Novell Strong Buy Rec-32 1/4
February 23, 2000
AXXel Knutson's Flash Recommendation:
Using, AXXel Knutson's
VTAR?
An Old Friend Gives us Another Opportunity -Strong Buy Recommendation Novell [NOVL-$32 1/4]
["Volume Trade Analysis Research"?]
"Manage the risk?the profits will take care of themselves"
"In this business, being right is not as important as making money?consistently, and one of primary tenets of the quest is the avoidance of the 'obvious risk'"
From AXXel Knutson,
EVP & Director, Institutional Equity Research
www.tradingweapon.com
a premium investor service of & securities offered through
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Novell 32 1/4
Chart is courtesy of R.W. Mansfield & Co. *
We are recommending the immediate purchase of Novell [NOVL-32 1/4] at current levels and very aggressive purchase in the event of any break below $30 [which we rate only as a 20% possibility]. Our VTAR ["Volume Trade Analysis Research"] price objective is about a 50% premium above recent high of $42 « giving us an 18-month price objective of $62. There is in our estimate about a 40% probability of attaining this level sooner than 18 months. The stock has a very stable base in the mid-20's and this propelled an attack on $40 which, it can be seen did not hold. This is not unusual particularly in view of the strong advance out of the twenties.
Novell provides network and Internet directory software and services. The company's solutions make networks more manageable and secure; additionally they integrate complete ranges of computer platforms, applications, services and devices.
The excuse for holders to dump was incorporated in the recent earnings announcement. This is how Bloomberg saw it and it pretty much tells the story of the crash out of the forties:
"Novell Tumbles 21% After Sales Slowed in 1st Quarter
2/18/00 1:22:00 PM
Source: Bloomberg News
Provo, Utah, Feb. 18 (Bloomberg) -- Novell Inc. shares fell 21 percent after the network-software maker said fiscal first- quarter revenue missed estimates because sales slowed at the end of January.
Novell tumbled 8 15/16 to 34 1/8 in Nasdaq trading of 19.4 million shares, making it the twelfth-most active stock in U.S. markets. Novell reported results for the quarter ended Jan. 31 late yesterday. Revenue rose 11 percent to $316 million, short of some analysts' estimates of $322 million. Novell, revived by Chief Executive Eric Schmidt after a several quarterly losses more than two years ago, attributed the unexpected sales slowdown to customers' preoccupation with potential Year 2000-related software problems. Before today, the shares had climbed 29 percent this month."
Although we don't buy this blaming of slowing sales growth on Year 2000 concerns, we do believe that the real point of the earnings announcement was missed. This is a company still in transition. M It is not likely that the road will be completely smooth and investors who think that their product lines and distribution channels are totally seamless at this point ignore the fact that Eric Schmidt and his crew have turned this company around and they still have nearly $1 billion [with a "b"] in cash and that is after a very aggressive stock re-purchase plan that this writer suggested to NOVL in August of 1998 @ $8 5/8 when we were the ONLY analyst in town with a "Buy" recommendation [not that the bums bought even one share through me I will hasten to note]. But no hard feelings, the stock treated us well and this writer thinks that it will do so again, so back up the truck and get a load [of Novell, that is]. But past performance is not necessarily indicative of future price performance.
We would suggest you visit the website novell.com and see for yourself what makes this an attractive turnaround.
Here is the Novell commentary on their balance sheet and stock re-purchase program for the last quarter:
On the balance sheet, cash and short-term investments were $948 million at the end of the first quarter, compared with $895 million at the Oct. 1999 fiscal year-end. In addition to the $45 million of net income, collections on receivables, and a refund associated with the tax settlement reported in the fourth quarter
of fiscal 1999, led to very strong cash flow from operations of $141 million. Days sales outstanding of trade receivables was 68 days, down from 75 days at the end of fiscal 1999. Deferred revenue primarily from maintenance associated with Novell's site-license business increased to $181 million up 31 percent
from year-over-year.
During the quarter, the company spent $89 million to repurchase 3.7 million shares of Novell common stock. On Aug. 19, 1999 the Novell board of directors authorized up to $500 million for a share repurchase program through Oct.31, 2000. Over the two fiscal periods since this authorization, the company has spent
$288 million to purchase and retire 13 million shares of common stock.
If you want the full text:
novell.com
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www.tradingweapon.com
A premium investor service of Platinum Equities, Inc.
New York City
Hands-On Accounts"
In response to inquiries relative to opening securities accounts handled directly by AXXel Knutson, here is the deal: Accounts are handled directly by Knutson and the basic charge is a commission on transactions of 1% of the transaction amount in and the same going out. There are no additional investment management fees and there is no sharing of profits or losses. Client-selected stocks may not enter the account unless approved by AXXel and this is not a likely occurrence. The minimum account accepted is $100,000 and this minimum will increase in 2000. Sob stories are listened to for amounts under $100k but rarely accepted unless AXXel is in the mood. These accounts tend to be trading accounts so don't even ask if you can't stand the activity. AXXel does not personally trade in the same stocks as clients or those written about in his newsletters or spoken about in media appearances although Platinum Equities and its officers may take and have positions although they receive no advance notice of new recommendations or changes in opinion. Those interested in additional information may call at 800-696-9002 or email AXXel at axxel@blast.net. There are no investment management fees and no sharing of profits/losses. We do not deal in BB stocks [with the exception of some ADR's] or any stocks in which Platinum makes a market or has any corporate finance affiliation. Refreshing, isn't it?
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Investment decisions should not be based solely on our proprietary indicators, which are intended as an adjunct to your additional analysis. Please accept these comments as market commentary. We do not intend these comments to replace detailed fundamental analysis. We urge you to accomplish that additional research via your contacts on the Internet or through a trusted financial advisor. If you want additional information, we will give it upon your request.
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