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Technology Stocks : Novell (NOVL) dirt cheap, good buy? -- Ignore unavailable to you. Want to Upgrade?

To: Salah Mohamed who wrote (18650)	11/24/1997 8:44:00 PM
From: Jim McCormack	Read Replies (1) \| Respond to of 42771

Earnings Prediction Repost - My .02 To: Don Earl (17449 ) From: Jim McCormack Sunday, Sep 21 1997 10:40PM EST Reply #17460 of 18650 Don - Lets try to work the Numbers... I'm open to discussing the numbers. We do have a very serous problem however. The fact is that the "Sell Through" is not tied to how much Novell will "Sell Into" the channel. We have seen them over sell the channel 2 times in 8 quarters. They can not, it appears, accurately forecast demand at the end user level. They continue to over sell the distribution channel and have to "Work Off" excess supply by holding sales for a quarter or more. Further complicating matters is the fact that this revenue source is only 60% of the business as the rest is direct license OEM revenues and royalties. "Third quarter revenue was principally from sales to large network users through the Company's major account, corporate and volume license programs." - Sec 3q Filing All of the Revenue adjustments were taken on the 60% - the Channel. You can't Stuff yourself can you? They shipped nothing so the 40% of the business conducted Novell Direct and "Business as usual" is worth 91 million. What is the Channel worth? We can analyze the products if you like but the historical shipping into the channel has been way off - they claim in Q2 they held 110 million back. The quarter came in at 273. The next quarter it comes in at 91. Remember they began shipping again after the last exercise in 96-q3, and went on to ship in 96-q4, 97-q1, 97-q2 (Minus 110 million). Now they stop and blow off the excess and sales go to 91 million from a normal run rate of 350-375. That means they had 110 million extra they worked out in 97-q2 and 350-91=260 they just completed working out (Eric said the Sell through was 250 million so we still track each other)for a total of 370 excess "Sell Into" the channel. The 350 run rate is conservative it is higher. What it means to me is that It took 5 quarters to get the revenue right and it was 370 million "Extra" in the end. So lets take the last 5 quarters revenue (365+385+375+273+91) 1489 and take out the "Extra" 370 and get 1189 and devide that by 5qs to get 223. Take the 223 and turn it into 60% and then add in the 40% or 91 million for non channel revenue last quarter and you get 225 million was what they should have been shipping each quarter. This is conservative in that the 91 million has been growing from 5% to 40% over the past 2 years. You could argue that as Direct revenues continue to grow you need less Boxed software so less and less channel selling is required - 5% less per quarter in fact. So 225 - %5 = 213 million next quarter. It really is up to Novell. They can easily over sell the channel and then we will have this talk again in 5 quarters. I think they have learned the lesson and will not "Stuff" anymore. Thats why I say 200 million. What do you think? Jim Work with me on this and we can figure it out.... Remember the Stuffing is only 60% of the revenue - so eventuially we have to forecast the other 40% too.

To: Salah Mohamed who wrote (18650)	11/24/1997 8:48:00 PM
From: Jim McCormack	Read Replies (1) \| Respond to of 42771

Earnings Background Data.... To: vinod Khurana (17445 ) From: Jim McCormack Saturday, Sep 20 1997 6:24PM EST Reply #17447 of 18651 95-97 Revenue Breakdown and Thoughts for Q4 -97 95 95 95 96 96 96 96 97 97 97 97 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Educ 41 41 ? 41 35 39 36 32 32 20 22* UNIX 22 20 ? 31 18 18 12 10 9 8 6* Netware 244 295 ? 230 65 216 243 253 169 39 132* Net Svs 77 93 ? 93 49 92 94 80 63 24 40* Totals 384 449 ? 395 167 365 385 375 273 91 200* See the original post for the details.... Put me down for 200 - 210 for the Quarter. No longer hold it but used to.... JIM

To: Salah Mohamed who wrote (18650)	11/25/1997 7:38:00 AM
From: BJP1946	Read Replies (3) \| Respond to of 42771

The EPS is irrelevant since no one is buying this stock on that basis. Similarly, if they lose money, who cares [unless the loss is so great as to threaten their ability to move forward with their plans]? What is important is whether the numbers together with the accompanying discussion give the appearance of a company that has stabilized and/or stabilized and turned.