Novell (NOVL) dirt cheap, good buy? Message Board

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Technology Stocks : Novell (NOVL) dirt cheap, good buy?

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To: Joe Antol who wrote (14179)	6/26/1997 5:29:00 PM
From: Jim McCormack	of 42771

Novell Revenue projection for Joe Lets start with the Bad news..We know from the SEC 10Q dated June 16, 1997: "The Company will implement this reduction in channel inventory held by distributors by not shipping additional products to distributors in its third fiscal quarter of 1997, thus decreasing revenue by a corresponding amount. In the second quarter of fiscal 1997, this distribution channel accounted for approximately $100 million of revenue..... The Staff reductions As per the SEC Filing - The Company plans to reduce its workforce by approximately 18% or 1,000 employees in the third quarter of fiscal 1997.... The decision to withhold shipments to distributors is expected to result in an operating loss in the third fiscal quarter of 1997. The workforce reduction is estimated to yield a one-time restructuring charge ranging from $25 million to $35 million in the third fiscal quarter of 1997, principally comprised of severance and excess facilities costs." A couple of things to keep in mind: This is round two of holding shipments to the reseller channel. In Q2 in 1996 they withheld. In detailing the Q2 1996 results the Sec filing points out "none of the $188 million of revenue in the second quarter of fiscal 1996 came from the normal distribution channel which has provided 50% to 60% of revenue." What does this mean for us now that we are in Q3? I expect that by not shipping to the channel it will result in lets be conservative - 85 million dollars in decreased revenue (I read the 85 million number somewhere and it makes sense as 100 million was the revenue for the channel for 1997 Q2 see above). If you drop last quarter revenues of 273 million by 85 million you get 188 million. Hold operating costs constant at 224 million and you have a loss of 36 million. Now add the charge of 25-35 million (Call it 30 million for this exercise) and you are at a 66 million dollar loss. That's a loss of loss of .18 a share. Take out the charge and it is still .10 a share loss. Add 10 million in investment income if that makes you happy but it is still 26 million dollar loss and .07 a share loss. So someone tell me a better analysis because Zacks has it at a .01 loss this next quarter. You have to make up about 62.5 million in revenue somewhere. Ok you cut the Op costs number. You can't cut it by 60 million in one quarter. You have to boost the revenues somewhere to make the (.01) work. Currency conversion won't help either. Gotta be a big Boost or Zacks is way off. Comments by anyone? Please offer an analysis - you know one with numbers.... so it will have a basis in fact that I can grasp as real. Jim McCormack quote.yahoo.com

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