Novell Meets Quarterly Profit Target, But Sales Show Disappointing Growth
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
Novell Corp. used cost cutting to meet its profit target, but the company's fiscal first-quarter sales were slightly below expectations due to lingering effects of the year-2000 computer problem.
For the period ended Jan. 31, the Provo, Utah, software company reported net income of $44.8 million, or 13 cents a diluted share, up 55% from $28.99 million, or eight cents a share, a year earlier. Sales increased 11% to $316 million from $285.8 million.
Novell's earnings were exactly in line with a consensus of analysts' expectations compiled by First Call/Thomson Financial. But its sales growth was below the 13% increase the company -- and many people on Wall Street -- expected.
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Analysts often are skeptical of claims by technology companies that Y2K hurt their sales, especially since so many companies escaped unharmed. But Bob Lam of Bear, Stearns & Co. said the calendar turnover had indeed posed a problem for Novell in the last quarter. He also suggested the market may have slowed as Novell customers waited to learn about the new Windows 2000 product from Microsoft Corp., Redmond, Wash.
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Novell is girded for a major battle with Microsoft; last week, for example, the company announced it had found a serious flaw in the Windows 2000. Microsoft responded that Novell's engineers had made a mistake in their analysis of Windows 2000. But Novell said third-party testers had verified that the flaw exists.
Mr. Lam said that while Novell will have its hands full in its battle with Microsoft, the company is developing products for other markets besides the desktop-computer arena, where it is most vulnerable to inroads from Windows. One example is in using Novell software to power a new class of products to speed up Internet traffic; Mr. Lam predicted Novell will start seeing some upside from those efforts later in the year.
Write to Lee Gomes at lee.gomes@wsj.com
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