Novell, Inc. (NASDAQ: NOVL) today announced financial results for its third fiscal quarter ended July 31, 2008. For the quarter, Novell reported net revenue of $245 million. This compares to net revenue of $237 million for the third fiscal quarter 2007. Income from operations for the third fiscal quarter 2008 was $1 million, compared to a loss from operations of $10 million for the third fiscal quarter 2007. Loss from continuing operations in the third fiscal quarter 2008 was $15 million, or $0.04 loss per share, due to a $15 million impairment charge related to our auction-rate securities. This compares to a loss from continuing operations of $4 million, or $0.01 loss per share, for the third fiscal quarter 2007. Foreign currency exchange rates favorably impacted revenue by $7 million, unfavorably impacted operating expenses by $7 million and did not materially impact income from operations year-over-year.
On a non-GAAP basis, income from operations for the third fiscal quarter 2008 was $24 million. This compares to non-GAAP income from operations of $14 million in the year-ago quarter. Non-GAAP income from continuing operations for the third fiscal quarter 2008 was $21 million, or $0.06 per share. This compares to non-GAAP income from continuing operations of $19 million, or $0.05 per share, for the third fiscal quarter 2007.
For the third fiscal quarter 2008, Novell reported $33 million of product revenue from Open Platform Solutions of which $31 million was from Linux Platform Products, up 30% year-over-year. Product revenue from Identity and Security was $37 million of which Security was $34 million, up 22% year-over-year. Product revenue from Systems and Resource Management was $47 million, up 25% year-over-year. Workgroup product revenue of $92 million was down 1% year-over-year.
"We had another quarter of strong product revenue growth and expanding operating margins," said Ron Hovsepian, President and CEO of Novell. "Our transformation of the company positions us well to focus on sustained growth in 2009."
Cash, cash equivalents and short-term investments were $1.4 billion at July 31, 2008, down from $1.8 billion in the year-ago quarter, primarily due to the acquisition of PlateSpin, the repurchase of a portion of our debentures and our stock repurchase program. Days sales outstanding in accounts receivable was 78 days at the end of the third fiscal quarter 2008, up from 74 days at the end of the year-ago quarter. Total deferred revenue was $726 million at the end of the third fiscal quarter 2008, down from $734 million at the end of the year-ago quarter. Cash flow from operations was $30 million for the third fiscal quarter 2008. This compares to cash flow from operations of $25 million in the third fiscal quarter 2007.
With regard to the Company's previously announced share repurchase program, Novell repurchased 7 million shares of common stock at a cost of $45 million during the quarter. To date, the Company has repurchased 10 million shares at a cost of $58 million. The Company has $42 million remaining under the existing share repurchase program.
During the quarter, Novell used $27 million of cash to repurchase a portion of its outstanding 0.5% senior convertible debentures. To date, $142 million of cash has been used for these repurchases.
Full details on Novell's reported results, including a reconciliation of the non-GAAP results, are included in the financial schedules that are a part of this release.
Novell management issues the following financial guidance:
For the full fiscal year 2008:
Net revenue is expected to be between $940 million and $970 million.
Non-GAAP operating margin is expected to be between 8% and 10%, exceeding previously stated guidance of between 7% to 9%.
A live Webcast of a Novell conference call to discuss the quarter will be broadcast at 5:00 PM ET August 28, 2008, from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is 866-335-5255, password "Novell", and the international dial-in number is +1-706-679-2263, password "Novell".
We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, operating margin, income from continuing operations, net income, income per share from continuing operations and net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine bonuses. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgments and settlements, purchased in-process research and development, and the sale of business operations, long-term investments, and property, plant and equipment.
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, including those related to future financial and operating results, future opportunities, the benefits and synergies of the company's brands, strategies and acquisitions, and the growth of the Linux Platform Products, Security, and Systems and Resource Management markets. 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 transform its business through the implementation of its strategic plan, Novell's ability to realize the benefits anticipated from the Microsoft transaction and other transactions, Novell's ability to realize the benefits anticipated from its restructuring plan, and the expected charges to be incurred and payments to be made under the restructuring plan, Novell's ability to achieve its expense targets, Novell's success in executing its Linux Platform Products, Security, and Systems and Resource Management strategies, Novell's ability to take a competitive position in the Linux Platform Products, Security, and Systems and Resource Management industries, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand, Novell's ability to integrate acquired operations and employees, and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 21, 2007. 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 except as required by the securities laws.
Novell, Inc. (NASDAQ: NOVL) delivers the best engineered, most interoperable Linux platform and a portfolio of integrated IT management software that helps customers around the world reduce cost, complexity and risk. With our infrastructure software and ecosystem of partnerships, Novell harmoniously integrates mixed IT environments, allowing people and technology to work as one. For more information, visit Novell, the Novell logo, and PlateSpin are registered trademarks of Novell, Inc. in the United States and other countries. All third party marks are the property of their respective owners.
Novell, the Novell logo, and PlateSpin are registered trademarks of Novell, Inc. in the United States and other countries. All third party marks are the property of their respective owners.
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