Novell Completes Channel Inventory Reduction; Second Fiscal Quarter 1996 Results In Line With February Pre-Announcement
OREM, Utah--(BUSINESS WIRE)--May 29, 1996--Consistent with its February 21, 1996 announcement of a change in its long-standing distribution stocking policy, Novell, Inc. (NASDAQ:NOVL) today reported that it has reduced worldwide channel inventories by approximately $225 million in the second fiscal quarter ended April 27, 1996.
This company-instituted reduction in shipments decreased revenue in the quarter by a corresponding amount, resulting in revenue of $188 million and a loss of ($0.15) per share.
Second-quarter results compare with year-earlier earnings of $0.26 per share and revenue of $530 million, which included $149 million of revenue from personal productivity applications and UnixWare. Novell sold these product lines during the first half of fiscal 1996 as the company sharpened its focus on network software. The sale of personal productivity applications to Corel Corporation was completed on March 1, 1996. As expected, the sale led to a second quarter $20 million pre-tax gain, or $0.04 per share after tax.
"In a single quarter, we achieved our very aggressive objectives of both completing the sale to Corel and dramatically reducing and rebalancing Novell product inventory in our worldwide distribution channel," said Robert J. Frankenberg, Novell chairman and chief executive officer.
"Novell changed its traditional distribution stocking policy to address evolving customer purchase patterns toward channel, OEM, and direct license programs. As with other business decisions we have made during fiscal 1996, these actions make Novell a more dynamic and competitive company, repositioned for enhanced profitability and shareholder value."
Second-quarter revenue of $188 million included those parts of Novell's business not affected by the channel stocking change. These were corporate and channel licenses; OEM programs; sales by Novell KK, our Japanese joint venture; and education and service. Revenue from license and OEM programs grew 41 percent year-over-year to $107 million.
Of this, revenue from corporate and channel license programs grew 125 percent year-over-year, led by significant sales of NetWare 4.1 to AlliedSignal, Mobil Oil, the Department of Justice, Citicorp, McKinsey & Company, and TRW. GroupWise, Novell's electronic messaging and Internet/intranet mail application, accounted for $10 million in license revenue, up 50 percent from the previous quarter.
"Novell is continuing to gain market share within the enterprise segment of the network software market," said Frankenberg. "These accounts are implementing large, distributed networks requiring the advanced capabilities that NetWare and GroupWise provide and that competing products do not," said Frankenberg.
Novell's sale of its personal productivity applications to Corel enabled the company to further lower operating expenses during the second quarter. Operating expenses declined 16 percent from the year-earlier period and 4 percent from the prior quarter. Since October 1995, Novell has reduced employment by 1,900 employees associated with the sold product lines, bringing total headcount to under 5,900 worldwide.
On the balance sheet, cash and short-term investments totaled $1.2 billion, compared with $1.3 billion at October 28, 1995 and down slightly from first-quarter 1996. Novell repurchased 16 million shares of outstanding common stock for $200 million during the second quarter. Year-to-date in fiscal 1996 Novell has purchased 23 million of its shares for $306 million at an average cost of under $13.50 per share. The company's Board of Directors authorized the repurchase of up to 37 million shares of common stock through October 1996.
Novell, Inc. (NASDAQ: NOVL) is the world's leading networking software provider. Novell software provides the infrastructure for a networked world, enabling our customers to connect with other people and the information they need, anytime and anyplace. Novell partners with other technology and market leaders to help customers make networks a part of their everyday lives.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
Fiscal Quarter Ended Six Months Ended
April 27, April 29, April 27, April 29,
1996(a) 1995 1996(a) 1995
__________ __________ __________ __________
Net sales $ 188,180 $ 529,508 $ 626,099 $1,022,733
Cost of sales 68,614 124,455 164,625 241,330
__________ __________ __________ __________
Gross profit 119,566 405,053 461,474 781,403
Operating expenses 250,757 288,177
Sales and mktg. 127,292 148,374 148,356 182,817
Product dev. 69,723 93,000 73,269 69,764
General and
administrative 34,731 35,794 18,442 ---
__________ __________ __________ __________
Total operating
expenses 231,746 277,168 490,824 540,758
__________ __________ __________ __________
Income (loss) from
operations (112,180) 127,885 (29,350) 240,645
Other income (expense)
Investment income 11,257 15,037 26,157 24,604
Gain on sale of
assets 19,815 -- 19,815 --
Other, net (2,138) 1,240 (4,288) 1,498
__________ __________ __________ __________
Other income, net 28,934 16,277 41,684 26,102
__________ __________ __________ __________
Income (loss)
before taxes (83,246) 144,162 12,334 266,747
Income taxes (27,887) 48,294 4,132 89,360
__________ __________ __________ __________
Net income
(loss) $ (55,359) $ 95,868 $ 8,202 $ 177,387
__________ __________ __________ __________
Net income (loss)
per share $ (0.15) $ 0.26 $ 0.02 $ 0.48
========= ========= ========= =========
Weighted average
shares outstanding 362,442 374,383 367,013 373,205
========= ========= ========= =========
Note (a): During the second fiscal quarter of 1996, Novell reduced
worldwide channel inventories by an estimated $225 million. This
company-instituted reduction in shipments decreased revenue in the
quarter by a comparable amount.
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
April 27, October 28,
1996 1995
ASSETS
Current Assets
Cash and short-term
investments $1,181,015 $1,321,231
Receivables, net 357,122 470,437
Inventories 16,942 23,025
Prepaid expenses 31,784 50,576
Deferred income taxes 72,285 59,913
----------- -----------
Total current assets 1,659,148 1,925,182
Property, plant
and equipment, net 357,442 390,452
Other assets 50,288 101,196
___________ ___________
Total assets $2,066,878 $2,416,830
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 88,591 $ 116,305
Accrued compensation 68,319 97,637
Accrued marketing
liabilities 47,994 72,339
Other accrued
liabilities 117,488 90,623
Income taxes payable -- 29,942
Deferred revenue 38,810 54,099
___________ ___________
Total current
liabilities 361,202 460,945
Minority interests 17,174 17,623
Put warrants 90,025 --
Shareholders' equity 1,598,477 1,938,262
___________ ___________
Total liabilities and
shareholders' equity $2,066,878 $2,416,830
========= =========
CONTACT: Novell, Inc.
Peter Troop, 408/577-8975
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