- Linux Platform Products revenue grows 30 percent year-over-year
- Identity and Access Management revenue up 46 percent year-over-year
- Announces voluntary stock-based compensation review
WALTHAM, Mass., Aug. 29 /PRNewswire-FirstCall/ -- Novell, Inc. (Nasdaq:
NOVL) today announced preliminary financial results for its third fiscal
quarter ended July 31, 2006. These financial results are preliminary
because Novell, during this quarter, began a self-initiated, voluntary
review of the company's historical stock-based compensation practices and
related potential accounting impact. The financial results reported today
do not take into account any adjustments that may be required in connection
with the completion of the stock-based compensation review and should be
considered preliminary until Novell files its Form 10-Q for the third
fiscal quarter ended July 31, 2006.
Financial Results
For the third fiscal quarter 2006, Novell reported net revenue of $241
million, compared to net revenue of $252 million for the third fiscal
quarter 2005. The loss available to common stockholders from continuing
operations in the third fiscal quarter 2006 was $3 million or $0.01 loss
per diluted common share. This compares to income available to common
stockholders from continuing operations of $0.4 million, or $0.00 per
diluted common share, for the third fiscal quarter 2005.
On a non-GAAP basis, adjusted income available to common stockholders
from continuing operations for the third fiscal quarter 2006 was $20
million, or $0.05 per diluted common share. Those amounts excluded
stock-based compensation, severance-related expenses, a loss on the planned
disposition of our Japan consulting group, a gain on sale of property,
plant and equipment and related adjustments for income taxes, debt interest
expense and the allocation of earnings to preferred stockholders. This
compares to non-GAAP adjusted income available to common stockholders from
continuing operations of $13 million, or $0.03 per diluted common share,
for the third fiscal quarter 2005. These amounts primarily exclude
restructuring charges and related adjustments for income taxes, debt
interest expense and the allocation of earnings to preferred stockholders.
In the third fiscal quarter 2006, Novell finalized the disposition of
its Celerant consulting subsidiary. Accordingly, all Celerant financial
results were excluded from Novell's continuing operations for income
statement reporting purposes. Celerant's results for all periods presented
are reported as discontinued operations.
During the third fiscal quarter 2006, Novell reported $12 million of
revenue from Linux* Platform Products, up 30% year-over-year. Revenue from
Identity and Access Management was $26 million, up 46% year-over-year.
Combined revenue from Open Enterprise Server and NetWare-related products
declined 19% from the year ago period.
"Novell's focus on execution and acceleration of our strategy resulted
in continued strong growth in Linux and Identity revenues," said Ron
Hovsepian, president and CEO of Novell. "The launch of SUSE Linux
Enterprise 10 and the rollout of a new marketing campaign earlier this
month has generated widespread customer and partner enthusiasm, and we are
aggressively moving to drive adoption of the new platform."
Cash, cash equivalents and short-term investments were $1.3 billion at
July 31, 2006, consistent with last quarter. Days sales outstanding in
accounts receivable was 88 days at the end of the third fiscal quarter
2006, up from 77 days in the year ago quarter. Accounts receivable aging
remains within historical ranges. Deferred revenue was $391 million at the
end of the third fiscal quarter 2006, up $25 million, or 7%, from the prior
year. Cash flow from operations was $33 million for the third fiscal
quarter 2006, up from $15 million from the third fiscal quarter 2005.
Full details on Novell's preliminary results, including a
reconciliation of the non-GAAP adjusted results, are included in the
financial schedules that are a part of this release.
Stock-Based Compensation Review
Novell initiated the voluntary review of historical stock-based
compensation practices and the related potential accounting impact in light
of news about the stock option practices of numerous companies across
several industries. Based on preliminary findings, the Audit Committee of
Novell's Board of Directors engaged independent outside legal counsel to
conduct the review.
The Audit Committee is working to complete the stock-based compensation
review in a timely manner, and Novell intends to file its Quarterly Report
on Form 10-Q for the period ended July 31, 2006 as soon as practicable
after the Audit Committee's review is concluded. At this time, Novell is
not in a position to predict when the stock-based compensation review will
be completed and it is possible that Novell may not file its Quarterly
Report on Form 10-Q for the third fiscal quarter ended July 31, 2006 on a
timely basis.
This review may result in the need to record non-cash stock
compensation charges and related tax effects. Novell does not know whether
any such compensation charges would affect the preliminary financial
results for its third fiscal quarter ended July 31, 2006 being announced
today, or would be deemed to be material and require the company to restate
previously issued financial statements. Novell will also need to determine
the impact of this matter on its system of internal controls.
Financial Outlook
Novell management provides the following financial guidance:
-- Net revenue for the fourth fiscal quarter 2006 is expected to be
between $246 million and $256 million.
-- On a non-GAAP basis, income available to common stockholders from
continuing operations per diluted common share for the fourth fiscal
quarter 2006 is expected to be $0.04, excluding an estimated $0.03 per
share expense from stock-based compensation.
A summary of Novell's vision, mission and strategy can be accessed on
the Novell(R) Web site at: http://www.novell.com/company/ir/qresults/ .
Conference call notification and Web access detail
A live Webcast of a Novell conference call to discuss the quarter will
be broadcast at 5:00 PM ET August 29, 2006, from Novell's Investor
Relations Web page: http://www.novell.com/company/ir/qresults/ . The
domestic conference call dial-in number is 866-335-5255, password "Novell",
and the international dial-in number is +1-706-679-2263, password "Novell".
The call will be archived on the Web site approximately two hours after
its conclusion, and will be available for telephone playback through
midnight ET, September 6, 2006. The domestic toll-free replay number is
800-642-1687, and the international replay number is +1-706-645-9291.
Replay listeners must enter conference ID number 3713912.
A copy of this press release is posted on Novell's Web site at:
http://www.novell.com/company/ir/qresults/ .
Legal notice regarding 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 company's brands and strategies, future opportunities
and the growth of the market for Identity and Access Management and Linux
Platform Products. 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 success in executing its Linux, Identity and Access Management
and Resource Management strategies, Novell's ability to take a competitive
position in the Linux, Identity and Access Management and Resource
Management industries, business conditions and the general economy, market
opportunities, potential new business strategies, competitive factors,
sales and marketing execution, shifts in technologies or market demand,
Novell's ability to integrate acquired operations and employees, the final
conclusions of the Audit Committee (and the time of such conclusions)
concerning matters relating to the company's stock-based compensation
practices and the other factors described in Novell's Annual Report on Form
10-K filed with the Securities and Exchange Commission on Jan. 10, 2006.
Novell disclaims any intention or obligation to update any forward-looking
statements as a result of developments occurring after the date of this
press release except as required by the securities laws.
There can be no assurance that the outcome of the review by the
company's Audit Committee of the company's past stock-based compensation
practices and the related potential accounting impact will not result in
changes in the preliminary financial results for the third fiscal quarter
2006 or a restatement of financial results provided by the company for any
historical period. In addition, the review and possible conclusions may
require additional expenses to be recorded; may adversely affect our
ability to file required reports with the U.S. Securities and Exchange
Commission ("SEC") on a timely basis, our conclusions on the effectiveness
of our internal control over financial reporting and disclosure controls
and procedures and our ability to meet the requirements of the Nasdaq Stock
Market for continued listing of our shares; and may result in claims and
proceedings relating to such matters, including shareholder litigation and
actions by the SEC and/or other governmental agencies and negative tax or
other implications for the company resulting from any accounting
adjustments or other factors.
About Novell
Novell, Inc. delivers Software for the Open Enterprise(TM). With more
than 50,000 customers in 43 countries, Novell helps customers manage,
simplify, secure and integrate their technology environments by leveraging
best-of-breed, open standards-based software. With over 20 years of
experience, 5,000 employees, 5,000 partners and support centers around the
world, Novell helps customers gain control over their IT operating
environment while reducing cost. More information about Novell can be found
at http://www.novell.com .
NOTE: Novell and NetWare are registered trademarks, and Software for
the Open Enterprise is a trademark of Novell, Inc. in the United States and
other countries. * Linux is a registered trademark of Linus Torvalds. All
other third-party trademarks are the property of their respective owners.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(Preliminary)
(In thousands, except per share data)
Fiscal Quarter Ended Fiscal Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2006 2005 2006 2005
Net revenue:
Software licenses $45,435 $45,628 $127,600 $135,692
Maintenance and services 195,917 206,754 594,772 615,913
Total net revenue 241,352 252,382 722,372 751,605
Cost of revenue:
Software licenses 4,984 4,475 13,322 13,970
Maintenance and services 75,711 80,171 230,348 249,043
Total cost of revenue 80,695 84,646 243,670 263,013
Gross profit 160,657 167,736 478,702 488,592
Operating expense (income):
Sales and marketing 89,463 84,457 265,034 262,126
Product development 47,238 50,304 140,627 150,949
General and administrative 25,298 24,453 80,186 68,118
Restructuring expenses - 9,443 (1,000) 19,692
Purchased in-process
research and development - - 2,110 480
Gain on sale of property,
plant and equipment (3,778) - (5,968) (1,589)
Gain on legal settlements - - (1,225) (447,560)
Loss on Japan consulting
group held for sale 8,273 - 8,273 -
Executive termination
benefits 9,409 - 9,409 -
Total operating expense 175,903 168,657 497,446 52,216
Income (loss) from
operations (15,246) (921) (18,744) 436,376
Other income, net 10,811 8,350 36,760 21,816
Income (loss) from
continuing operations,
before income taxes (4,435) 7,429 18,016 458,192
Income tax expense
(benefit) (1,948) 6,869 13,031 81,234
Income (loss) from
continuing operations (2,487) 560 4,985 376,958
Income from discontinued
operations, before income
taxes 12,165 2,752 13,743 7,642
Income tax expense
(benefit) (2,871) 1,172 972 2,926
Income from discontinued
operations 15,036 1,580 12,771 4,716
Income before cumulative
effect of a change in
accounting principle 12,549 2,140 17,756 381,674
Cumulative effect of a
change in accounting
principle (897) - (897) -
Net income $11,652 $2,140 $16,859 $381,674
Income (loss) available
to common stockholders -
diluted:
Continuing operations $(2,534) $430 $4,824 $377,125
Net income $11,554 $1,910 $16,478 $381,539
Income (loss) per share
available to common
stockholders - diluted:
Continuing operations $(0.01) $0.00 $0.01 $0.87
Net income $0.03 $0.00 $0.04 $0.88
Weighted average shares -
diluted 340,127 385,377 374,472 435,820 (1)
(1) Diluted weighted average shares includes 52 million potential shares
related to convertible debt.
Reclassifications, none of which affected net income, were made to the
prior period amounts in order to conform to the current period's
presentation.
Stock-based compensation expense recorded in above amounts:
Fiscal Quarter Fiscal
Ended Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2006 2005 2006 2005
Cost of revenue $1,053 $2 $3,038 $4
Sales and marketing 3,133 446 9,709 804
Product development 1,999 294 6,386 947
General and administrative 1,414 (919) 9,628 (521)
Total stock-based compensation
expense $7,599 $(177) $28,761 $1,234
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets (Preliminary)
(In thousands)
Jul 31, 2006 Oct 31, 2005
Assets
Current assets:
Cash and cash equivalents $500,716 $811,238
Short-term investments 798,615 843,666
Receivables, net 236,112 293,627
Prepaid expenses 32,159 30,777
Other current assets 24,766 29,745
Current assets held for sale 2,930 -
Total current assets 1,595,298 2,009,053
Property, plant and equipment, net 186,752 212,377
Long-term investments 55,064 54,340
Goodwill 427,375 395,509
Intangible assets, net 44,919 56,421
Deferred income taxes 1,334 1,384
Other assets 33,085 32,774
Total assets $2,343,827 $2,761,858
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $40,320 $45,445
Accrued compensation 105,934 113,760
Other accrued liabilities 78,521 131,105
Income taxes payable 53,894 56,869
Deferred revenue 390,799 405,751
Current liabilities held for sale 619 -
Total current liabilities 670,087 752,930
Deferred income taxes 3,995 4,537
Senior convertible debentures 600,000 600,000
Total liabilities 1,274,082 1,357,467
Minority interests - 8,555
Preferred stock 9,350 9,350
Stockholders' equity 1,060,395 1,386,486
Total liabilities and stockholders'
equity $2,343,827 $2,761,858
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows (Preliminary)
(In thousands)
Fiscal Quarter Fiscal
Ended Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2006 2005 2006 2005
Cash flows from operating
activities:
Net income $11,652 $2,140 $16,859 $381,674
Adjustments to reconcile net
income to net cash provided
by operating activities:
Stock-based compensation expense 7,599 (177) 29,024 1,234
Tax effects of stock-based
compensation plans (1,028) 2,906 4,258 16,166
Excess tax benefits from stock-
based compensation 1,028 - (4,258) -
Depreciation and amortization 8,773 11,284 31,151 41,074
Loss on Japan consulting group
held for sale 8,273 - 8,273 -
Gain on sale of Celerant,
discontinued operations before
taxes (11,960) - (11,960) -
Executive termination benefits 9,409 - 9,409 -
Cumulative effect of a change in
accounting principle 897 - 897 -
Changes in accounts receivable
allowances 243 (3,563) (4,660) (9,352)
Utilization of previously reserved
acquired net operating losses 340 - 3,860 29,600
Gain on sale of property, plant
and equipment (3,778) - (5,968) (1,589)
Impairment of long-term
investments, net of gains 128 (822) 626 1,108
Purchased in-process research and
development - - 2,110 480
Changes in current assets and
liabilities, excluding the
effect of acquisitions and
dispositions 1,267 3,730 (45,601) (18,234)
Net cash provided by operating
activities 32,843 15,498 34,020 442,161
Cash flows from financing
activities:
Issuance of common stock, net 3,592 3,056 21,674 16,035
Excess tax benefits from stock-
based compensation (1,028) - 4,258 -
Payment of cash dividends on
Series B Preferred Stock (94) (125) (141) (375)
Repurchases of common stock,
retired (132,521) - (400,000) -
Net cash (used) provided by
financing activities (130,051) 2,931 (374,209) 15,660
Cash flows from investing
activities:
Purchases of property, plant and
equipment (2,229) (8,484) (16,783) (20,168)
Proceeds from the sale of
property, plant and equipment 17,734 - 24,992 10,421
Proceeds from repayment of note
receivable - - 9,092 -
Short-term investment activity (1,223) (8,583) 45,035 153,792
Long-term investment activity 1,586 1,666 (1,428) (1,352)
Cash paid for equity investment in
Open Invention Network, LLC - - (4,225) -
Proceeds from the sale of
Celerant, net of cash divested 37,922 - 37,922 -
Cash paid for acquisition of Tally
Systems and Immunix, net of cash
acquired - - - (33,829)
Cash paid for acquisition of
e-Security, net of cash acquired - - (71,550) -
Purchase of intangible assets (1,159) - (1,159) (15,500)
Other 3,219 (4,077) 7,771 241
Net cash provided (used) by
investing activities 55,850 (19,478) 29,667 93,605
(Decrease) increase in cash and
cash equivalents (41,358) (1,049) (310,522) 551,426
Cash and cash equivalents -
beginning of period 542,074 986,879 811,238 434,404
Cash and cash equivalents -
end of period $500,716 $985,830 $500,716 $985,830
Certain reclassifications, none of which affected net income, were made to
the prior period amounts in order to conform to the current period's
presentation.
Novell, Inc.
Unaudited Non-GAAP Adjusted Earnings
Information (Preliminary)
(In thousands, except per share data)
Fiscal Quarter Fiscal
Ended Year-to-Date
Jul 31, Jul 31, Jul 31, Jul 31,
2006 2005 2006 2005
GAAP diluted income (loss)
available to common
stockholders from continuing
operations $(2,534) $430 $4,824 $377,125
Pre-tax adjustments:
Stock-based compensation
expense 7,599 (177) 28,761 1,234
Restructuring expenses - 9,443 (1,000) 19,692
Purchased in-process research
and development - - 2,110 480
Gain on sale of property, plant
and equipment (3,778) - (5,968) (1,589)
Gain on legal settlements - - (1,225) (447,560)
Loss on Japan consulting group
held for sale 8,273 - 8,273 -
Executive termination benefits 9,409 - 9,409 -
Impairment of long-term
investments, net of gains 128 (822) 626 1,108
Income tax adjustments:
Tax adjustments, net (49) (301) (752) (2,055)
Cumulative tax effect of the
Microsoft settlement - 2,900 - 72,260
Diluted income (loss)
adjustments:
Debt interest expense 1,493 1,493 4,479 (4,479)
Allocation of earnings to
preferred stockholders (83) (114) (161) 3,727
Total net adjustments 22,992 12,422 44,552 (357,182)
Non-GAAP diluted income available
to common stockholders from
continuing operations $20,458 $12,852 $49,376 $19,943
GAAP diluted income (loss) per
common share from
continuing operations $(0.01) $0.00 $0.01 $0.87
Adjustments detailed above 0.06 0.03 0.10 (0.82)
Non-GAAP diluted income per common
share from
continuing operations $0.05 $0.03 $0.11 $0.05
GAAP diluted weighted average
shares from
continuing operations 340,127 385,377 374,472 435,820
Change in dilution from:
Conversion of convertible debt 52,074 52,074 52,074 (52,074)
Stock option exercises 5,460 - 4,146 -
Restricted stock 141 (272) (532) -
Non-GAAP diluted weighted average
shares 397,802 437,179 430,160 383,746
Certain reclassifications were made to the prior period amounts in
order to conform to the current period's presentation.
SOURCE Novell, Inc.
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Related links:
http://www.novell.com
CONTACT:
Bruce Lowry, +1-415-383-8408, or
blowry@novell.com, or Bill Smith, 1-800-317-3195, or
wsmith@novell.com, both of Novell, Inc.
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