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

To: Paul Fiondella who wrote (18701)	11/25/1997 10:51:00 PM
From: Don Earl	Respond to of 42771

Hi Paul, Yep, looks like somehow selling 1,000,000 shares of Corel for 60% less than when they got it, is considered income. Education and services are at least 6 million above normal. It should be pretty constant at around 30-32 million, so it was either over sold last quarter or stuffed a bit for Q4. Sales and marketing includes salaries, advertising, and branch office expenses. That is where most of the restructuring savings would show up. It also suggests they spent almost nothing on advertising last quarter. According to IR, channel shipments in Q2 were reduced by $30 million, which means that actual sell through in Q2 was $303 million. From Q2 to Q4 sales have dropped by $34 million or over 10%. In eight months Schmidt has managed to shake customer confidence with all the bad PR over lay offs and restructuring, piss off all the resellers by not giving them the traditional discounts, has done nothing to improve marketing, or stop revenue from declining. Give him a bag of fries, a lab coat, and put him to work doing what he knows how to do. My short position was based on revenue in this area that should have produced a -.02 to -.04 loss. $269 million is terrible, no matter how they cook the books or what kind of happy face they paint on it. There are too many great companies with good earnings that have been beat up on the Asian scare for me to waste any more time on a company that can't show anything that even vaguely resembles growth. Regards, Don

To: Paul Fiondella who wrote (18701)	11/25/1997 10:54:00 PM
From: E_K_S	Read Replies (1) \| Respond to of 42771

Paul - Good breakdown of the Novell financials...here is a bit more to add to your report (http://www.techweb.com/investor/news/1997/11/1125novl.html) "Revenue was down 30 percent from last year's fourth quarter, to $269 million; $99 million, or 37 percent, came from network software licenses. Novell, which has been shoring up its reseller relationships to stem the loss of LAN operating system market share to Microsoft's NT, said fully 54 percent of all sales came from channel partners." ====================================================================== I also expected to see more savings from the 1000 employee layoff but perhaps that will not kick in until next quarter. The big number that everybody has focused on is the revenue figure but as you pointed out ..."Revenue is down 30% from fourth quarter..." as are earnings per share. I guess the way I continue to view this company is what will the revenue picture look like 18 months from now. We know that many of the current product lines will be generating less and less revenue and we only have Border Manager and Moab to contribute to new growth. I am still not convinced that we have finally stabilized the revenue shortfall and would like to see a whole new category of revenue (from a brand new product or service) which contributes atleast 30% to the overall pie. Is it possible for CEO Schmidt to deliver a new innovative product or service in the next 18 months that would represent 30% of Novell's 1998-1999 revenues?? Well certainly it is possible.....but based on managements past track record and their failure to generate new business products (especially in the low end market), I do not see it occuring yet on my radar screen. I get the feeling that CEO Schmidt is focusing on the installed customer base and the NetWare 3.1 to IntraNetware 4.0 conversion/upgrade window. This must be accomplished before the release of NT 5.0. This action alone should stabilize the revenues at the $1 billion/year level for 1998-1999. Unless CEO Schmidt can come up with a killer application, product or service which generates significant new revenues in 18 months, I just do not see the growth potential (ie.growth rates) to value this stock above $10.00. Until the street is convinced that Novell can grow their revenues at a 20% level, I think this stock will be in a trading range. Based on today's results we have achieved a NEGATIVE growth rate of 30% over the past year! This is a growth stock story right?? Is this a stock you would really want as a core holding in your portfolio? I think not...perhaps a reevaluation in 18 months may see things differently but this investor continues to shake his head. EKS P.S. Salah did show that this was comming over 8 month's ago...but I just did not think it would get this bad.