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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: Salah Mohamed who wrote (6002)12/18/1996 10:26:00 PM
From: E_K_S   of 42771
 
Hi Salah: Here is the way Morgan Stanley projects it for 1977.
How do their etimate differ from yours?


1997E
1/97E 4/97E 7/97E 10/97E FY97E

Netware 4.0 136 142 145 149 572
Netware 3.0 65 55 45 45 210
NetWare Other/NEST 2 2 2 2 8
NetWare Systems Group 203 199 192 196 790
Royalties 6 6 6 6 24
Network Services 85 90 100 110 385
License Revenue 294 295 298 312 1199
Education, Service & Other 55 55 58 62 230
Discontinued operations - - - - -
OEM/Master Licenses 145 155 165 175 640
Net Sales 349 350 356 374 1429

Cost of Sales 71 73 73 78 295
Sales & Marketing 124 128 128 135 515
Product Develop. 60 61 62 62 245
G & A 35 35 35 36 141
Total Op Expenses 219 224 225 233 901
Total Expenses 290 297 298 311 1196

Operating Income 59 53 58 63 233
Investment Income 15.0 15.0 15.0 15.0 60.0
Interest Expense 1 1 1 1 4
Merger expenses 0 0 0 0 0
Pretax Income 75 69 74 79 297
Taxes 24 22 24 25 95
Net income from ops 51 47 50 54 202
Extraordinary items - - - - 0
Taxes on extr. items - - - - 0
Net Income 51 47 50 54 202

Avg Shrs. (mil.) 335 330 330 330 331

EPS-Operating 0.15 0.14 0.15 0.16 0.60
% Change -12% - -12% 0% 94%

EPS-Reported 0.15 0.14 0.15 0.16 0.60

Growth Y/Y %
Netware 4 4 294 11 10 32
Netware 3 -34 90 -47 -44 -28
Total Netware -13 183 -14 -10 6
Total Revenue -20 86 -2 2 5
Op Expenses -9 -3 3 3 -2
Op Profit -9 -167 -13 -1 106

% of Revenue
Cost of Sales 20.3 20.9 20.5 20.9 20.6
Gross Margin 79.7 79.1 79.5 79.1 79.4
Sales & Marketing 35.5 36.6 36.0 36.1 36.0
Product Development 17.2 17.4 17.4 16.6 17.1
G & A 10.0 10.0 9.8 9.6 9.9
Op Margin 16.9 15.1 16.3 16.8 16.3
Net Income 14.6 13.4 14.1 14.4 14.1
Eff Tax Rate 32.0 32.0 32.0 32.0 32.0
LTM Sales 1269 1431 1422 1429 -
LTM EPS-reported 0.29 0.62 0.60 0.60 -

E = Morgan Stanley Research Estimates
Fiscal year ends in October.
Morgan Stanley & Co. Incorporated and/or its affiliates make a market
in securities of Microsoft and Novell.
======================================================================

MS is very conservative. The way I see it is if they indeed see
only $0.60 for 1997 then we should take the $18.00 buyout.
Software business would be worth $12.00 plus $6.00 in assets.

However, I suppose one could make an argument for higer sales
and revenues. Remember the non US (ie. foreign) revenues
usually peak 8-12 months after U.S. revenues peak. Therefore
foreign revenues will be quite strong in 3rd and 4th quarters
1997.

EKS
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