Novell Earnings Document Difficult Year

Novell Inc. Tuesday reported fiscal fourth-quarter earnings that show a slight increase in revenue over last quarter but reflect that the company struggled mightily this year.

The company posted revenue of US$273 million for the fourth quarter, up $3 million from last quarter, but down from $345 million for the same quarter a year ago.

For the fiscal year ending Oct. 31, Novell had revenue of $1.16 billion, down $11 million from fiscal 1999. Net income for the year of $49 million was down sharply over last year's $191 million.

When factoring in a restructuring charge of $48 million taken when the company laid off 16 percent of its workforce last quarter, Novell had a diluted loss per share of 11 cents. Without considering the charge, earnings per share were breakeven, which is in line with analysts' estimates as reported by FirstCall.

"We have had a pretty difficult year," said Eric Schmidt, chairman and chief executive officer. But Schmidt said the company is six months into a transformation from a packaged product company to a business and solutions company.

"We are getting lots of validation that our strategy is correct," said Schmidt. "In 2001, our aim is to improve Novell's overall business performance around growth in new Net services." Those Net services are directory-enabled applications Novell has developed including DirXML and iChain.

Schmidt said he was not ready to make any announcements about spinning off Novell's Net Content division into a company called Volera, which was first reported by Network World. He did acknowledge that Novell is contemplating a spinoff of the business. "We are still analyzing it internally and that analysis is favorable, but we continue to figure out how to structure it."

Despite Schmidt's assessment for the future, gains made with the transformation to a business and solutions company were not enough to offset dramatic declines in Novell's traditional packaged software business.

Novell's packaged software sales declined by US$243 million, or 47 percent. Those sales accounted for only 23 percent of total revenue for fiscal 2000. Revenue from NetWare servers was down 7 percent from the previous quarter, to $112 million. For the fiscal year, revenue for NetWare was down 24 percent.

The company blamed part of that decline on the flurry of spending before the anticipated Year 2000 crisis last year.

Novell said the 12 percent growth in its large network site-license and OEM business during the year was not enough to offset the decline in packaged software. Revenue from large network site-licenses, and OEMs, grew to $750 million, and accounted for 65 percent of total revenue in fiscal 2000.

Novell took other steps last quarter to correct its slide by reorganizing around new business groups and delivering DirXML and iChain.

Revenue in the fourth quarter from directory-enabled applications was up 15 percent from last quarter, to $90 million. For the year, revenue was up 4 percent over 1999.

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