| Novell's Linux earnings keep growing |
Aug. 30, 2007
Novell announced on Aug. 29 its financial results for its third fiscal quarter, which ended July 31, 2007. While the Linux company still showed a net loss, it narrowed its losses as its Linux business boomed with a growth of 77 percent year over year.
For the quarter, Novell reported net revenue of $243 million, compared with net revenue of $236 million for the third fiscal quarter of 2006. The loss from operations for the third fiscal quarter of 2007 was $10 million, compared with a loss from operations of $40 million for the third fiscal quarter of 2006.
A year ago, Novell also faced delisting from NASDAQ because it had been late in filing its quarterly Form 10-Q with the Securities and Exchanges Commission for the period ending July 31, 2006. By NASDAQ rules, if these reports aren't filed on time, the market has to consider delisting the stock.
Novell had said on Sept. 11, 2006, that it would be late for its 10-Q, stating that it was conducting a voluntary audit of its historical stock-based compensation practices. Those days are behind Novell now.
Novell's partnership with Microsoft, while complained about by free software supporters, hasn't hurt the company's Linux business. For the third fiscal quarter of 2007, Novell reported $22 million in 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.
Outside of its business per se, Novell also won a major victory against SCO. The U.S. District Court in Salt Lake City ruled that Novell, and not SCO, owned Unix's intellectual property. If upheld, this effectively puts an end to SCO's cases against IBM, Novell and other Linux companies.
"We are encouraged by our Linux performance and the market's continued enthusiasm for our desktop to data center strategy. In addition, we are pleased with our operating margin expansion and progress on our strategic initiatives," said Ron Hovsepian, Novell's president and CEO.
In other revenue, Novell realized $30 million from Identity and Security Management. Of this, 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 Novell's Workgroup business unit declined 2 percent from the year-ago period to $83 million.
The loss available to common stockholders from continuing operations in the quarter 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 of 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 (Generally Accepted Accounting Principles) basis, adjusted income from operations for the third fiscal quarter 2007 was $12 million. This compares with 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 with 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.
Novell continues to be cash rich. The company totaled cash, cash equivalents and short-term investments of $1.8 billion on July 31, 2007. 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 with $36 million in the third fiscal quarter 2006.
Looking ahead, Hovsepian said, "Net revenue for fiscal year 2007 is expected to be between $925 million and $955 million, which is 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."
In short, Novell's Linux business is doing better than expected, and because of this the company's overall revenue should continue to improve.
—Steven J. Vaughan Nichols
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