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Novell Reports Financial Results for First Fiscal Quarter 2005
Tuesday February 22, 4:00 pm ET


WALTHAM, Mass., Feb. 22 /PRNewswire-FirstCall/ -- Novell, Inc. (Nasdaq: NOVL - News) today announced financial results for its first fiscal quarter ended Jan. 31, 2005. For the quarter, Novell reported revenues of $290 million, compared to revenues of $267 million for the first fiscal quarter 2004. Net income available to common stockholders in the first fiscal quarter 2005 was $392 million, or $0.90 per diluted common share. This compared to net income available to common stockholders of $10 million, or $0.03 per diluted common share, for the first fiscal quarter 2004.
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On a non-GAAP basis, adjusted net income available to common stockholders for the first fiscal quarter 2005 was $10 million, or $0.03 per diluted common share, which excludes a $448 million net gain on a previously announced legal settlement with Microsoft, $6 million of restructuring expense, a $2 million gain on a sale of property, $1 million of long-term investment impairments and the related adjustments for income taxes and the allocation of earnings to preferred stockholders. This compares to non-GAAP adjusted net income available to common stockholders for the first fiscal quarter 2004 of $11 million, or $0.03 per diluted common share, which excludes the effect of long-term investment impairments of $1 million. Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.

In the first fiscal quarter 2005, foreign currency exchange rates favorably impacted total revenue by approximately $10 million year-over-year. Foreign currency exchange rates favorably impacted net income by $2 million year-over-year.

During the first fiscal quarter 2005, Novell recognized revenue of $15 million associated with its SUSE(R) LINUX business, including $7 million of recognized revenue from subscriptions to SUSE LINUX Enterprise Server. Sales of subscriptions to SUSE LINUX Enterprise Server totaled 21,000 units in the quarter.

"Novell made steady progress on executing its strategy this quarter. We still have work ahead of us as we continue to reposition the company in our growth markets," said Jack Messman, Chairman and CEO of Novell. "Our solid balance sheet gives us increased financial flexibility to execute strategic initiatives in the future."

On the balance sheet, cash and short-term investments were $1.7 billion at Jan. 31, 2005, compared with $1.2 billion at Oct. 31, 2004. Days sales outstanding (DSO) in accounts receivable was 59 days at the end of the first fiscal quarter 2005, down from 60 days in the year ago quarter. Deferred revenues were $343 million at the end of the first fiscal quarter 2005, up $49 million or 17% year over year. Cash flow from operations was $452 million for the first fiscal quarter 2005, up from $31 million a year ago, mainly due to the net $448 million Microsoft settlement payment.

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Novell (nasdaq: NOVL - news - people ) is set to report earnings for the first quarter. Analysts expect the software company to report earnings of 2 cents per share and revenue of $285 million. Last month, Banc of America Securities upgraded Novell to "buy" from "neutral" and said the risk/reward scenario "looks attractive at current levels." The firm cited a number of potential catalysts for shares including continued growth of SuSE Linux products, the recent release of OES (Open Enterprise Server) and the potential for a stock buyback in fiscal 2005. "We believe there is room for upside to the current valuation if Novell can even modestly improve its profitability over the next 12 months," it said. "While Novell has yet to show consistent execution and the ability to meaningfully increase its profitability since acquiring SuSE, we believe the integration between the two companies is now largely complete and expectations for 2005 are reasonable and may leave some room for upside." Banc of America also raised the price target for Novell to $8.50 from $7.50. The stock has declined more than 13% so far this year.