Novell reports fourth quarter and full year fiscal 2002 results

Novell, Inc. today reported revenue of $300 million for its fourth fiscal quarter ended October 31, 2002, and a loss of $0.25 per share, reflecting $109 million in non-cash charges from the write-down of impaired real estate assets and venture investments. Excluding the impact of these charges, earnings for the fourth fiscal quarter would be $15 million, or $0.04 per share.

"Novell's business strengthened more quickly and performed better than expected in the fourth quarter," said Novell chairman and chief executive officer Jack L. Messman. "Three key factors account for the improvement: growing traction from our new secure identity management offerings for internet solutions, stabilization of our consulting business, and growth from large network site licenses as evidenced by deferred revenue hitting an all time high."

"We spent the year investing in and building Novell's business emphasis around secure identity management, Web application development, application integration and our platform for highly interactive network solutions. We see the current progress we're making in our business, translating to year-over-year growth for Novell in 2003," Messman explained.

For Novell's fiscal year 2002, the company reported revenue of $1.13 billion and a net loss per share of $0.68. Excluding restructuring, integration and impairment charges taken during the year, earnings for the fiscal year would be $45 million, or $0.12 per share.

Novell® Nsure™ secure identity management solutions contributed to Novell's improving fourth quarter business performance globally. A growing community of innovative customers recognize the strategic importance of these solutions and are designing and deploying them, including Allianz Suisse, one of the largest insurance companies in Switzerland, DaimlerChrysler, the BT Group in the UK, the City of Los Angeles and Cathay Pacific Airways.

Large network site licenses grew during the quarter to account for 62 percent of total Novell revenue. This led to an increase of deferred revenue on Novell's balance sheet to its highest level ever at $275 million.

Novell software segment revenue grew year-over-year, and was up nine percent sequentially, to $224 million. Directory services related products used in Novell Nsure solutions had the strongest growth, up 90 percent sequentially from the third quarter, and 129 percent year-over-year, with the benefit of a new offering, to total $25 million in the fourth quarter. Other strong contributors to the quarterly performance came from Novell Nterprise™ brand products, including ZENworks® management software and improving NetWare® sales.

Overall results for Novell's fourth fiscal quarter compare to revenue of $316 million and a reported loss per share of $0.26 in the same period a year ago, which also included charges for impaired investments, as well as for restructuring and integration. With these charges excluded, earnings for Novell's fourth fiscal quarter 2001 would have been $0.02 per share.

For the prior fiscal year 2001, the company reported revenue of $1.05 billion and a net loss per share of $0.82. Excluding restructuring, integration, and impairment charges taken during the year, Novell earnings for fiscal year 2001 would have been $0.05 per share.

Review of Q4 Performance
>>> Revenue allocated by business segment: Novell's software segment at $224 million, accounted for 74 percent of total revenue. Within this segment, NetWare revenue was $92 million, while management, collaboration and other revenue was $71 million. Net Directory Services revenue was $25 million. Customer service and education revenue was $36 million.

Novell's consulting segment contributed 25 percent of revenue, or $75 million, unchanged from the prior quarter. The Volera segment, providing content delivery network software, accounted for an additional $2 million, also unchanged from the third quarter.

>>> Revenue allocated by business category: Large network site-licenses led with $186 million, or 62 percent of revenue. Packaged software license sales for smaller networks totaled $23 million, or eight percent of total Novell revenue. Consulting services, product support and education revenue, not included in site-licenses, was $86 million, for 29 percent of total revenue. OEM royalties contributed two percent of total revenue.

>>> Revenue by geography: During the fourth fiscal quarter 2002, revenue from the United States was $149 million. The Europe, Middle East and Africa region contributed $111 million in revenue, Asia Pacific $23 million, and Canada and the Americas $18 million.

>>> Expenses: Operating expenses were up $91 million from the third quarter to $255 million, including $80 million in asset impairment changes, and the addition of expenses from the recently acquired SilverStream Software.

>>> Other income, net, as reported, was a loss of $23 million for the quarter. After adjusting for the impact of impaired investment charges of approximately $28 million, other income, net, would have been $4 million, primarily due to interest income.

On the balance sheet, cash and short-term investments were $636 million at the end of fiscal 2002, compared with $705 million at the October 2001 fiscal year-end. Cash flow from operations for the quarter was a positive $33 million. For the fiscal year, cash flow from operations was $51 million. Novell wrote-down the asset value of facilities that it owns by $80 million to reflect a decline in facility utilization and real estate values. Days sales outstanding (DSO) declined sequentially to 65 days, from 66 days.

Deferred revenue at $275 million was up 15 percent from the third quarter. It grew 13 percent year-over-year. This revenue represents pre-paid software maintenance associated with Novell's large network site license business and will be recognized in future periods.

Business outlook
Novell anticipates year-over-year revenue growth in its first fiscal quarter ending January 31, 2003. On a sequential basis from the fourth quarter, the company expects it will experience a normal seasonal revenue decline of upwards of six percent. With this revenue performance, Novell would likely post earnings at slightly above break-even for its first fiscal quarter.

Novell now expects revenue to grow about five percent year-over-year in fiscal 2003. Following its first quarter, the company anticipates that it will achieve sequential improvements in revenue and earnings.

A summary of Novell's vision, mission and strategy can be accessed on the Novell Web site at: http://www.novell.com/company/ir/qresults/

Conference call notification and Web access detail
A live webcast of a Novell conference call to discuss the fourth fiscal quarter results with financial analysts will be broadcast at 5 PM EST November 21 on the Quarterly Results page at Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/

Through midnight, December 5, an audio replay of the call will be available on the Quarterly Results page of Novell's Investor Relations Web page at: http://www.novell.com/company/ir/qresults/. A telephone replay of the conference call will be available after 7:30 PM EST November 21, through midnight, December 5. To access the playback dial: 888-325-4189.

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 for the combined company and the growth of the market for Web services 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 ability to deliver on its one Net vision of the Internet, Novell's ability to take a competitive position in the Web services 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 and the most recent quarterly report filed by Novell with the SEC. Novell disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this presentation.