Novell Reports Fourth Quarter and Full Year Fiscal 2001 Results

Novell, Inc. (NASDAQ:NOVL) today reported revenue of $308 million and pro forma earnings of $0.02 per share for its fourth fiscal quarter 2001. Pro forma earnings do not include the impact of restructuring, integration, and impaired investment charges recorded in the fourth quarter. Including these charges, which totaled $114 million, the reported net loss for the fourth fiscal quarter was $0.26 per share.

For Novell's fiscal year ended October 31, 2001, Novell reported revenue of $1.04 billion and reported a net loss per share of $0.82. After adjusting for the impact of restructuring, integration, and impaired investment charges, pro forma earnings on a diluted basis were $0.04 per share for the fiscal year.

"We are making progress in Novell's business with leading solution wins, important new Net services software offerings, and new partnerships with other vendors," said Jack Messman, Novell chairman and chief executive officer. "As expected, we saw improvement in Novell software revenue over the third quarter, but IT services revenue continued to decline in a difficult market environment.

"Changes in how we have sized and structured our business will improve Novell's operating results in fiscal 2002," Messman explained. "Overall performance next year will be dependent on an improving IT market. It is positive that the security and Web-based solutions that Novell software and services make possible are seen as catalysts for an improving IT market."

Results for Novell's fourth fiscal quarter compare to revenue of $273 million, and a reported loss per share of $0.11 in the same period a year ago. For the prior fiscal year 2000, the company reported revenue of $1.16 billion and earnings of $0.15 per share.

Review of Q4 Performance
In Novell's fourth fiscal quarter, the company's software business accounted for $232 million, or 75 percent of total revenue. Cambridge Technology Partners, Novell's new services division, contributed an additional $75 million to total revenue.

Total Novell revenue by business category was led by large network site-licenses growing seven percent sequentially from the third quarter 2001 to $179 million, or 58 percent of revenue. Packaged software license sales for smaller networks were down 10 percent, to $30 million, or 10 percent of total Novell revenue. Consulting services, product support and education revenue independent of site licenses was $93 million, or 30 percent of total revenue. OEM and other revenue contributed 2 percent to total revenue.

>>> Revenue by product category: Net Management Services revenue was flat sequentially to the third fiscal quarter at $170 million. Net Directory Services revenue was $11 million, more than double that reported in the third fiscal quarter 2001. Volera, Inc., a Novell subsidiary, had flat revenue of $2 million. Customer service, education and consulting revenue was up slightly at $50 million. Cambridge services revenue contributed an additional $75 million.

>>> Revenue by geography: During the third fiscal quarter 2001 revenue from the United States was $170 million. The Europe, Middle East and Africa region, contributed $97 million in revenue, Asia Pacific $24 million, and Canada and the Americas $17 million.

>>> Other income, as reported, was a loss of $52 million for the quarter. After adjusting for the impact of impaired investment charges of $59 million, other income, net, contributed $6 million, primarily due to interest income.

On the balance sheet, cash and short-term investments were $705 million at the end of fiscal 2001, compared with $698 million at the October 2000 fiscal year-end. Cash flow from operations for the quarter was a positive $30 million. For the fiscal year, cash flow from operations was $92 million. Days sales outstanding (DSO) declined sequentially to 67 days, from 85 days.

Deferred revenue was up 10 percent from the third quarter and up 20 percent year-over-year to $243 million, due to growth in large network site-licenses. This revenue represents pre-paid service and future software deliveries associated with Novell's large network site license business, and is recognized over time.

Business outlook
Novell's first fiscal quarter is traditionally the company's weakest due to seasonality. Novell also anticipates short-term downward pressure on revenue as the company implements its transition to a customer focused selling model. The first fiscal quarter will be the first for a new sales organization that sells solutions as well as software and services. The company now expects that in its first fiscal quarter ending January 31, 2002, revenue will be between $265 and $275 million. Revenue at these levels is likely to leave the company at approximately break-even for its first fiscal quarter before the impact of any restructuring and integration costs.

For the balance of fiscal year 2002, the company anticipates that it will achieve sequential improvements in revenue and earnings.

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 29th on the Quarterly Results page at Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/.

Through midnight, December 6, 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 6:30 PM EST November 29, through midnight, December 6. To access the playback dial: 402-220-0103.

Forward looking statements
This press release contains forward-looking statements that involve a number of risks and uncertainties, as well as assumptions about changes in Novell's staffing, organization and business processes, changing markets and market conditions, market opportunities, marketing efforts, near and long-term operating performance and business objectives, potential new business strategies, new solutions focus, a new selling organization, Net services, anticipated demand for new offerings from markets that Novell is entering, future business performance and outlook. These forward-looking statements are neither promises nor guarantees and involve a number of risks and uncertainties that could cause actual results to differ materially. The risks and uncertainties include, but are not limited to, the following: business conditions and the general economy; changes in distribution choices and channel partners; competitive factors; sales and marketing execution; shifts in technologies or market demand, the successful integration of Novell and Cambridge Technology Partners and other risks identified in the company's SEC filings, including information under the heading "forward looking statements" its Form 10-K for the fiscal year 2001 and in the Form S-4 registration statement filed in connection with the merger with Cambridge Technology Partners.

About Novell
Novell, Inc. (NASDAQ: NOVL), is a leader in eBusiness solutions and Net services software designed to secure and power the networked world. Novell and its eServices division, Cambridge Technology Partners, help organizations solve complex business challenges, simplify their systems and processes, and capture new opportunities with one Net solutions. Novell provides worldwide channel, consulting, education and developer programs to support its offerings.

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 http://www.novell.com. Information on eBusiness and integration solutions from Cambridge Technology Partners can be accessed at http://www.ctp.com. Press may access Novell announcements and company information on the World Wide Web at http://www.novell.com/pressroom.

Novell is a registered trademark of Novell, Inc. in the United States and other countries. Cambridge Technology Partners is a registered trademark of Cambridge Technology Partners, Inc. All third-party trademarks are the property of their respective owners.

Novell, Inc. Consolidated Unaudited Condensed Statements of Income (In thousands, except per share data)
		Fiscal Quarter Ended				Fiscal Year Ended
		Oct 31, 2001		Oct 31, 2000		Oct 31, 2001		Oct 31, 2000
Net sales		$307,610		$273,324		$1,040,097		$1,161,735
Cost of sales		120,067		79,906		327,935		327,398
Gross profit		187,543		193,418		712,162		834,337
Operating expenses
	Sales and marketing	105,493		133,418		443,828		495,245
	Product development	44,321		52,796		191,709		228,002
	General and administrative	39,914		26,780		117,261		94,780
	Restructuring	49,785		47,892		80,177		47,892
Total operating expenses		239,513		260,886		832,975		865,919
Income (loss) from operations		(51,970)		(67,468)		(120,813)		(31,582)
Other income (expense), net		(52,099)		20,881		(155,953)		102,254
Income (loss) before taxes		(104,069)		(46,587)		(276,766)		70,672
Income tax expense (benefit)		(9,558)		(11,630)		(14,944)		21,202
Net income (loss) before accounting change		(94,511)		(34,957)		(261,822)		49,470
Cumulative effect of accounting change, net of tax		-		-		(11,048)		-
NET INCOME (LOSS)		$(94,511)		$(34,957)		$(272,870)		$49,470
Net income (loss) per share:
Basic
	Before cumulative effect of accounting change	$(0.26)		$(0.11)		$(0.79)		$0.15
	Cumulative effect of accounting change	-		-		(0.03)		-
		$(0.26)		$(0.11)		$(0.82)		$0.15
Diluted
	Before cumulative effect of accounting change	$(0.26)		$(0.11)		$(0.79)		$0.15
	Cumulative effect of accounting change	-		-		(0.03)		-
		$(0.26)		$(0.11)		$(0.82)		$0.15
Weighted average shares:
	Basic	361,587		327,473		332,582		326,621
	Diluted	361,587		327,473		332,582		334,596
Note: Certain reclassifications, none of which affect net income, have been made to prior period's amounts in order to conform to the current year's presentation.

 

Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (In thousands)
ASSETS			Oct 31, 2001		Oct 31, 2000
Current assets
	Cash and short-term investments		$705,243		$698,193
	Receivables, net *		227,044		196,672
	Inventories		947		2,621
	Prepaid expenses		29,808		26,120
	Deferred& refundable income taxes		34,595		60,109
	Other current assets		29,729		23,644
Total current assets			1,027,366		1,007,359
Property, plant and equipment, net			496,620		290,104
Long-term investments			114,971		383,583
Other assets			265,049		31,300
Total assets			$1,904,006		$1,712,346
LIABILITIES& SHAREHOLDERS' EQUITY
Current liabilities
	Accounts payable		$77,571		$85,050
	Accrued compensation		87,382		54,546
	Accrued marketing liabilities		13,672		13,632
	Other accrued liabilities		150,842		59,644
	Income taxes payable		38,175		39,043
	Deferred revenue		243,261		203,163
Total current liabilities			610,903		455,078
Minority interests			22,436		12,183
Shareholders' equity			1,270,667		1,245,085
Total liabilities and shareholders' equity			$1,904,006		$1,712,346
* Receivables, net include trade receivables less allowances. All other non-trade receivables are included in other current assets.

 

Novell, Inc. Proforma Information Excluding Non-recurring items and Cambridge Results (In thousands, except per share data)
	Novell, Inc. As Reported Q4 2001	Proforma Adjustments	Novell, Inc. Proforma Q4 2001	Cambridge Q4 2001 Results	Novell, Inc. Proforma Q4 2001 excl. Cambridge	Novell, Inc. Proforma Q4 2000
Net sales	$ 307,610	$           -	$ 307,610	$ 75,468	$ 232,142	$ 273,324
Gross profit	187,543	-	187,543	11,789	175,754	193,418
Operating earnings (loss) (a)	(51,970)	54,446	2,476	(14,698)	17,174	(19,576)
Earnings (loss) before tax (b)	(104,069)	113,001	8,932	(15,284)	24,216	1,305
Net earnings (loss) (c)	(94,511)	101,567	7,056	(12,075)	19,131	940
Net earnings (loss) per share (c)	$     (0.26)	$      0.28	$      0.02	$     (0.03)	$      0.05	$      0.02
	Novell, Inc. As Reported Q3 2001	Proforma Adjustments	Novell, Inc. Proforma Q3 2001	Cambridge Q3 2001 Results	Novell, Inc. Proforma Q3 2001 excl. Cambridge
Net sales	$ 246,697	$           -	$ 246,697	$ 20,306	$ 226,391
Gross profit	172,908	-	172,908	1,570	171,338
Operating earnings (loss) (a)	(33,574)	34,492	918	(6,496)	7,414
Earnings (loss) before tax (b)	(23,068)	39,492	16,424	(6,196)	22,620
Net earnings (loss) (c)	(19,274)	32,249	12,975	(4,895)	17,870
Net earnings (loss) per share (c)	$     (0.06)	$      0.10	$     0.04	$     (0.01)	$     0.05
	Novell, Inc. As Reported FY 2001	Proforma Adjustments	Novell, Inc. Proforma FY 2001	Cambridge Q3 & Q4 2001 Results	Novell, Inc. Proforma FY 2001 excl. Cambridge	Novell, Inc. Proforma FY 2000
Net sales	$ 1,040,097	$           -	$ 1,040,097	$ 95,775	$ 944,322	$ 1,161,735
Gross profit	712,162	-	712,162	13,360	698,802	834,337
Operating earnings (loss) (a)	(120,813)	88,739	(32,074)	(21,194)	(10,880)	16,310
Earnings (loss) before tax (b)	(276,766)	294,341	17,575	(21,480)	39,055	118,564
Net earnings (loss) (c)	(272,870)	286,754	13,884	(16,969)	30,853	85,367
Net earnings (loss) per share (c)	$       (0.82)	$      0.86	$      0.04	$     (0.05)	$      0.09	$      0.25
(a) Q4 2001 excludes restructuring charges of $49.8 million and integration charges of $4.7 million. Fiscal year 2001 excludes restructuring charges of $80.2 million and integration charges of $8.7 million. Q3 excludes restructuring charges of $30.4 million and integration charges of $4 million. Q4 and fiscal year 2000 excludes restructuring charges of $47.9 million. (b) Q4 2001 excludes investment write downs of $58.6 million in addition to the items listed in footnote (a), above. Fiscal year 2001 excludes investment writedowns of $205.6 million in addition to the items listed in footnote (a), above. Q3 2001 excludes investment write downs of $5 million in addition to the items listed in footnote (a), above (c) Q4 2001, fiscal year 2001, Q3 2001, Q4 2000. and fiscal year 2000 exclude the items listed in footnotes (a) and (b), necessary related tax adjustments. Fiscal year 2001 also excludes the Q1 2001 adjustment for above and the cumulative effect of an accounting change of $11 million.