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

To: ToySoldier who wrote (25668)	2/26/1999 11:05:00 AM
From: DJBEINO	Respond to of 42771

As Expected, Novell Meets Estimates (2/26) Individual Investor Online Analysis OK, so Novell didn't blow out the $0.08 per share estimate in the first quarter. For the first quarter ending January 31, 1999, Novell earned $0.08 per diluted share on $285.8 million in sales. This compares with just $0.04 per share and $252 million in revenues for the period ending January 31, 1998. Earnings were at the low end of the consensus range. Revenues increased 13.4%, leading CEO Eric Schmidt to conclude that he was "pleased" with the results. On the conference call, he alluded that the best is yet to come both in terms of product development and return to shareholders. Revenue from directory-enabled NetWare servers totaled $146 million. This is up 16% from the first quarter of 1998. GroupWise software, ManageWise, and Z.E.N. works management software increased 50% from the previous year to $53 million. Sales in the US were up 9% year-over-year. Asia Pacific revenue was flat with last year and came in at $22 million. Europe, the Middle East, and Africa revenue increased a remarkable 31% to $94 million for the quarter. Management attributed to the demand for NDS as the result of preparations for "Euro-driven" market opportunities, and post-2000 network infrastructures. Gross margins improved slightly to 77.5% from 77.4% in the same period last year. Sales and marketing expenses decreased to 36.9% of sales in the first quarter versus 41.3% last year. Product development costs accounted for 18.9% of sales as compared to 23.9% last year. General and administrative costs consumed 9.1% of sales, down 100 basis points from last year. Operating income showed a tremendous improvement over the same period last year, and now stands $36.4 million, or 12.7% of sales, as compared to $4.9 million, or roughly 2% of sales last year. CFO, Dennis Raney indicated that operating margins will expand as the year progresses, perhaps to as much as 20% of sales. On the balance sheet the company showed just over $1 billion in cash and short-term investments. Net receivables were $206.2 million versus $246.5 million last year. Days sales outstanding on trade receivables decreased to 66 days from 75 days at the end of fiscal 1998. Inventories were $2.7 million, down from $3.6 million in the previous year. The current ratio at the end of the quarter was a healthy 3.5 to 1. Shareholder's equity per share was $4.30. During the quarter the company spent $77 million repurchasing 5 million shares of Novell common stock. The company is authorized to repurchase 10%, or roughly 35 million shares. Management indicated that the company will be active in developing new relationships, similar to the one recently announced with Oracle (NASDAQ: ORCL). To quote Eric Schmidt, "Novell's turnaround is done. We are now focused on growing the company and expanding upon our existing product line." Mr. Schmidt also commented on the conference call that he was speaking with an Oracle representative who mentioned to him that "Oracle views Novell as being at the center of the universe, and active directory (products) as being a satellite." .This comment says to us that Novell maintains, and is expected to maintain a dominant position in active directory, and that they will be the market leader going forward. We think that the company will at least meet estimates of $0.48 per share for the year ending October 1999. As the year progresses, and as Wall Street gets a better glimpse of the product pipeline over the coming quarters, we think that it is likely that estimates will increase. The ride has just begun. Stay tuned. Analyst: Glenn S. Curtis iionline.com