NOVL Novell, Inc. (MM)

- Fourth fiscal quarter 2007 product revenue grew 10 percent year-over-year, led by 69 percent Linux Platform Products revenue growth WALTHAM, Mass., Dec. 13 /PRNewswire-FirstCall/ -- Novell, Inc. (NASDAQ:NOVL) today announced financial results for its fourth fiscal quarter and full fiscal year ended Oct. 31, 2007. For the quarter, Novell reported net revenue of $245 million, which excludes $6 million of revenue from its Swiss-based business consulting unit, which Novell agreed to sell during the quarter. This compares to net revenue of $234 million for the fourth fiscal quarter 2006. The loss from operations for the fourth fiscal quarter 2007 was $13 million, compared to income from operations of $4 million for the fourth fiscal quarter 2006. The loss available to common stockholders from continuing operations in the fourth fiscal quarter 2007 was $9 million, or $0.03 loss per common share. This compares to income available to common stockholders from continuing operations of $21 million, or $0.05 per diluted common share, for the fourth fiscal quarter 2006. Foreign currency exchange rates favorably impacted total revenue by approximately $6 million and did not materially impact the loss from operations year-over-year. On a non-GAAP basis, adjusted income from operations for the fourth fiscal quarter 2007 was $20 million. This compares to non-GAAP adjusted income from operations of $18 million in the year-ago quarter. Non-GAAP adjusted income available to common stockholders from continuing operations for the fourth fiscal quarter 2007 was $20 million, or $0.06 per adjusted diluted common share. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $20 million, or $0.05 per adjusted diluted common share, for the fourth fiscal quarter 2006. In the fourth fiscal quarter 2007, Novell entered into an agreement to sell its Swiss-based business consulting unit. Accordingly, all financial results for this unit were excluded from Novell's continuing operations for income statement reporting purposes and are reported as discontinued operations. For the full fiscal year 2007, Novell reported net revenue of $932 million and a loss available to common stockholders from continuing operations of $26 million, or $0.08 loss per common share. Comparatively, net revenue for the full fiscal year 2006 was $919 million and income available to common stockholders from continuing operations was $4 million, or $0.01 per diluted common share. Foreign currency exchange rates favorably impacted total revenue by approximately $15 million and negatively impacted the loss from operations by $5 million year-over-year. For the fourth fiscal quarter 2007, Novell reported $23 million of revenue from Open Platform Solutions, of which $22 million was from Linux(*) Platform Products, up 69 percent year-over-year. Linux Platform Products invoicing was $46 million during the quarter, up 108 percent year-over-year. Revenue from Identity and Security Management was $33 million, of which Identity and Access Management was $30 million, up 27 percent year-over-year. Revenue from Systems and Resource Management was $36 million, up 5 percent year-over-year. Workgroup revenue of $88 million was up 1 percent year-over-year. "We are pleased with our overall results for 2007. While undergoing transformational change, we grew revenue and exceeded our operating targets. We are on the right path to long-term, sustainable profitability," said Ron Hovsepian, president and CEO of Novell. Cash, cash equivalents and short-term investments were $1.9 billion at Oct. 31, 2007, up from $1.5 billion last year. Days sales outstanding in accounts receivable was 77 days at the end of the fourth fiscal quarter 2007, down from 86 days at the end of the year-ago quarter. Total deferred revenue was $768 million at the end of the fourth fiscal quarter 2007, up $341 million, or 80 percent, from Oct. 31, 2006. Cash flow from operations was $77 million for the fourth fiscal quarter 2007, compared to $62 million in the fourth fiscal quarter 2006. Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release. Financial Outlook Novell management issues the following financial guidance: For the full fiscal year 2008: -- Net revenue is expected to be between $920 million and $945 million. -- Non-GAAP adjusted operating margin is expected to be between 7 and 9 percent. Non-GAAP Financial Measures We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, adjusted operating margin, adjusted diluted income available to common stockholders from continuing operations, and adjusted diluted income per common share from continuing operations based on an adjusted number of diluted weighted average shares. We provide non-GAAP financial measures to (i) enhance an overall understanding of our current financial performance and prospects for the future and (ii) enable investors to evaluate our performance in the same way that management does. Management uses these non-GAAP adjusted financial measures to evaluate performance, allocate resources, and determine commissions and bonuses. The non-GAAP adjusted financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinary course of business, such as, but not limited to, stock-based compensation expenses, restructuring expenses, asset impairments, litigation judgments and settlements, the write-off of acquired in-process research and development, and gains (losses) on the sale of business operations, long-term investments, and property, plant and equipment. A summary of Novell's vision, mission and strategy can be accessed on the Novell(R) Web site at: http://www.novell.com/company/ir/qresults/. Conference Call Notification and Web Access Detail A live Webcast of a Novell conference call to discuss the quarter and the year will be broadcast at 5:00 PM ET Dec. 13, 2007, from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is 866-335-5255, password "Novell", and the international dial-in number is +1-706-679-2263, password "Novell". The call will be archived on the Novell Web site approximately two hours after its conclusion and will remain on the Web site until Dec. 28, 2007. The call will also be available for telephone playback through midnight ET, Dec. 28, 2007. The domestic toll-free replay number is 800-642-1687, and the international replay number is +1-706-645-9291. Replay listeners must enter conference ID number 28171181. A copy of this press release is posted on Novell's Web site at: http://www.novell.com/company/ir/qresults/. Legal Notice Regarding Forward-Looking Statements This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act, including those related to future financial and operating results, benefits and synergies of the company's brands and strategies, future opportunities and the growth of the market for Identity and Access Management and Linux Platform Products. You should be aware that Novell's actual results could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, Novell's ability to transform its business through the implementation of its strategic plan, Novell's ability to realize the benefits anticipated from the Microsoft transaction and Novell's restructuring plan, and the expected charges to be incurred and payments to be made under the restructuring plan, Novell's ability to achieve its expense targets, Novell's success in executing its Linux Platform Products, Identity and Access Management, and Systems and Resource Management strategies, Novell's ability to take a competitive position in the Linux Platform Products, Identity and Access Management, and Systems and Resource Management industries, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand, Novell's ability to integrate acquired operations and employees, and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 25, 2007. Novell disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release except as required by the securities laws. About Novell Novell, Inc. (NASDAQ:NOVL) delivers infrastructure software for the Open Enterprise. Novell is a leader in desktop to data center operating systems based on Linux and the software required to secure and manage mixed IT environments. Novell helps customers around the world minimize cost, complexity and risk, allowing them to focus on innovation and growth. For more information, visit http://www.novell.com/. Novell is a registered trademark of Novell, Inc. in the United States and other countries. *Linux is a registered trademark of Linus Torvalds. All other third-party trademarks are the property of their respective owners. Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year Ended Oct 31, Oct 31, Oct 31, Oct 31, 2007 2006 2007 2006 Net revenue: Software licenses $51,055 $46,078 $175,877 $173,678 Maintenance and subscriptions 128,272 117,384 494,675 479,283 Services (1) 65,609 70,320 261,947 266,370 Total net revenue 244,936 233,782 932,499 919,331 Cost of revenue: Software licenses 5,705 4,591 19,478 18,161 Maintenance and subscriptions 12,849 11,886 48,272 49,680 Services 46,160 50,715 192,504 213,171 Total cost of revenue 64,714 67,192 260,254 281,012 Gross profit 180,222 166,590 672,245 638,319 Operating expenses: Sales and marketing 84,327 87,769 346,777 353,750 Product development 55,134 43,544 208,370 180,380 General and administrative 29,527 23,088 111,006 102,259 Total operating expenses before other 168,988 154,401 666,153 636,389 Income from operations before other operating expenses 11,234 12,189 6,092 1,930 Other operating expenses (2) 24,525 8,525 61,860 44,124 Income (loss) from operations (13,291) 3,664 (55,768) (42,194) Other income, net 16,937 32,792 64,183 69,374 Income from continuing operations, before income taxes 3,646 36,456 8,415 27,180 Income tax expense 12,809 17,115 34,691 22,642 Income (loss) from continuing operations (9,163) 19,341 (26,276) 4,538 Income (loss) from discontinued operations, before income taxes (8,785) (371) (18,253) 16,576 Income tax expense (benefit) on discontinued operations - (900) (69) 1,561 Income (loss) from discontinued operations (8,785) 529 (18,184) 15,015 Income (loss) before cumulative effect of a change in accounting principle (17,948) 19,870 (44,460) 19,553 Cumulative effect of a change in accounting principle - - - (897) Net income (loss) $(17,948) $19,870 $(44,460) $18,656 Income (loss) available to common stockholders: Continuing operations $(9,163) $20,703 $(26,276) $4,332 Net income (loss) $(17,948) $21,229 $(44,460) $18,220 Income (loss) per share available to common stockholders: Continuing operations $(0.03) $0.05 $(0.08) $0.01 Net income (loss) $(0.05) $0.05 $(0.13) $0.05 Weighted average shares 350,017 395,456 (3) 347,552 365,659 (1) Services includes consulting, technical support and training services (2) See Page 8 of 13 for a detail of other operating expenses. (3) Weighted average shares includes 52 million potential shares related to convertible debt. Reclassifications, none of which affected net income (loss), were made to prior period amounts in order to conform to the current period's presentation. Stock-based compensation expense recorded in above amounts: Fiscal Quarter Fiscal Year Ended Ended Oct 31, Oct 31, Oct 31, Oct 31, 2007 2006 2007 2006 Cost of revenue $1,184 $1,077 $4,425 $4,096 Sales and marketing 2,631 2,138 9,722 11,533 Product development 2,595 1,885 9,965 8,226 General and administrative 1,942 1,053 7,729 11,147 Total operating expenses 7,168 5,076 27,416 30,906 Continuing operations 8,352 6,153 31,841 35,002 Discontinued operations - - - 263 Total stock-based compensation expense $8,352 $6,153 $31,841 $35,265 DATASOURCE: Novell, Inc. CONTACT: Media, Bruce Lowry, +1-415-383-8408, , or Investors, Susan Walker White, 1-800-317-3195, , both of Novell, Inc. Web site: http://www.novell.com/

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