Novell takes loss, anticipates slowdown

Novell reported roughly 13 per cent growth in revenue for its fiscal fourth quarter of 2001, ended October 31. However, investment and restructuring costs hit the company's earnings during the quarter.

Revenue rang in at $US308 million, compared to $US273 million for the same quarter last year. Sales from its software business accounted for 75 per cent of its total revenue, the company said.

Business from Cambridge Technology Partners, its new services division, contributed an additional $US75 million to total revenue.

But a total of $US114 million in investment charges cut into the earnings. The charges result from its acquisition of Cambridge, as well as restructuring charges due to layoffs announced this month.

Locally, the education sector sales and consulting services experienced strong growth, according to Ashley Wearne, managing director, Novell Australia and New Zealand.

"In Australia and New Zealand, Novell's financial results from quarter four showed a 5 per cent increase in local currency revenue over the same period last year. This figure does not include the revenues of Cambridge which will lead to a further significant increase in our business for the next financial year."

"Of particular note is the growth in sales of multiproduct solutions and the strong uptake of student provisioning among education providers. Indeed, education sector sales and the consulting services division experienced strong double-digit growth which we forecast to continue into financial year 2002."

A saturation of the IT consulting market, combined with overlap in staff following its acquisition of Cambridge, caused Novell to lay off 1400 employees, or about 19 per cent of its staff, earlier this month.

Novell cited lowered expectations for the fiscal first quarter of 2002 for the layoffs.

In a statement, Novell chairman and chief executive officer, Jack Messman, said: "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 said.

Messman expects the reduction in workforce, combined with the sale of some of its facilities, to reduce Novell's costs by nearly $US200 million in 2002.

"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."

But the forecasts are grim for first fiscal quarter, which Novell said is traditionally its weakest.

The company expects revenue between $US265 and $US275 million, leaving it at break-even for its first fiscal quarter ending January 31. This is before the impact of any restructuring and integration costs.

"Until we see that we're reaching cash-flow positive, we're going to hoard our cash and we would therefore only do small acquisitions," Messman said. "It would have to be a very unusual opportunity for us to consider a large acquisition at this time."

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