Novell Reports Second Fiscal Quarter 1999 Results: Revenue of $316 Million and Earnings of $0.11 Per Share
PROVO, Utah, May 25 /PRNewswire/ -- Novell®, Inc. (Nasdaq: NOVL - news) today reported revenue of $316 million for its second fiscal quarter ended April 30, 1999, a 20 percent increase over the $262 million recorded in the second quarter of fiscal 1998. Net income was $39 million in the quarter, up from $19 million in the prior year. Earnings on a diluted basis were $0.11 per share, compared with $0.05 in the year-earlier period.
For the first six months of fiscal 1999, Novell's revenue increased 17 percent year-over-year to $601 million due to increasing demand for NetWare® server software that deploys Novell Directory Services® (NDS(TM)), and other directory-related software and services. Net income more than doubled to $68 million or $0.19 per share, up from $33 million or $0.09 per share the year before.
''Novell is on its way to becoming a growth company again,'' said Dr. Eric Schmidt, Novell chairman and CEO. ''We had planned for growth, but the market's response to NetWare 5 has exceeded our plans. Novell has never had a stronger new product. Moreover, new Internet standards-based products and partnerships have led to higher levels of performance in Novell's business.''
The pace of NetWare 5 licensing reflects growing standardization around NDS, Internet Protocol (IP) support and upgrades to ensure Y2K compliant networks. Site licenses for Novell software and services that support directory deployments in large and mid-size networks were up 61 percent year-over-year to $181 million. These multi-product licenses are sold by Novell and its channel partners. NetWare directory-enabled platform licenses accounted for approximately half of this revenue stream. The other portion is made up of directory-enabled applications, such as GroupWise®, Z.E.N.works(TM), BorderManager(TM), and support services and directory solutions consulting.
On a geographic basis, Novell continued to see leading performance from its Europe, Middle East and Africa region, with revenue up 35 percent to $105 million, on strong gains in the United Kingdom, Germany, France and the Netherlands. In the Asia Pacific region, revenue of $26 million grew 23 percent, reflecting the initial benefit of improved business conditions. In the United States, revenue was $169 million, up 13 percent year-over-year. In the Americas region, outside the United States, revenue increased 14 percent to $16 million.
By product category, revenue from directory-enabled NetWare server software totaled $169 million in the second quarter, up 41 percent from the second quarter of 1998. Directory-enabled applications grew 30 percent to $73 million. Service, training and consulting revenue was up 47 percent to $44 million. Pre-directory products declined 47 percent to $30 million.
The Novell balance sheet at the end of the second fiscal quarter reported cash and short-term investments of $974 million, compared with $1.007 billion at the October 1998 fiscal year-end. Operations contributed net cash of $78 million in the quarter. Days sales outstanding of trade receivables declined to 60 days, down from 75 days at the end of fiscal 1998.
During the quarter, the company spent $69 million to repurchase approximately 4 million shares of Novell common stock. On June 5, 1998, Novell's board of directors authorized the company to repurchase up to 10 percent, or approximately 35 million shares, of Novell common stock over 12 months. To date, the company has spent $391 million to purchase and retire approximately 31 million shares of common stock.
Business Outlook
Novell's business objective, over the longer-term, is to grow its revenue as network deployments of Novell Directory Services (NDS) increase the market potential for directory-enabled applications that rely on NDS. In addition to the NetWare 5 network services platform with Internet Protocol support, Novell has delivered NDS 8 that allows this standards-based directory offering to scale to support hundreds of millions of objects in one NDS directory tree. NDS is intended to integrate enterprise systems and manage supply chain and e-commerce relationships. NDS 8 will be deployed across networks of mixed-servers through NDS for NT, NDS for Solaris and NDS for Linux.
The company believes the directory market creates an opportunity for Novell to enter software product categories where it has not historically competed. In addition, the company is actively pursuing areas of the Internet market that are still in an embryonic stage of development. Among others, Novell plans to bring new products to market between now and the end of fiscal 2000 that address single sign-on, electronic commerce infrastructure, quality of service, policy-based management, personal identity control, caching performance and public key security. The company expects NDS to maintain profiles of network resources that provide the basis for directory-enabled network solutions.
A potentially important new product category for Novell is the caching of Web pages and data on networks to enhance overall network performance. Novell believes caching will be valued as a universal network service that has the potential to be deployed behind every major router segment on networks and in front of every Web storefront. Directory-enabled caching from Novell will enable cache services to be integrated with other applications and services on the network. In March, Novell licensed its Internet Caching System(TM) (ICS) software to Compaq and Dell Computer, which have announced plans to ship cache appliances based on Novell's software in mid-1999. Novell's ICS software will enable these products to be the price/performance leaders for caches that scale from small network to very large data center requirements. ICS will accelerate the delivery of Web pages from any Web server whether it is based on NT, Solaris, other versions of UNIX, Linux or NetWare operating systems.
About Novell
Novell, Inc. is the world's leading provider of directory-enabled networking software. Novell solutions give businesses total control of their private networks and the Internet, simplifying the management of user access and identity. Novell's worldwide channel, developer, education, and technical support programs are the most extensive in the network computing industry.
For information on Novell's complete range of products and services, contact Novell's Customer Response Center at 888-321-4CRC (4272), or visit Novell's Web site at www.novell.com. Investors can obtain financial and corporate information at Novell's investor relations Web site at www.novell.com/ir. Press may access Novell announcements and company information on the World Wide Web at www.novell.com/pressroom.
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.
NOTE: Novell, NetWare, GroupWise and Novell Directory Services are registered trademarks, and BorderManager, Z.E.N.works, NDS and Internet Caching System are trademarks of Novell, Inc. in the United States and in other countries. All other trademarks are the property of their respective holders.
Novell, Inc.
Consolidated Unaudited Condensed Statements of Income
(In thousands, except per share data)
Fiscal Quarter Ended Six Months Ended
Apr 30, Apr 30, Apr 30, Apr 30,
1999 1998 1999 1998
Net sales $315,652 $262,250 $601,458 $514,292
Cost of sales 76,211 59,278 140,331 116,365
Gross profit 239,441 202,972 461,127 397,927
Operating expenses
Sales and marketing 106,455 101,424 211,792 205,635
Product development 58,083 60,850 112,088 121,088
General and administrative 25,411 26,350 51,405 51,924
Total operating expenses 189,949 188,624 375,285 378,647
Income from operations 49,492 14,348 85,842 19,280
Other income, net 4,295 12,467 8,081 27,110
Income before taxes 53,787 26,815 93,923 46,390
Income taxes 15,061 7,508 26,299 12,989
Net income $38,726 $19,307 $67,624 $33,401
Weighted average shares:
Basic 335,276 351,762 336,359 351,396
Diluted 351,116 356,586 351,319 354,779
Net income per share:
Basic $0.12 $0.05 $0.20 $0.10
Diluted $0.11 $0.05 $0.19 $0.09
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
ASSETS Apr 30, Oct 31,
1999 1998
Current assets
Cash and short-term investments $974,440 $1,007,167
Receivables, net * 209,282 246,577
Inventories 3,108 3,562
Prepaid expenses 56,397 63,165
Deferred & refundable income taxes 88,480 95,343
Other current assets 18,489 19,886
Total current assets 1,350,196 1,435,700
Property, plant and equipment, net 344,261 346,196
Long-term investments 200,302 114,815
Other assets 24,334 27,401
Total assets $1,919,093 $1,924,112
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $61,920 $77,987
Accrued compensation 56,044 52,348
Accrued marketing liabilities 19,243 16,383
Other accrued liabilities 65,968 62,206
Income taxes payable 61,647 64,057
Deferred revenue 132,854 141,714
Total current liabilities 397,676 414,695
Minority interests 10,573 15,919
Shareholders' equity 1,510,844 1,493,498
Total liabilities and
shareholders' equity $1,919,093 $1,924,112
* Receivables, net include trade receivables less allowances.All other
trade receivables are included in Other current assets.
SOURCE: Novell, Inc.
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