Cramer has a thought
=============
Cramer hated NOVL for so long, that whenever he was asked about the stock he would go into one of his tirades. Making money certainly does have its effect on these clowns.
============
Goldman Tech Conference: Understanding
Novell's Rebirth
By Eric Moskowitz
Senior Writer
2/7/00 6:00 AM ET
Expect a clash of PC-based old tech and Internet-based new tech when
the five-day Goldman Sachs Technology Investment Symposium
opens Monday in Palm Springs, Calif. And no company will be trying
harder to fit in with the new tech crowd than Novell (NOVL:Nasdaq -
news).
Hidden among the high-profile presenters from the likes of CMGI
(CMGI:Nasdaq - news) and Commerce One (CMRC:Nasdaq - news) is
this Provo, Utah-based network software maker, which was written off
for dead back in 1997 when it reported a 27% drop in revenue. Back
then, it was one of many companies that just didn't get the new world
order.
But over the last year, money managers and analysts have been taking
long looks at the company led by ex-Sun Microsystems
(SUNW:Nasdaq - news) star Eric Schmidt. While investors aren't quite
convinced that Novell is an ideal short-range investment -- note its spike
to 42 before quickly retreating to 30 over the last month -- the Street is
starting to warm up to Novell's long-term vision of installing
directory-enabled appliances to simplify company networks.
The B2B Angle
"It's the most underpriced B2B company out there," says Paul Schupf,
who runs a New York-based money management firm and is one of
Novell's largest shareholders. "When Schmidt came in he was left with
a demoralized sales force and $1 billion in cash. Now Schmidt, who
understands networking better than anyone, finally has the products to
make Novell a first-class company."
"The beauty of the company is that it finally has a significant long-term
opportunity with its Novell Directory Services product," adds Steve
Shapich, an analyst at Olde Discount. "The only place they have been
lacking is marketing." His firm has an accumulate rating on Novell and
has done no company underwriting.
Novell's stock price has risen along with investor interest, doubling
since last November. Novell is now trading at 49 times this year's
earnings, but that's still below Microsoft's (MSFT:Nasdaq - news) P/E
of 62.
Novell's NDS, which enables businesses to manage their networks at
one central location, has been receiving a lot of support of late.
America Online (AOL:NYSE - news), Red Hat (RHAT:Nasdaq -
news), and British Telecom (BT:NYSE ADR - news) have all
expressed their support for NDS. "Ninety percent of Novell's revenue is
NDS-centric," says Joel Achramowicz, software analyst with Preferred
Capital Markets. "What used to be a network OS company is now a
directory-driven appliance company."
Lethal Injection
What also has investors is the company's improved execution. Novell's
earnings growth rate topped out at 79% in its last fiscal year ending in
October 1999. This year, analysts expect earnings to rise 47% with
year-over-year revenue growth of 22% to $1.5 billion. Analysts expect
Novell to report first-quarter earnings of 13 cents a share when it
reports, scheduled for Feb. 17. Novell officials are in a quiet period until
then and were unavailable for comment, according to a spokeswoman.
One of the reasons for Novell's recent retreat is investor concern over
the recent launch of Microsoft's Windows 2000, which houses its own
directory product, Active Directory. Novell fans are concerned, but
believe Novell's NDS and its forthcoming eDirectory are superior to
anything coming out of Redmond.
"Novell realizes the Internet is not platform-specific -- NDS is scalable
and runs on Sun's Solaris, Linux and Unix," says Schupf. "Microsoft's
product only runs on Windows, and that's the genius of what Sun and
Novell are doing."
One Big Number
Novell hasn't yet won over the Street, say analysts, because it has
failed to post that one big quarter that makes investors sit up and take
notice. It has only managed to meet or barely beat analysts' earnings
expectations thus far. "I think its stock is going to stay in the 30s until
it has that blowout quarter," says Shepich.
Schupf says he's not concerned. "Novell isn't a quarter-to-quarter story,
it's a long-term bet that Schmidt will make Novell a winner," says
Schupf, who sees Novell becoming a key player in network storage. So
does George Gilder, the influential tech futurist who put Novell on his
newsletter's Telecosm Technologies list last month. "Sun, Novell and
an ever-expanding array of companies that enable direct access to
network storage will play an increasing role in the new paradigm," he
wrote.
"This is a variant-perception type of stock," sums up Schupf. "That is
when you understand something that the Street doesn't." For Novell's
growing number of investors, the company's rebirth is becoming more
and more understandable every day.
Novell's Schmidt is scheduled to present Thursday at Goldman's
conference, which runs from Feb. 7 to 11. Schmidt will also be that
evening's keynote speaker. TheStreet.com will provide continuing
coverage of the conference.
Send |
