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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: E_K_S who wrote (17361)9/17/1997 11:54:00 PM
From: Jim McCormack   of 42771
 
Sifting through the SEC Filing....

Do you think that Novell could make it any harder for an investor
to try to get the numbers straight? They do this to confuse everyone
so things do not stand out as much.

Round one of analyzing:

1st 9mnth-96 1st 9mnth-97 96-3rdQ 97-3rdQ

Ed & Oth 116 85 39 20
Unix Roys 68 27 18 8
Net OS 512 462 216 39
Net Svs 233 165 92 24

Totals 929 739 365 91

Legend:

Education & other - Half of last year and 12 million less then last
quarter. This is a big concern of mine. Hate to see the Ed dollars
decline as I see the investment in educating people on the products
as a leading indicator of market "Belief" in the products.

Unix - Call it Half of Last year and Flat compared to last quarter
but they will decline now that the new Non Royalty paying version of
SCO is out R5. As people upgrade Novl loses a revenue stream. Not
much here anyway.....

NetOS - Would have been nice to get the 3.X 4.X break out. Lots of
work to be done to figure how this got so ugly so quickly. How about
some ideas? From 216 down to 39? Netware 4 was 185 in Q1 dropped to
135 in Q2 and now is ? in Q3. AS for 3.x it was 66 in Q1 and fell to
35 in Q2 so now it is ? in Q3. We could do the a straight line
analysis but we have to factor the channel redux in somewhere.
Straight I come up with lets say 109 and we got a number of 39 so that
leads us to attribute 86 to the channel and 20 to returns. Comments?

Net Services - Infrasructure products Mangement products and
groupwise. From 92 down to 24. Well last quarter:
25 for Network Infrastructure Products
14 for Network Management Products
26 for Groupwise
Thats 65 so with a number of 24 we lost 41 somewhere.... Groupwise was
on the verge of a release so sales had to slump. Have very little
idea how this turned to dust....

The whole analysis is a real pain because the third quarter numbers
from last year (Q3 96) are after they held product from the channel in
the second quarter (Q2 96) (Remember Channel Stuffing Volume #1 last
year). Those numbers are thus "Stuffed" as 4 quarters later (Q3-96,
Q4-96, Q1-97, Q2-97, we had a repeat performance of over selling our
distributers who failed to sell through to our end user customers. So
Q-3 97 we didn't ship again and tried to emptied the warehoses of our
distributers. (In fact we stopped shipping late in Q2-97 and didn't
ship at all in Q3-97)

The Question is HOW EMPTY ARE THE WAREHOUSES? Did the resellers sell
through any product or is it all still out there in the warehouse? If
it is and we ship to them again we will have round 3 of the "Channel
dance" in a few quarters. SELL THROUGH - that is the name of the game
for us. Are we moving product from our distibuters warehouse to the
end users or not?

Also - over 40% of revenue comes direct now through License and OEM
deals. You can't take the ship numbers from last time they stuffed
and assume they will sell that much this quarter now that they are
ready to ship again because the business no longer needs that much
Boxed product as it isn't sold and purchased that way anymore. Thats
how they got to a "Round two" - they never adjusted when they resumed
shipping.

The problem is that without Sell through stats from the vendors we
can't tell if Novell is stuffing again. Neither can they so lets hope
they have some numbers this time and use them. They sell to
distributers and we can't tell if it is sold to customers or building
up in the warehouse. I sure hope they can this time.

Anyway - Comments - Further Analysis?

Jim

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