Hi James...About Q1 Results
>>10% growth in server revenue<<
>>34% growth in GroupWise revenue<<
>>flat operating and administrative costs<<
You copied some info from Q1 report without really analyzing it. I'm
sure everyone on this thread read these numbers. Unfortunately, these
numbers are misleading. Almost everyone here agrees that Q1 numbers
are bad.
Let me analyze these numbers and see how bad they are. The growth
numbers you are citing, are in comparison with last year Q1 numbers.
The reason this comparison is made is because it accounts for seasonal
factors and the number of working days. Q1-96 was based on 13 weeks
reporting period. However, during Q1-97, Novell without any nouncement
changed their reporting period to end at the last day of the month.
This resulted in 14 weeks reporting period for Q1-97. Considering that
Q1 has 7 holidays, Q1-96 has 58 working days and Q1-97 has 63 working
days. In order to get a meaningful comparison you have to reduce the
reported numbers of Q1 by a factor of 58/63.
Now, let's look at some meaningful comparisons:
Q1-97 Q1-97 Q1-96 Q1-96
Adjusted (excluding discontinued biz)
Revenues 375 345 438 377
Total Expenses 313 337
Income from
Operations 62 101
Sever Sales 251 231 228
Groupwise sales 28 26 21
1. Revenues 97/96 = 345/377 = 91.5% (8.5% decline)
Don't forget that the main objective of the current management and the
BOD is to increase revenues according to Q4-96 conference call. I see
a significant decline. Ignore what Marengi said about Germany and
Japan, this is just another lame excuse. It is clear to me now that
during Q1 they realized that they will have catastrophic numbers, and
the brain trust of the company decided to change the reporting period
just that the results look a little more respectable.
2. Server Sales 97/96 = 231/228 = 101.3% (1.3% growth)
Novell spent about two years developing Green River and in the first
full quarter of deployment, server sales surged by 1.3% year over
year, Big Deal.
3. GroupWise Sales 97/96 = 26/21 = 124% (24% growth)
But Novell executives keep telling the media that they are targeting
a yearly growth of 60%-80% for GroupWise. This is clearly not within
their target range.
4. The best measure of evaluating whether the expenses are under
control or not is to compare the operating margins:
Operating Margins 96 = 101/438 = 23%
Operating Margins 97 = 62/375 = 16.5%
Supposedly, WP and Unix were not that profitable and accordingly
Novell got rid of them and assured everyone that by focusing on their
core business they will be smaller but more profitable. The above two
numbers are telling us a different story. Marengi in a published
report by Reuters on 2/13/97 told reporters that operating margins for
FY-97 will be between 20% to 23%. Clearly, at this time he knew Q1
numbers, was he misleading everybody?, or he didn't know how to
calculate the operating margin.
Further, during Q4-96 conference call, the CFO stated that Q1-97 will
have sequential growth in revenues and EPS over Q4-96. It is puzzling,
if they aren't sure, Why are they saying something they can not do?.
Now, they are saying expect sequential growth in Q2-97 over Q1-97. I
don't believe them anymore. If they could not do in Q1 with several
newly released products and a 14 week quarter, they can not do in Q2
with only one newly released product (Kayak) and a 12.5 weeks quarter.
At this time, I don't have any particular interest in Novell stock,
but I felt that this thread has been misled by Novell more times than
I like to remember, and I do believe that Novell investors deserve
better than the absurd numbers you quoted above.
I guess by now you know why Brown Brothers Hariman has downgraded the
stock to avoid, and Argus dropped it to a strong sell, and here are
some more analysts comments:
-----------------------------
2/28/97 - Bad News Sends Novell Shares Falling
The Salt Lake Tribune
By Lisa Carricaburu
From the article:
As a result, "We"ll be making significant resource and management
realignment," starting this week, Young told analysts. "Management and
employees are very excited about this much-needed road map for the
future."
The realignment includes the positioning of all revenue-producing
products under the direction of Denice Gibson, senior vice president
of distributed networks. Troop said Thursday she gained oversight for
two emerging products.
Truly dramatic restructuring, however, is unlikely to precede the
naming of a new chief executive officer to replace Robert Frankenberg,
who resigned in August.
"That is the biggest key to this company"s future," said Wendy
Abramowitz, an analyst with New York City"s Argus Research. "Novell
has been without a leader for too long."
Young said he recognizes employees and investors are anxious to see a
new CEO named.
A search is ongoing, he said. "Progress is being made and we hope to
have a selection before long."
An announcement could be made at Brainshare, Novell"s annual
developers conference scheduled for March 24. Young said the company,
which has 2,800 employees in Utah, also will use the event to talk
more about the company"s future.
Therein lies Novell"s problem, said Brian Eisenbarth, an analyst for
Collins & Co. in San Francisco. "It"s all talk."
**Comment** >>"It"s all talk."<<...This says it all.
-----------------------------
To Paul: Yes, I got more than disgusted with Q1 results. I just didn't
want to add to the gloom at that time.
To Steve: Agree, it will take a long time to gain the trust of Wall
Street after this catastrophe.
To Robert Butcher: Joe Antol is genuine.
I will post from time to time when I find something important or
interesting to say.
Regards
Salah |
