Novell Reports Fourth Fiscal Quarter 1998 Results: Revenue of $298 Million And Earnings of $0.12 Per Share
PROVO, Utah, Nov. 24 /PRNewswire/ -- Novell, Inc. (Nasdaq: NOVL - news) today reported revenue of $298 million for its fourth fiscal quarter ended October 31, 1998, an 11 percent increase over the $269 million recorded in the fourth quarter of fiscal 1997. Fourth quarter net income was $42 million, up $35 million from the comparable quarter of 1997. Earnings on a diluted basis were $0.12 per share, compared with $0.02 in the year-earlier period.
For the full fiscal year 1998, revenue was $1.084 billion, compared with $1.007 billion in fiscal 1997. Net income for the year was $102 million, compared to a ($78 million) loss for the prior year. Earnings per share on a diluted basis were $0.29 for the year, compared with a loss of ($0.22) per share in fiscal 1997, which included a ($0.10) per share loss due to restructuring.
Dr. Eric Schmidt, Novell chairman and CEO said: ''Our strategy is clearly working. Initial customer response to NetWare 5 and new Novell partnerships demonstrate that the market increasingly recognizes that directory is vital to managing information resources in an Internet world.''
During the fourth fiscal quarter, revenue from directory-enabled servers, consisting of NetWare 4 and NetWare 5, totaled $150 million, a 16 percent increase from the fourth quarter of 1997. Associated network infrastructure and application software contributed $83 million, up 30 percent from the year-ago quarter. Of this, directory-enabled network applications increased 49 percent to $54 million on the strength of Z.E.N.works and ManageWise management software and GroupWise collaboration products. Revenue from customer service, network training, and consulting for network solutions totaled $37 million, a 22 percent increase from the year-earlier period.
Record sales to large network customers in the fourth quarter led Novell's seasonally strongest period. Major account license programs were up 53 percent, compared to the year earlier quarter, to $152 million. The largest of these agreements typically involve decisions to deploy Novell Directory Services (NDS) to support diverse networks that include thousands of Windows NT Workstations and hundreds of NT Servers. Representative directory decisions in the quarter included license agreements from accounts as varied as Regime d'Assurance Chomage, the unemployment agency in France; Royal Bank of Scotland; the U.S. Immigration and Naturalization Service; and Telstra in Australia.
Fourth quarter revenue on a geographic basis was $179 million in the United States, up 23 percent year-over-year. In Europe, Middle East, and Africa, revenue was up 9 percent to $81 million. Revenue from Asia Pacific was down 39 percent over the prior year period to $21 million. In the Canada and the Americas region, outside the U.S., revenue was up 9 percent to $17 million.
On the balance sheet, cash and short-term investments were $1.007 billion at the end of fiscal 1998, compared with $1.033 billion at the end of fiscal 1997. The major source of cash for the year was from operations which contributed $294 million. The primary use of cash for the year was for share repurchase. On June 5, 1998, Novell's board of directors authorized the company to repurchase up to 10 percent, or approximately 35 million shares, of Novell common stock over twelve months. To date, the company spent $245 million to purchase and retire 21 million shares of common stock.
Business Outlook
Novell's business objective, over the longer-term, is to achieve growth as directory deployments in business networks increase the market potential for directory-enabled applications. In addition to having moved to open Internet standards with NetWare 5, Novell is also bringing to market new directory-enabled applications that it expects will ultimately span from systems management to commerce services on the network.
The company intends to expand the value of directory solutions through the integration of varied network resources with Novell Directory Services (NDS). Recent agreements with Cisco, Lucent Technologies, and Nortel are examples of this. In the case of these partners, NDS provides the basis for remote management of switches and routers.
Novell's deferred revenue continued to expand in the fourth quarter, reflecting the strong growth in Novell's multi-product license programs for large network accounts. The backlog of deferred revenue for future recognition reached $142 million at the end of the fourth quarter, up $67 million from the year-earlier quarter and up $39 million from the third quarter of 1998. Novell recognizes licensing revenue from software maintenance and service contracts over periods that typically run for 24 months.
Royalties from the licensing of Tuxedo transaction processing software totaled $36 million in fiscal 1998. A $12 million payment in the fourth quarter marked the end of these royalties.
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