Novell Sales Still Weak

FRAMINGHAM (08/18/2000) - Novell Inc. executives blamed disappointing sales of packaged software for quarterly results released this week that met analysts' expectations but saw a 17 percent drop in revenue from the same period last year.

In a conference call, Eric Schmidt, Novell's president and CEO, said the company met its total revenue and profit goals for the quarter but was disappointed by packaged software sales, especially in Europe. Schmidt said the company's ZENworks (Zero Effort Networking) for desktops is selling well, but other products in the ZENworks family of network and systems management products haven't lived up to expectations.

"They met the earnings expectations, but revenue is a little low," said Bob Lam, an analyst at Bear Stearns & Co. Inc. in New York. "Things seem to be stabilizing a little compared to the last quarter, but I still don't have 100 percent confidence."

Sales of the company's core NetWare server software were down 29 percent from the same quarter last year to US$120 million. During the third quarter ended July 31, Novell divided itself into four business units, reorganized its sales operation and refocused on solutions-oriented sales. The changes followed a sharp drop in revenue for the second quarter.

Al Gillen, an analyst at International Data Corp. in Framingham, Mass., said Novell's transition to being a supplier of "Net services" - directory-enabled services that live on the Internet - will cause "additional pain" in quarters to come.

The Net services message is also confusing customers about the future of NetWare, said Gillen. Though NetWare is unlikely to show any future growth, Novell needs to stabilize sales, Gillen said.

In an attempt to confirm its commitment to the platform, Novell has started talking about a two-year road map for NetWare. The firm said it sees the current NetWare 5 increasingly focusing on single-purpose servers while it coexists with two upcoming releases: a high-end NetWare version for mission-critical deployments, and a redesigned, 64-bit NetWare for IA-64 processors.

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