Novell continues its transition to Linux and returns to operating profitability. Company records non-recurring charges of $130 million, including writedowns of net deferred tax assets, long-term investments and intangible assets, and restructuring charges.
Novell, Inc. (NASDAQ:NOVL) today announced financial results for its fourth fiscal quarter ended Oct. 31, 2003. For the quarter, Novell reported revenues of $287 million, compared to revenues of $300 million for the fourth fiscal quarter 2002, and $283 million for the third fiscal quarter 2003. Net loss in the fourth fiscal quarter 2003 was $109 million, or $0.29 loss per share, including $130 million in non-recurring charges, principally to increase a valuation allowance for net deferred tax assets. This compared to a net loss of $92 million, or $0.25 loss per share, for the fourth fiscal quarter 2002.
For Novell's full year fiscal 2003, the company reported revenues of $1.1 billion and a net loss of $162 million, or $0.44 loss per share. Comparatively, revenues for the full year fiscal 2002 were $1.1 billion and a net loss of $247 million, or $0.68 loss per share.
On a non-GAAP basis, adjusted net income for the fourth fiscal quarter 2003 was $19 million, or $0.05 per share, which excludes a $119 million non-cash charge to increase a valuation allowance for net deferred tax assets that is further explained below, an $8 million restructuring charge, $3 million of charges related to the Ximian acquisition and impaired investments, and the related tax effects of these items. This compares to non-GAAP adjusted net income for the fourth quarter 2002 of $15 million, or $0.04 per share, which excludes $109 million in non-cash charges from the write-down of impaired real estate assets and venture investments. Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.
"We are pleased with the progress on operating profitability levels that we achieved in this quarter. Additionally, in our fourth quarter, we continued advancing toward many of the strategic goals we laid out at the beginning of our 2003 fiscal year," said Jack L. Messman, Novell chairman, president and chief executive officer. "Building value for our shareholders has been a top priority for Novell during 2003. We feel that we are poised to enter fiscal year 2004 with a better positioned company in the marketplace."
Novell has recently made two strategic moves to strengthen its products and services for the Linux platform. In August, Novell acquired Ximian, the leading provider of desktop and server solutions that enable enterprise Linux adoption. Shortly after the close of the fourth quarter, Novell agreed to acquire SUSE LINUX, one of the world's leading suppliers of Linux software and services.
"Having taken important steps with both Ximian and SUSE LINUX, we feel that the open source movement can be brought into the mainstream more expeditiously and with greater momentum," Messman said. "The customer can be reassured that mission-critical applications can indeed run on the Linux platform, reinforced by a worldwide technical support organization. We are responding to our customers, giving them the lower costs, flexibility and choice they have repeatedly told us they want."
On the balance sheet, cash and short-term investments were $752 million at the end of the fourth fiscal quarter 2003, compared with $636 million a year ago. Cash flow from operations during the fourth fiscal quarter 2003 was $53 million. For the full year fiscal year 2003, cash flow from operations was $55 million. Days sales outstanding (DSO) in accounts receivable was 74 days at the end of the fourth fiscal quarter 2003, up from 70 days in the prior quarter. Deferred revenues were $322 million at the end of the fourth fiscal quarter 2003, up 17% percent year-over-year.
Non-cash valuation allowance for deferred tax assets
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," in the fourth fiscal quarter 2003, the company provided a full valuation allowance against net deferred tax assets carried on its balance sheet. SFAS No. 109 requires an assessment of a company's current and previous performance and other relevant factors when determining the need for such a valuation allowance. Under this pronouncement, factors such as current and previous operating losses are given greater weight than the outlook for future profitability in determining deferred tax asset carrying value. This adjustment will have no impact on the company's cash flow or future prospects, nor does it alter the company's ability to utilize the underlying tax net operating loss and credit carryforwards in the future.
A summary of Novell's vision, mission and strategy can be accessed on the Novell Web site at: www.novell.com/company/ir/qresults.
Conference call notification and Web access detail
A live Webcast of a Novell conference call to discuss the quarter with financial analysts will be broadcast at 5 PM EST November 20, 2003, from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial in number is 888-323-5254, password "Novell", and the international dial in number is +1-773-756-4625, password "Novell". Until December 3, an audio replay of the call will be available from the same page. A telephone replay of the conference call will be available after 7:30 PM EST November 20, through December 3, at 888-568-0698. The international replay number is +1-402-998-1472. A copy of this press release is posted on Novell's Web site at: http://www.novell.com/company/ir/qresults/.
Legal notice regarding forward looking statements
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements," including those related to future financial and operating results, benefits and synergies of the company's brands and strategies, future opportunities and the growth of the market for open source solutions. You should be aware that Novell's actual results could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, Novell's ability to integrate acquired operations and employees, Novell's success in executing its Linux strategies, Novell's ability to deliver on its one Net vision of the Internet, Novell's ability to take a competitive position in the Linux industry, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand and the other factors described in Novell 's Annual Report on Form 10-K for the 2002 fiscal year. Novell disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this press release.
Novell, Inc. (Nasdaq: NOVL) delivers Software for the Open Enterprise™. With more than 50,000 customers in 43 countries, Novell helps customers manage, simplify, secure and integrate their technology environments by leveraging best-of-breed, open standards-based software. With over 20 years of experience, more than 5,000 employees, 5,000 partners and support centers around the world, Novell helps customers gain control over their IT operating environment while reducing cost. More information about Novell can be found at http://www.novell.com.
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