Novell Reorganizes Operations Amid Poor Q2 Results

SAN FRANCISCO (05/23/2000) - U.S. networking software vendor Novell Inc. today announced a dramatic reorganization of its operations at the same time it released poor second-quarter fiscal 2000 results. The company blames its poor financial performance on plunging sales of its packaged software in the global reseller channel.

Novell had already warned earlier this month that both fiscal 2000 second-quarter revenue and earnings would be much lower than had been previously expected due to channel issues. [See "Novell Substantially Lowers Q2 Expectations," May 2.]"Novell's packaged software revenue decline is an unintended consequence of our focus on new products in new markets," Eric Schmidt, Novell chairman and chief executive officer, said in a company statement issued today. He added that Novell needed to improve its focus and channel execution, hence the need for a company reorganization.

Both net revenue and earnings per share for the three-month period ended April 30, 2000, came close to the company's predictions at US$302 million and 9 cents per share respectively. Novell had said total revenue would be just over $300 million and earnings per share would be around 8 cents. Net income for the second quarter of fiscal 2000 was $31 million compared with $38.7 million in the year-ago quarter.

Included in the second-quarter results are a one-time royalty payment of $35 million made to Novell by Caldera Inc., the bulk of which relates to a January out-of-court antitrust settlement reached between Caldera and Microsoft Corp.

The royalty from Caldera added 7 cents per share to Novell's earnings, the company said in a statement issued today.

Six financial analysts polled by First Call/Thomson Financial on May 18 estimated Novell's earnings per share for the second quarter would be 1 cent.

Turning to Novell's reorganization, the company will consist of four business units. Each unit will have its own strategic focus in an attempt to make the vendor become much more market-driven, Novell said in today's statement. The four divisions will be Net Management, Net Directory, Net Content and Novell Customer Services.

Novell reported its results after the markets closed today. The company's share price ended today's trading up 9.1 percent at $9.75. Over the course of a 52-week period, Novell's stock has reached a high of $44.56 and a low of $8.37.

More details to follow.

Novell, in Provo, Utah, can be reached at http://www.novell.com/.

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