Novell Reports Second Fiscal Quarter 1998 Results: Revenue of $262 Million And Earnings of $0.05 Per Share
PROVO, Utah -- Novell, Inc. (Nasdaq: NOVL) today reported revenue of $262 million for its second fiscal quarter ended April 30, 1998, compared with $252 million in the first quarter of 1998. Second quarter net income was $19 million, up $5 million from the first quarter of 1998, and earnings on a diluted basis were $0.05 per share.
"Novell's recovery plan is working," said Dr. Eric Schmidt, chairman and CEO of Novell. "Disciplined expense control, on-time delivery of new Internet products, and sharp management focus have all contributed to solid second quarter results. We made progress toward our objective of restoring revenue and earnings growth, and extending our leadership into the Internet market. Having posted sequential revenue growth and the third consecutive improvement in earnings, our confidence is growing."
Novell's second quarter results included $14 million in operating profit --
a $9 million increase from the first quarter of 1998. For the first six months of fiscal 1998, revenue totaled $514 million and earnings were $0.09 per share on a diluted basis.
Total revenue from NetWare server operating systems contributed $149 million in the second quarter, up slightly from the first quarter of 1998.
Network services revenue, including GroupWise and ManageWise network applications, as well as infrastructure products such as BorderManager, LAN WorkPlace TCP/IP, NetWare for SAA Host Connectivity, NDS for NT, and Tuxedo royalties, increased 7 percent to $72 million.
Novell expanded its role as a network services provider during the quarter by licensing Novell Directory Services (NDS) and other core software to Maritime Telegraph and Telephone in Canada and to Singapore Telecom. These Internet Service Providers join seven others who have deployed or announced plans to use NDS as the basis for providing a range of business-class, value-added Internet services to their customers.
Revenue from multi-product license programs and OEM sales increased 4 percent over the first quarter of 1998 to $143 million, driven by 18-percent revenue growth to large enterprise customers. Significant enterprise customers during the quarter included Mihelin, the U.S. Postal Service, MCI, Time Warner, First Union National Bank, and the State of Ohio.
On a geographic basis, revenue from the United States increased 4 percent from the first quarter of 1998 to $149 million, while the Europe, Middle East, and Africa region grew 9 percent to $78 million. Revenue in Asia Pacific and the Americas decreased slightly, totaling $21 million and $15 million, respectively.
On the balance sheet, cash and short-term investments were $1.085 billion at the end of the second quarter, up $51 million from fiscal year-end 1997 and up $39 million from first quarter 1998. Fiscal year-to-date, cash flow from operations contributed $69 million to the net cash increase.
An important product milestone during the second quarter was the release of the third and final Beta of NetWare 5 server operating system, based on open Internet standards. The delivery of Beta 3, expected to reach some 200,000 users worldwide, places the product on schedule for commercial release during the summer of 1998. A new release of NetWare for Small Business, with simplified installation and a broader range of applications, also shipped during the quarter.
In the second quarter of fiscal 1997, before the mid-year restructuring of Novell's business, the company reported revenue of $273 million and a loss of ($0.04) per share. In the first quarter 1998, Novell reported $252 million in revenue and earnings of $0.04 per share.
Founded in 1983, Novell is the world's leading provider of network software. The company offers a wide range of network solutions, education, and support for distributed network, Internet, and small-business markets. Information about Novell's complete range of products and services can be accessed on the World Wide Web at www.novell.com.
Forward looking statements in this release are made under the Safe Harbor Reform Act of 1996. These statements are based on current expectations and actual results may differ materially due to risks, uncertainties, and other factors. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's 10-K and 10-Q filings, as well as the annual report.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
Second Fiscal Quarter Ended Six Months Ended
Apr 30, Apr 30, Apr 30, Apr 30,
1998 1997 1998 1997
Net sales $262,250 $273,107 $514,292 $647,954
Cost of sales 57,021 77,175 112,160 153,146
Gross profit 205,229 195,932 402,132 494,808
Operating expenses
Sales and marketing 98,253 116,068 199,988 243,958
Product development 58,046 68,442 115,832 140,197
General and administrative 34,582 39,517 67,032 77,248
Total operating expenses 190,881 224,027 382,852 461,403
Income (loss) from operations 14,348 (28,095) 19,280 33,405
Other income, net 12,467 6,415 27,110 20,192
Income (loss) before taxes 26,815 (21,680) 46,390 53,597
Income taxes 7,508 (7,046) 12,989 17,419
Net income (loss) $19,307 ($14,634) $33,401 $36,178
Weighted average shares:
Basic* 351,762 347,320 351,396 346,913
Diluted* 356,586 347,904 354,779 347,499
Net income (loss) per share:
Basic* $0.05 ($0.04) $0.10 $0.10
Diluted* $0.05 ($0.04) $0.09 $0.10
* The Company has always reported net income per share on a diluted basis.
The calculation of diluted net income per share includes the effect of common stock equivalents such as outstanding stock options, while the calculation of basic net income per share does not.
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
Apr 30, 1998 Oct 31, 1997
ASSETS
Current assets
Cash and short-term investments $1,084,635 $1,033,473
Receivables, net 220,128 234,358
Inventories 6,316 10,656
Prepaid expenses 62,152 57,685
Deferred & refundable income taxes 117,849 134,210
Total current assets 1,491,080 1,470,382
Property, plant and equipment, net 340,708 373,865
Other assets 83,397 66,402
Total assets $1,915,185 $1,910,649
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $60,875 $82,759
Accrued compensation 47,344 51,397
Accrued marketing liabilities 17,741 27,728
Other accrued liabilities 71,453 85,157
Income taxes payable 3,839 --
Deferred revenue 83,251 74,915
Total current liabilities 284,503 321,956
Minority interests 18,681 23,276
Shareholders' equity 1,612,001 1,565,417
Total liabilities and
shareholders' equity $1,915,185 $1,910,649
/CONTACT: Peter Troop, 408-577-8975, or peter_troop@novell.com, or
Jonathan Cohen, 408-577-7268, or jcohen@novell.com, both of Novell, Inc./
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