| Novell's so-so second quarter results |
May 31, 2007
Novell Inc. has announced its financial results for its second fiscal quarter, which ended April 30.
For the quarter, Novell reported net revenue of $239 million, compared to net revenue of $233 million for the second fiscal quarter 2006. The loss available to common stockholders from continuing operations in the second fiscal quarter 2007 was $110,000, or $0.00 loss per common share.
On a non-GAAP basis, which excludes stock-based compensation and certain other items, adjusted income available to common stockholders from continuing operations for the second fiscal quarter 2007 was $16 million, or $0.05 per diluted common share, which includes a $0.02 favorable tax adjustment. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $7 million, or $0.02 per diluted common share, for the second fiscal quarter 2006.
Novell has also recently completed its stock option self-audit. The company's auditors did not find any evidence of intentional wrongdoing by any former or current Novell employees, officers or directors. However, it also found that Novell had used incorrect measurement dates for some of the stock-based compensation awards granted during the review period.
The total stock-based compensation expense from 1997 through 2005 that should have been reported amounted to an after-tax amount of about $19 million. This was a small amount and Novell has decided that it will not restate its consolidated financial statements for prior periods.
So much for the not so hot news. Looking closer at the same 2007 quarter, Novell reported $19 million of revenue from Linux Platform Products, up 83 percent year-over-year, and $29 million of invoicing, up 114 percent year-over-year. Revenue from identity and access management was $23 million, up 5 percent year-over-year.
However, independent institutional investment bank, First Albany Corp.'s managing director of equity research, Mark Murphy, closer look at the numbers revealed some trouble for Novell. Murphy noted that Microsoft-driven Linux bookings, which had come from sales of Microsoft and Novell's SLES (SUSE Linux Enterprise Server) 10 certificate program had declined 75% sequentially to $18-million. This was "worse than our forecast of a 30%-70% sequential decline. In addition Murphy commented, "Novell's core Linux bookings declined 39% sequentially to $11-million and were roughly flat year/year."
This quarter's results did not include the recent three-way SLES certificate deal between Microsoft, Novell and Dell. It also did not take into consideration Novell's concern that Microsoft may stop distributing the SLES certificates entirely depending on how things play out with Linux and the GPLv3.
Adding to Novell's woes, revenue from systems and resource management was $32 million, down 4 percent year-over-year. Revenue from the workgroup business unit declined 4 percent from the year ago period to $84 million.
Still. Murphy was impressed that Novell had improved its gross margins by 71% and that the company has expanded its operating margin to 3.2%, up from 0.7% the year-ago period operating margin. In other words, the company has considerably cut down its costs in doing business. Murphy was also happy to see identity and access management invoicing rebounding to 22% growth.
"We were pleased with the overall results this quarter. We saw continued strength in our Linux business, improvement in our identity business and better-than-expected results in workgroup. Additionally, we benefited from the impact of cost control measures," said Ron Hovsepian, president and CEO of Novell, in a press conference.
"While there remains a lot of work ahead of us, our business is moving in the right direction and we believe we are on track to achieve our fiscal 2007 exit rate operating margin target."
Novell continues to be cash rich. It has 1.8 billion in cash, cash equivalents and short-term investments. Days sales outstanding in accounts receivable was 64 days at the end of the second fiscal quarter 2007, down from 66 days in the year ago quarter. Total deferred revenue was $700 million at the end of the second fiscal quarter 2007, up $354 million, or 102 percent, from the prior year. Cash flow from operations was a negative $29 million for the second fiscal quarter 2007, compared to a negative $24 million in the second fiscal quarter 2006.
Looking ahead for the full fiscal year 2007, Novell expects its revenue to be between $925 million and $955 million, adjusted to account for the divestment of the Salmon business consulting group during the second fiscal quarter 2007. On a non-GAAP basis, adjusted income from operations is expected to be between break-even and $10 million, excluding stock-based compensation and restructuring expenses.
In short, Novell expects its Linux business to continue to grow, but the company as a whole over fiscal year 2007 expects to be cash revenue neutral. As for First Albany's take away, Murphy maintains a buy recommendation because the disappointing Linux results are offset by margin improvement. "We would continue to buyers on weakness based upon an improved balance sheet, low valuation, and potential future restructuring/buyback catalysts," said Murphy.
-- Steven J. Vaughan-Nichols
Do you have comments on this story?
Talkback here
NOTE: Please post your comments regarding our articles using the above link. Be sure to use this article's title as the "Subject" in your posts. Before you create a new thread, please check to see if a discussion thread is already running on the article you plan to comment on. Thanks!
(Click here for further information)
|
|
|
7 Advantages of D2D Backup
For decades, tape has been the backup medium of choice. But, now, disk-to-disk (D2D) backup is gaining in favor. Learn why you should make the move in this whitepaper.
4 Legal Reasons to Control Internet Access
The Internet is obviously a valuable resource for many organizations. However, many are exposed to legal liability concerns because they fail to control Internet access. Learn if you're safe in this white paper.
Rapidly Resolve J2EE Application Problems
Whether you are in the process of building J2EE applications or have J2EE applications already running in production, you must ensure that they deliver the expected ROI. Learn how in this white paper.
Load Testing 2.0 for Web 2.0
There are many unknowns in stress testing Web 2.0 applications. Find out how to test the performance of Web 2.0 in this white paper.
Build Better Games Online
For the game infrastructure providers, life is complex. Making money from games has become more complicated. Why? Find out in this white paper.
Building a Virtual Infrastructure from Servers to Storage
This white paper discusses the virtual storage solutions that reduce cost, increase storage utilization, and address the challenges of backing up and restoring Server environments.
Gaining Faster Wireless Connections with WiMAX
Welcome to what is quickly becoming the hyperconnected world where anything that would benefit from being connected to the network will be connected. Learn more in this white paper.
Is Your Desktop a Security Threat?
The new wave of sophisticated crimeware not only targets specific companies, but also targets desktops and laptops as backdoor entryways into those business’ operations and resources. Learn how to stay safe in this white paper.
Increasing SAN Reliability by 100 Percent
Storage area networks (SAN) are a strong part of storage plans. Learn how to increase your reliability and uptime by 100 percent in this case study.
|
|
|
|
|
news feed