on Form 10?K for the 2001 fiscal year and the most recent quarterly report filed by Novell with the SEC. Novell disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this presentation.
About Novell
Novell, Inc. (Nasdaq: NOVL) is a leading provider of Net business solutions designed to secure and power the networked world. Novell and its eServices company, Cambridge Technology Partners, help organizations solve complex business challenges, simplify their systems and processes, leverage emerging Web services, and capture new opportunities with one Net solutions. Novell provides worldwide channel, developer, consulting, and education programs to support its offerings. For more information: www.novell.com/pressroom.