FYI from RB thread
By: drouin1
Reply To: 11257 by MorayMan
Sunday, 14 May 2000 at 1:45 PM EDT
Post # of 11304
Here is a letter from Peter Troup in Novell Investor Relations.
Eric has read your message and asked me to respond. I'm director investor relations. First off, the company very much appreciates your frustration, and is starkly aware of how it needs to perform.
Separate of the Q2 pre-announcement, Dennis Raney, the CFO has said that he intends for the company to regularly buy-back shares as it goes forward. So additional repurchase proposals, beyond what has already been approved, will be brought to the board for consideration. Over the last 18 months Novell has maintained its cash balance at almost $1 billion while spending over $900 million of cash generated from operations to repurchase its common shares.
Per-seat directory pricing isn't seen as the issue. But Novell believes that management and organizational shortcomings in sales represent real issues. The company is very disappointed in the channel revenue fall-off and its impact on fiscal Q2. Inadequate sales forecasting led to $10 million a week declines in forecast for each of the last five weeks of the quarter. On Tuesday of last week we announced the appointment of a new senior vp of worldwide sales, Nicholas A. Tiliacos most recently with Lucent. The issues he needs to address relate to the channel situation, but also direct selling efforts. They include:
- - poor quota management, with numerous changes undercutting sales efforts
- - delays in effective sales segmentation that aggravated channel conflict
- - limited channel support and engagement in the face of aggressive training and product
introductory efforts by major competitors
- - the need to complete the transition of Novell's sales teams to solution selling.
All the issues relate to the business changes underway in the company. It's change that is coming harder and taking more time to get done than we anticipated. The company is in the midst of adopting new go-to-market strategies that address a new Net services market, have us entering the Internet and ASP market, while also targeting an expansion of sales from both existing and new customers from our traditional enterprise network management market.
But ultimately revenue performance matters first for Novell and its shareholders. The financial community wants to see strong revenue growth as reassurance that Novell's strategy is right. Even before the Q2 pre-announcement, many took the company's revenue growth over the last two quarters as a disappointment. Q4 of FY99 was up 16% year-over-year. Q1 of FY00 was up 11%. Now we've announced that total Q2 FY00 revenue will be down from the $316 million reported in FY99 to just over $300 million. It is taking the company more time than it, and many in the financial community had hoped, to deliver the revenue growth that is needed.
Novell is entering new markets - - Solaris, Linux, xSPs and the Internet - - with new products, it is engaging established customers around new Net services offerings. But the company is also encountering lengthened selling cycles, and now significant disruption in the traditional computer reseller channel. The company is confident that it will ultimately succeed in these new markets, and more broadly as a business to business Internet software provider... but it will take time, we've said at least the next six months, to address the sales issues. The degree to which the company succeeds, or not, will now depend on how effective it can be in business and sales execution.
Finally, the company isn't for sale for a number of reasons that tie to optimizing shareholder return... first at current price levels the company believes it is far undervalued. Especially so, because irrespective of the immediate business issues that the company is facing, Novell is as confident as ever in its one Net vision, Net services product strategy, and the long-term market opportunity they represent.
The company understands your frustration, and very much appreciates your support....
Peter Troop
Investor Relations
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