Exhibit 99.1
FOR IMMEDIATE RELEASE
December 5, 2006
Novell Reports Preliminary Financial Results for Fourth Fiscal Quarter and Full Fiscal Year 2006
• Strong fiscal year 2006 revenue growth in key solution categories
• Linux Platform Products revenue grows 26% year-over-year
• Identity and Access Management revenue grows 30% year-over-year
• Provides financial guidance for full fiscal years 2007 and 2008
WALTHAM, Mass. – December 5, 2006 – Novell, Inc. (NASDAQ:NOVL) today announced preliminary financial results for its fourth fiscal quarter and fiscal year ended October 31, 2006. These financial results are preliminary because Novell, during the third fiscal quarter, began a self-initiated, voluntary review of the company's historical stock-based compensation practices and related potential accounting impact. The financial results reported today do not take into account any adjustments that may be required in connection with the completion of the stock-based compensation review and should be considered preliminary until Novell files its Form 10-Q for the third fiscal quarter ended July 31, 2006 and Form 10-K for the full fiscal year ended October 31, 2006.
Financial Results
For the fourth fiscal quarter 2006, Novell reported net revenue of $245 million, compared to net revenue of $288 million for the fourth fiscal quarter 2005. The net income available to common stockholders from continuing operations in the fourth fiscal quarter 2006 was $25 million, or $0.06 per diluted common share. This compares to a loss available to common stockholders from continuing operations of $6 million, or $0.02 loss per diluted common share, for the fourth fiscal quarter 2005.
On a non-GAAP basis, which is described below, adjusted income available to common stockholders from continuing operations for the fourth fiscal quarter 2006 was $20 million, or $0.05 per diluted common share. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $32 million, or $0.07 per diluted common share, for the fourth fiscal quarter 2005.
For the full fiscal year 2006, Novell reported revenue of $967 million and net income available to common stockholders from continuing operations of $21 million, or $0.06 per diluted common share. Comparatively, revenue for the full fiscal year 2005 was $1.039 billion and net income available to common stockholders from continuing operations was $373 million, or $0.85 per diluted common share, including a $448 million net legal settlement with Microsoft.
During the fourth fiscal quarter 2006, Novell reported $13 million of revenue from Linux* Platform Products, up 32% year-over-year. Revenue from Identity and Access Management was $24 million, up 3% year-over-year. Combined revenue from Open Enterprise Server and NetWare®-related products declined 25% from the year ago period.
“We are pleased with the progress we made in our key growth categories of Linux and Identity in fiscal year 2006, ” said Ron Hovsepian, President and CEO of Novell. “Coupled with the unprecedented Linux partnership with Microsoft just recently announced, we will add significant momentum to our Linux business. With these proof points established and with the initiatives we have begun to improve our sales model, development processes and back office efficiencies, we feel confident that we are on the right path to put Novell on target for sustained profitability in the future. ”
Cash, cash equivalents and short-term investments were $1.5 billion at October 31, 2006, up from $1.3 billion last quarter. Days sales outstanding in accounts receivable was 86 days at the end of the fourth fiscal quarter 2006, up from 81 days in the year ago quarter. Accounts receivable aging remains within historical ranges. Deferred revenue was $427 million at the end of the fourth fiscal quarter 2006, up $21 million, or 5%, from the prior year. Cash flow from operations was $62 million for the fourth fiscal quarter 2006, up from $58 million from the fourth fiscal quarter 2005.
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.
Update on Stock-Based Compensation Review
Novell's previously announced, self-initiated review of its historical stock-based compensation practices, which is being conducted by the Audit Committee of its Board of Directors with the assistance of independent outside counsel, is on-going. Novell expects to file its Form 10-Q report for the third fiscal quarter ended July 31, 2006 and Form 10-K report for the full fiscal year ended October 31, 2006 following the conclusion of the review.
Update on Third Fiscal Quarter 2006
Because the financial results for the third fiscal quarter ended July 31, 2006 remain preliminary, an increase of $9 million in accrued liabilities as a result of a change in estimate identified during the fourth fiscal quarter 2006 must be recognized as an expense in the third fiscal quarter. As a result, operating expenses increased by $9 million, and the net loss available to common stockholders from continuing operations in the third fiscal quarter 2006 increased from the previously reported $3 million, or $0.01 loss per diluted common share, to $10 million, or $0.03 loss per diluted common share. Third fiscal quarter 2006 non-GAAP adjusted income available to common stockholders from continuing operations of $20 million, or $0.05 per diluted common share, remained unchanged.
Financial Outlook
Novell management provides the following financial guidance:
For the full fiscal year 2007:
- Net revenue is expected to be between $945 million and $975 million.
- On a non-GAAP basis, adjusted income from operations is expected to be between breakeven and $10 million, excluding an estimated $35 million expense from stock-based compensation. However, in fiscal year 2007, Novell anticipates it will no longer exclude stock-based compensation expense from its non-GAAP financial measures.
- Novell is targeting fourth fiscal quarter 2007 exit rate operating margins, as described below, of between 5% and 7%.
- Novell is targeting fourth fiscal quarter 2008 exit rate operating margins of between 12% and 15%.
Non-GAAP Financial Measures
To supplement Novell's preliminary consolidated unaudited condensed financial statements presented in accordance with GAAP and to better reflect comparative quarter-over-quarter and year-over-year operating performance, Novell uses non-GAAP financial measures of adjusted diluted income available to common stockholders from continuing operations and adjusted diluted income per common share from continuing operations, which reflect the exclusion of certain expenses and gains, and adjusted diluted weighted average shares outstanding. Novell's financial outlook uses a non-GAAP income from operations measure. These non-GAAP financial measures do not replace the presentation of Novell's GAAP financial results but are provided to improve overall understanding of current financial performance and prospects for the future.
Novell considers non-GAAP adjusted diluted income available to common stockholders from continuing operations to be after-tax income generated from continuing operations excluding certain non-recurring or non-core items such as, but not limited to, stock-based compensation for fiscal year 2006, restructuring expenses, asset impairments, actual and estimated 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.
Novell does not provide financial guidance for GAAP financial measures because items identified as excluded from non-GAAP financial measures are difficult to forecast.
A summary of Novell’s vision, mission and strategy can be accessed on the Novell® 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 will be broadcast at 5:00 PM ET December 5, 2006, 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 Web site approximately two hours after its conclusion, and will be available for telephone playback through midnight ET, December 12, 2006. 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 9942446.
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,” 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 realize the benefits anticipated from the Microsoft transaction, Novell's success in executing its Linux, Identity and Access Management and Resource Management strategies, Novell's ability to take a competitive position in the Linux, Identity and Access Management 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, the final conclusions of the Audit Committee (and the time of such conclusions) concerning matters relating to the company's stock-based compensation practices and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission on January 10, 2006. 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.
There can be no assurance that the outcome of the review by the company's Audit Committee of the company's past stock-based compensation practices and the related potential accounting impact will not result in changes in the preliminary financial results for the third and fourth fiscal quarter 2006 and full fiscal year 2006 or a restatement of financial results provided by the company for any historical period. In addition, the review and possible conclusions may require additional expenses to be recorded, may continue to adversely affect our ability to file required reports with the U.S. Securities and Exchange Commission (“SEC”) on a timely basis, our conclusions on the effectiveness of our internal control over financial reporting and disclosure controls and procedures and our ability to meet the requirements of the Nasdaq Stock Market for continued listing of our shares; and may result in claims and proceedings relating to such matters, including shareholder litigation and actions by the SEC and/or other governmental agencies and negative tax or other implications for the company resulting from any accounting adjustments or other factors.
About Novell
Novell, Inc. (Nasdaq: NOVL) delivers infrastructure software for the Open Enterprise. We are a leader in enterprise-wide operating systems based on Linux and open source and the security and systems management services required to operate mixed IT environments. We help our customers minimize cost, complexity and risk, allowing them to focus on innovation and growth. For more information, visithttp://www.novell.com.
_________________
Novell and NetWare are registered trademarks 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.
Press Contact:
Bruce Lowry
Novell, Inc.
Phone: 415-383-8408
E-Mail: blowry@novell.com
Investor Relations Contact:
Bill Smith
Novell, Inc.
Phone: 800-317-3195
E-Mail: wsmith@novell.com
Novell, Inc. Page 7 of 14 Consolidated Unaudited Condensed Statements of Operations (Preliminary) (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year Ended ----------------------------------------------------- ---------------------------------------------------- Oct 31, 2006 Oct 31, 2005 Oct 31, 2006 Oct 31, 2005 ----------------------- ---------------------- ---------------------- ---------------------- Net revenue: Software licenses $ 46,078 $ 78,111 $ 173,678 $ 213,803 Maintenance and services 198,827 209,507 793,599 825,420 ----------------------- ---------------------- ---------------------- ---------------------- Total net revenue 244,905 287,618 967,277 1,039,223 ----------------------- ---------------------- ---------------------- ---------------------- Cost of revenue: Software licenses 4,206 7,630 17,528 21,600 Maintenance and services 72,759 81,423 303,107 330,466 ----------------------- ---------------------- ---------------------- ---------------------- Total cost of revenue 76,965 89,053 320,635 352,066 ----------------------- ---------------------- ---------------------- ---------------------- Gross profit 167,940 198,565 646,642 687,157 ----------------------- ---------------------- ---------------------- ---------------------- Operating expense (income): Sales and marketing 87,795 92,209 352,829 354,335 Product development 45,169 54,678 185,796 205,627 General and administrative 23,995 24,514 104,181 92,632 Restructuring expenses 5,405 38,061 4,405 57,753 Other operating expense (income) (1) 3,120 1,521 24,719 (447,148) ----------------------- ---------------------- ---------------------- ---------------------- Total operating expense 165,484 210,983 671,930 263,199 ----------------------- ---------------------- ---------------------- ---------------------- Income (loss) from operations 2,456 (12,418) (25,288) 423,958 Other income, net 32,781 12,177 69,541 33,993 ----------------------- ---------------------- ---------------------- ---------------------- Income (loss) from continuing operations, before income taxes 35,237 (241) 44,253 457,951 Income tax expense 12,028 5,426 23,218 86,660 ----------------------- ---------------------- ---------------------- ---------------------- Income (loss) from continuing operations 23,209 (5,667) 21,035 371,291 Income (loss) from discontinued operations, before income taxes (843) 549 12,900 8,191 Income tax expense (benefit) - (166) 972 2,760 ----------------------- ---------------------- ---------------------- ---------------------- Income (loss) from discontinued operations (843) 715 11,928 5,431 Income (loss) before cumulative effect of a change in accounting principle 22,366 (4,952) 32,963 376,722 Cumulative effect of a change in accounting principle - - (897) - ----------------------- ---------------------- ---------------------- ---------------------- Net income (loss) $ 22,366 $ (4,952) $ 32,066 $ 376,722 ======================= ====================== ====================== ====================== Income (loss) available to common stockholders - diluted: Continuing operations $ 24,554 $ (5,758) $ 20,761 $ 373,183 ======================= ====================== ====================== ====================== Net income (loss) $ 23,714 $ (5,043) $ 31,575 $ 378,159 ======================= ====================== ====================== ====================== Income (loss) per share available to common stockholders - diluted: Continuing operations $ 0.06 $ (0.02) $ 0.06 $ 0.85 Net income (loss) $ 0.06 $ (0.01) $ 0.09 $ 0.86 Weighted average shares - diluted 395,456 (2) 382,279 365,659 440,585 (2) (1) See Page 10 of 14 for a detail of other operating expense (income). (2) Diluted weighted average shares includes 52 million potential shares related to convertible debt. Amounts reported as 'preliminary' for the third fiscal quarter ended July 31, 2006 have been updated for a known change in estimate, impacting net income. Also, reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation. Stock-based compensation expense recorded in above amounts: Fiscal Quarter Ended Fiscal Year Ended ----------------------------------------------------- ---------------------------------------------------- Oct 31, 2006 Oct 31, 2005 Oct 31, 2006 Oct 31, 2005 ----------------------- ---------------------- ---------------------- ---------------------- Cost of revenue $ 1,057 $ 2 $ 4,095 $ 6 Sales and marketing 2,115 194 11,824 998 Product development 1,956 225 8,342 1,172 General and administrative 1,016 93 10,644 (428) Discontinued operations - - 263 - ----------------------- ---------------------- ---------------------- ---------------------- Total stock-based compensation expense $ 6,144 $ 514 $ 35,168 $ 1,748 ======================= ====================== ====================== ======================
Novell, Inc. Page 8 of 14 Consolidated Unaudited Condensed Balance Sheets (Preliminary) (In thousands) Oct 31, 2006 Oct 31, 2005 -------------------- --------------------- Assets Current assets: Cash and cash equivalents $ 675,787 $ 811,238 Short-term investments 790,500 843,666 Receivables, net 233,986 293,627 Prepaid expenses 32,328 30,777 Other current assets 28,524 29,745 -------------------- --------------------- Total current assets 1,761,125 2,009,053 Property, plant and equipment, net 184,084 212,377 Long-term investments 2,263 54,340 Goodwill 424,701 395,509 Intangible assets, net 40,404 56,421 Deferred income taxes 4,770 1,384 Other assets 32,376 32,774 -------------------- --------------------- Total assets $ 2,449,723 $ 2,761,858 ==================== ===================== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 44,419 $ 45,445 Accrued compensation 105,410 113,760 Other accrued liabilities 91,837 131,105 Income taxes payable 49,598 56,869 Deferred revenue 426,971 405,751 -------------------- --------------------- Total current liabilities 718,235 752,930 Deferred income taxes 4,186 4,537 Senior convertible debentures 600,000 600,000 -------------------- --------------------- Total liabilities 1,322,421 1,357,467 Minority interests - 8,555 Preferred stock 9,350 9,350 Stockholders' equity 1,117,952 1,386,486 -------------------- --------------------- Total liabilities and stockholders' equity $ 2,449,723 $ 2,761,858 ==================== ===================== Amounts reported as 'preliminary' for the third fiscal quarter ended July 31, 2006 have been updated for a known change in estimate. Also, reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.
Novell, Inc. Consolidated Unaudited Condensed Statements of Cash Flows (Preliminary) Page 9 of 14 (In thousands) Fiscal Quarter Ended Fiscal Year Ended --------------------------------------------- -------------------------------------------- Oct 31, 2006 Oct 31, 2005 Oct 31, 2006 Oct 31, 2005 -------------------- -------------------- -------------------- -------------------- Cash flows from operating activities: Net income (loss) $ 22,366 $ (4,952) $ 32,066 $ 376,722 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Stock-based compensation expense 6,144 514 35,168 1,748 Tax effects of stock-based compensation plans 10,994 (2,367) 15,252 13,799 Excess tax benefits from stock-based compensation (10,994) - (15,252) - Depreciation and amortization 13,068 13,439 46,976 54,513 Changes in accounts receivable allowances (2,228) 1,514 (6,888) (7,838) Utilization of previously reserved acquired net operating losses 2,725 - 6,585 29,600 Purchased in-process research and development - - 2,110 480 Gain on sale of property, plant and equipment - - (5,968) (1,589) Loss on sale of Japan consulting group - - 8,273 - Executive termination benefits - - 9,409 - Impairment of long-term investments, net of gains (1,371) 192 (745) 1,300 Gain on sale of venture capital funds (17,953) - (17,953) - Impairment of intangible assets 1,230 1,521 1,230 1,521 Celerant discontinued operations, before taxes 843 - (11,117) - Cumulative effect of a change in accounting principle - - 897 - Changes in current assets and liabilities, excluding the effect of acquisitions and dispositions 37,448 48,392 (994) 30,158 -------------------- -------------------- -------------------- -------------------- Net cash provided by operating activities 62,272 58,253 99,049 500,414 -------------------- -------------------- -------------------- -------------------- Cash flows from financing activities: Issuance of common stock, net 18,457 6,073 40,131 22,108 Excess tax benefits from stock-based compensation 10,994 - 15,252 - Payment of cash dividends on Series B Preferred Stock (46) (216) (187) (591) Repurchases of common stock, retired - - (400,000) - -------------------- -------------------- -------------------- -------------------- Net cash provided (used) by financing activities 29,405 5,857 (344,804) 21,517 -------------------- -------------------- -------------------- -------------------- Cash flows from investing activities: Purchases of property, plant and equipment (7,128) (10,613) (26,668) (30,781) Proceeds from the sale of property, plant and equipment - - 24,992 10,421 Proceeds from repayment of note receivable - - 9,092 - Short-term investment activity 12,184 (228,162) 57,219 (74,370) Long-term investment activity 2,901 1,633 1,473 281 Cash paid for equity investment in Open Invention Network, LLC - - (4,225) - Proceeds from the sale of Celerant, net of cash divested - - 37,922 - Proceeds from the sale of Japan consulting group, net of cash divested 1,450 - 1,450 - Proceeds from the sale of venture capital funds 71,298 - 71,298 - Cash paid for acquisition of Tally Systems and Immunix, net of cash acquired - - - (33,829) Cash paid for acquisition of e-Security, net of cash acquired - - (71,550) - Purchase of intangible assets - - (1,159) (15,500) Restricted cash for acquisition of India joint venture - (7,500) - (7,500) Other 2,689 5,940 10,460 6,181 -------------------- -------------------- -------------------- -------------------- Net cash provided (used) by investing activities 83,394 (238,702) 110,304 (145,097) -------------------- -------------------- -------------------- -------------------- Increase (decrease) in cash and cash equivalents 175,071 (174,592) (135,451) 376,834 Cash and cash equivalents - beginning of period 500,716 985,830 811,238 434,404 -------------------- -------------------- -------------------- -------------------- Cash and cash equivalents - end of period $ 675,787 $ 811,238 $ 675,787 $ 811,238 ==================== ==================== ==================== ==================== Amounts reported as 'preliminary' for the third fiscal quarter ended July 31, 2006 have been updated for a known change in estimate, impacting net income. Also, reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.
Novell, Inc. Unaudited Non-GAAP Adjusted Earnings Information (Preliminary) Page 10 of 14 (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year Ended ---------------------------------------- ---------------------------------------- Oct 31, 2006 Oct 31, 2005 Oct 31, 2006 Oct 31, 2005 ----------------- ----------------- ----------------- ----------------- GAAP diluted income (loss) available to common stockholders from continuing operations $ 24,554 $ (5,758) $ 20,761 $ 373,183 ----------------- ----------------- ----------------- ----------------- Pre-tax adjustments: Operating expenses: Stock-based compensation expense 6,144 514 34,905 1,748 Restructuring expenses 5,405 38,061 4,405 57,753 ----------------- ----------------- ----------------- ----------------- Sub-total 11,549 38,575 39,310 59,501 ----------------- ----------------- ----------------- ----------------- Other operating expenses (income): Purchased in-process research and development - - 2,110 480 Gain on sale of property, plant and equipment - - (5,968) (1,589) Litigation-related expense (income) - - 7,775 (447,560) Loss on sale of Japan consulting group - - 8,273 - Executive termination benefits - - 9,409 - Impairment of intangible assets 1,230 1,521 1,230 1,521 Stock-based compensation review expenses 1,890 - 1,890 - ----------------- ----------------- ----------------- ----------------- Sub-total 3,120 1,521 24,719 (447,148) ----------------- ----------------- ----------------- ----------------- Non-operating expenses (income): Gain on sale of venture capital funds (17,953) - (17,953) - Impairment of long-term investments, net of gains (1,371) 486 (745) 1,594 ----------------- ----------------- ----------------- ----------------- Sub-total (19,324) 486 (18,698) 1,594 ----------------- ----------------- ----------------- ----------------- Total pre-tax adjustments (4,655) 40,582 45,331 (386,053) Income tax adjustments: Tax adjustments, net 74 (2,176) (2,519) (4,231) Cumulative tax effect of the Microsoft settlement - (1,700) - 70,560 Diluted income (loss) adjustments: Debt interest expense - 1,493 5,972 - Allocation of earnings to preferred stockholders 20 (236) (177) 3,116 ----------------- ----------------- ----------------- ----------------- Total net adjustments (4,561) 37,963 48,607 (316,608) Non-GAAP diluted income available to common stockholders from continuing operations $ 19,993 $ 32,205 $ 69,368 $ 56,575 ================= ================= ================= ================= GAAP diluted income (loss) per common share from continuing operations $ 0.06 $ (0.02) $ 0.06 $ 0.85 Adjustments detailed above (0.01) 0.09 0.10 (0.72) ----------------- ----------------- ----------------- ----------------- Non-GAAP diluted income per common share from continuing operations $ 0.05 $ 0.07 $ 0.16 $ 0.13 ================= ================= ================= ================= GAAP diluted weighted average shares from continuing operations 395,456 382,279 365,659 440,585 Change in dilution from assumed: Conversion of convertible debt - 52,074 52,074 - Stock option exercises 1,655 8,400 4,358 - ----------------- ----------------- ----------------- ----------------- Non-GAAP diluted weighted average shares 397,111 442,753 422,091 440,585 ================= ================= ================= ================= Amounts reported as 'preliminary' for the third fiscal quarter ended July 31, 2006 have been updated for a known change in estimate, impacting net income. Also, reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.
Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (Preliminary) Page 11 of 14 (In thousands, except per share data) Fiscal Year Fiscal Year Q4 2005 % 2005 % Q3 2006 % Q4 2006 % 2006 % ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Net revenue: Software licenses $ 78,111 27.2 $ 213,803 20.6 $ 45,435 18.8 $ 46,078 18.8 $ 173,678 18.0 Maintenance and services 209,507 72.8 825,420 79.4 195,917 81.2 198,827 81.2 793,599 82.0 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Total net revenue 287,618 100.0 1,039,223 100.0 241,352 100.0 244,905 100.0 967,277 100.0 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Cost of revenue: Software licenses 7,630 2.7 21,600 2.1 4,984 2.1 4,206 1.7 17,528 1.8 Maintenance and services 81,423 28.3 330,466 31.8 75,711 31.4 72,759 29.7 303,107 31.3 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Total cost of revenue 89,053 31.0 352,066 33.9 80,695 33.4 76,965 31.4 320,635 33.1 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Gross profit 198,565 69.0 687,157 66.1 160,657 66.6 167,940 68.6 646,642 66.9 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Operating expense (income): Sales and marketing 92,209 32.1 354,335 34.1 89,463 37.1 87,795 35.8 352,829 36.5 Product development 54,678 19.0 205,627 19.8 47,238 19.6 45,169 18.4 185,796 19.2 General and administrative 24,514 8.5 92,632 8.9 25,298 10.5 23,995 9.8 104,181 10.8 Restructuring expenses 38,061 13.2 57,753 5.6 - - 5,405 2.2 4,405 0.5 Other operating expense (income) (1) 1,521 0.5 (447,148) (43.0) 22,904 9.5 3,120 1.3 24,719 2.6 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Total operating expense 210,983 73.4 263,199 25.3 184,903 76.6 165,484 67.6 671,930 69.5 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Income (loss) from operations (12,418) (4.3) 423,958 40.8 (24,246) (10.0) 2,456 1.0 (25,288) (2.6) ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Other income Investment income 12,992 4.5 42,658 4.1 13,003 5.4 34,684 14.2 77,559 8.0 Other, net (815) (0.3) (8,665) (0.8) (2,192) (0.9) (1,903) (0.8) (8,018) (0.8) ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Other income, net 12,177 4.2 33,993 3.3 10,811 4.5 32,781 13.4 69,541 7.2 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Income (loss) from continuing operations, before income taxes (241) (0.1) 457,951 44.1 (13,435) (5.6) 35,237 14.4 44,253 4.6 Income tax expense (benefit) 5,426 1.9 86,660 8.3 (3,789) (1.6) 12,028 4.9 23,218 2.4 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Income (loss) from continuing operations (5,667) (2.0) 371,291 35.7 (9,646) (4.0) 23,209 9.5 21,035 2.2 Income (loss) from discontinued operations, before income taxes 549 0.2 8,191 0.8 12,165 5.0 (843) (0.3) 12,900 1.3 Income tax expense (benefit) (166) (0.1) 2,760 0.3 (2,871) (1.2) - - 972 0.1 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Income (loss) from discontinued operations 715 0.2 5,431 0.5 15,036 6.2 (843) (0.3) 11,928 1.2 ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Income (loss) before cumulative effect of a change in accounting principle (4,952) (1.7) 376,722 36.3 5,390 2.2 22,366 9.1 32,963 3.4 Cumulative effect of a change in accounting principle - - - - (897) (0.4) - - (897) (0.1) ------------- -------- ------------ -------- ------------- -------- ------------- -------- ------------- -------- Net income (loss) $ (4,952) (1.7) $ 376,722 36.3 $ 4,493 1.9 $ 22,366 9.1 $ 32,066 3.3 ============= ======== ============ ======== ============= ======== ============= ======== ============= ======== Income (loss) available to common stockholders - diluted: Continuing operations $ (5,758) (2.0) $ 373,183 35.9 $ (9,693) (4.0) $ 24,554 10.0 $ 20,761 2.1 ============= ======== ============ ======== ============= ======== ============= ======== ============= ======== Net income (loss) $ (5,043) (1.8) $ 378,159 36.4 $ 4,427 1.8 $ 23,714 9.7 $ 31,575 3.3 ============= ======== ============ ======== ============= ======== ============= ======== ============= ======== Income (loss) per share available to common stockholders - diluted: Continuing operations $ (0.02) $ 0.85 $ (0.03) $ 0.06 $ 0.06 Net income (loss) $ (0.01) $ 0.86 $ 0.01 $ 0.06 $ 0.09 Weighted average shares - diluted 382,279 440,585 340,127 395,456 365,659 (1) See Page 10 of 14 for a detail of other operating expense (income). Amounts reported as 'preliminary' for the third fiscal quarter ended July 31, 2006 have been updated for a known change in estimate, impacting net income. Also, reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.
Novell, Inc. Unaudited Trended Solutions and Segment Revenue Page 12 of 14 (In thousands) Fiscal Year Fiscal Year Change from Revenue by solution Q4 2005 % 2005 % Q3 2006 % Q4 2006 % 2006 % Q4 06 to Q4 05 FY06 to FY05 ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ ---------------- --------------- IT software and solutions Open platform solutions Linux platform products $ 9,829 3.4 $ 35,836 3.4 $ 11,590 4.8 $ 13,017 5.3 $ 45,296 4.7 $ 3,188 32.4 $ 9,460 26.4 Other open platform products 4,070 1.4 17,761 1.7 3,407 1.4 893 0.4 8,146 0.8 (3,177) (78.1) (9,615) (54.1) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Total open platform solutions 13,899 4.8 53,597 5.2 14,997 6.2 13,910 5.7 53,442 5.5 11 0.1 (155) (0.3) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Systems, security and identity management Identity and access management 22,980 8.0 74,936 7.2 26,053 10.8 23,773 9.7 97,721 10.1 793 3.5 22,785 30.4 Resource management 50,180 17.4 144,358 13.9 33,600 13.9 34,022 13.9 134,579 13.9 (16,158) (32.2) (9,779) (6.8) Other systems, security and identity management products 5,624 2.0 21,022 2.0 4,110 1.7 4,506 1.8 17,975 1.9 (1,118) (19.9) (3,047) (14.5) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Total systems, security and identity management 78,784 27.4 240,316 23.1 63,763 26.4 62,301 25.4 250,275 25.9 (16,483) (20.9) 9,959 4.1 ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Workspace solutions Open Enterprise Server 46,540 16.2 85,331 8.2 45,204 18.7 47,660 19.5 181,695 18.8 1,120 2.4 96,364 112.9 NetWare and other NetWare-related 27,807 9.7 193,549 18.6 9,592 4.0 8,365 3.4 47,779 4.9 (19,442) (69.9)(145,770) (75.3) Collaboration 28,105 9.8 99,422 9.6 25,276 10.5 24,394 10.0 96,176 9.9 (3,711) (13.2) (3,246) (3.3) Other workspace products 9,294 3.2 30,842 3.0 4,141 1.7 6,832 2.8 23,594 2.4 (2,462) (26.5) (7,248) (23.5) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Total workspace solutions 111,746 38.9 409,144 39.4 84,213 34.9 87,251 35.6 349,244 36.1 (24,495) (21.9) (59,900) (14.6) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Total software-related licenses and maintenance 204,429 71.1 703,057 67.7 162,973 67.5 163,462 66.7 652,961 67.5 (40,967) (20.0) (50,096) (7.1) Global services 83,189 28.9 336,166 32.3 78,379 32.5 81,443 33.3 314,316 32.5 (1,746) (2.1) (21,850) (6.5) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Total net revenue by solution $ 287,618 100.0 $1,039,223 100.0 $ 241,352 100.0 $ 244,905 100.0 $ 967,277 100.0 $(42,713) (14.9)$(71,946) (6.9) ========== ===== =========== ====== ========== ===== ========== ===== =========== ====== ========= ====== ======== ====== Revenue by segment Americas $ 142,175 49.4 $ 537,198 51.7 $ 136,660 56.6 $ 137,032 56.0 $ 536,813 55.5 $ (5,143) (3.6) $ (385) (0.1) EMEA 120,770 42.0 407,998 39.3 83,819 34.7 86,362 35.3 345,597 35.7 (34,408) (28.5) (62,401) (15.3) Asia Pacific 24,673 8.6 94,027 9.0 20,873 8.6 21,511 8.8 84,867 8.8 (3,162) (12.8) (9,160) (9.7) ---------- ----- ----------- ------ ---------- ----- ---------- ----- ----------- ------ -------- ------ -------- ------ Total net revenue by segment $ 287,618 100.0 $1,039,223 100.0 $ 241,352 100.0 $ 244,905 100.0 $ 967,277 100.0 $(42,713) (14.9)$(71,946) (6.9) ========== ===== =========== ====== ========== ===== ========== ===== =========== ====== ========= ====== ======== ====== Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Novell, Inc. Page 13 of 14 Unaudited Trended Solutions Revenue by Software Licenses and Maintenance and Services (In thousands) Fiscal Year Fiscal Year Change from Q4 2005 % 2005 % Q3 2006 % Q4 2006 % 2006 % Q4 06 to Q4 05 FY06 to FY05 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ------------------ ------------------ IT software and solutions Open platform solutions Linux platform products Software licenses $ - - $ - - $ - - $ - - $ - - $ - - $ - - Maintenance and services 9,829 3.4 35,836 3.4 11,590 4.8 13,017 5.3 45,296 4.7 3,188 32.4 9,460 26.4 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 9,829 3.4 35,836 3.4 11,590 4.8 13,017 5.3 45,296 4.7 3,188 32.4 9,460 26.4 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Other open platform products Software licenses 21 0.0 268 0.0 123 0.1 4 0.0 605 0.1 (17) (81.0) 337 125.7 Maintenance and services 4,049 1.4 17,493 1.7 3,284 1.4 889 0.4 7,541 0.8 (3,160) (78.0) (9,952) (56.9) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 4,070 1.4 17,761 1.7 3,407 1.4 893 0.4 8,146 0.8 (3,177) (78.1) (9,615) (54.1) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Systems, security and identity management Identity and access management Software licenses 13,022 4.5 31,714 3.1 11,947 5.0 9,429 3.9 40,760 4.2 (3,593) (27.6) 9,046 28.5 Maintenance and services 9,958 3.5 43,222 4.2 14,106 5.8 14,344 5.9 56,961 5.9 4,386 44.0 13,739 31.8 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 22,980 8.0 74,936 7.2 26,053 10.8 23,773 9.7 97,721 10.1 793 3.5 22,785 30.4 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Resource management Software licenses 24,225 8.4 46,539 4.5 8,760 3.6 8,602 3.5 30,839 3.2 (15,623) (64.5) (15,700) (33.7) Maintenance and services 25,955 9.0 97,819 9.4 24,840 10.3 25,420 10.4 103,740 10.7 (535) (2.1) 5,921 6.1 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 50,180 17.4 144,358 13.9 33,600 13.9 34,022 13.9 134,579 13.9 (16,158) (32.2) (9,779) (6.8) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Other systems, security and identity management products Software licenses 2,583 0.9 7,650 0.7 1,039 0.4 1,521 0.6 5,430 0.6 (1,062) (41.1) (2,220) (29.0) Maintenance and services 3,041 1.1 13,372 1.3 3,071 1.3 2,985 1.2 12,545 1.3 (56) (1.8) (827) (6.2) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 5,624 2.0 21,022 2.0 4,110 1.7 4,506 1.8 17,975 1.9 (1,118) (19.9) (3,047) (14.5) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Workspace solutions Open Enterprise Server Software licenses 16,832 5.9 34,862 3.4 9,071 3.8 10,990 4.5 39,269 4.1 (5,842) (34.7) 4,407 12.6 Maintenance and services 29,708 10.3 50,469 4.9 36,133 15.0 36,670 15.0 142,426 14.7 6,962 23.4 91,957 182.2 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 46,540 16.2 85,331 8.2 45,204 18.7 47,660 19.5 181,695 18.8 1,120 2.4 96,364 112.9 ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ NetWare and other NetWare-related Software licenses 8,002 2.8 52,248 5.0 5,961 2.5 5,509 2.2 24,108 2.5 (2,493) (31.2) (28,140) (53.9) Maintenance and services 19,805 6.9 141,301 13.6 3,631 1.5 2,856 1.2 23,671 2.4 (16,949) (85.6) (117,630) (83.2) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 27,807 9.7 193,549 18.6 9,592 4.0 8,365 3.4 47,779 4.9 (19,442) (69.9) (145,770) (75.3) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Collaboration Software licenses 8,944 3.1 26,636 2.6 7,570 3.1 6,581 2.7 23,585 2.4 (2,363) (26.4) (3,051) (11.5) Maintenance and services 19,161 6.7 72,786 7.0 17,706 7.3 17,813 7.3 72,591 7.5 (1,348) (7.0) (195) (0.3) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 28,105 9.8 99,422 9.6 25,276 10.5 24,394 10.0 96,176 9.9 (3,711) (13.2) (3,246) (3.3) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Other workspace products Software licenses 4,482 1.6 13,886 1.3 964 0.4 3,442 1.4 9,082 0.9 (1,040) (23.2) (4,804) (34.6) Maintenance and services 4,812 1.7 16,956 1.6 3,177 1.3 3,390 1.4 14,512 1.5 (1,422) (29.6) (2,444) (14.4) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 9,294 3.2 30,842 3.0 4,141 1.7 6,832 2.8 23,594 2.4 (2,462) (26.5) (7,248) (23.5) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Total software-related licenses and maintenance Software licenses 78,111 27.2 213,803 20.6 45,435 18.8 46,078 18.8 173,678 18.0 (32,033) (41.0) (40,125) (18.8) Maintenance and services 126,318 43.9 489,254 47.1 117,538 48.7 117,384 47.9 479,283 49.5 (8,934) (7.1) (9,971) (2.0) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ 204,429 71.1 703,057 67.7 162,973 67.5 163,462 66.7 652,961 67.5 (40,967) (20.0) (50,096) (7.1) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Global services 83,189 28.9 336,166 32.3 78,379 32.5 81,443 33.3 314,316 32.5 (1,746) (2.1) (21,850) (6.5) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Total net revenue Software licenses 78,111 27.2 213,803 20.6 45,435 18.8 46,078 18.8 173,678 18.0 (32,033) (41.0) (40,125) (18.8) Maintenance and services 209,507 72.8 825,420 79.4 195,917 81.2 198,827 81.2 793,599 82.0 (10,680) (5.1) (31,821) (3.9) ----------- ------ ----------- ------------------ ------ ----------- ------ ----------- ------ ---------- ------ ----------- ------ Total net revenue $ 287,618 100.0 $1,039,223 100.0 $ 241,352 100.0 $ 244,905 100.0 $ 967,277 100.0 $ (42,713) (14.9) $ (71,946) (6.9) =========== ====== =========== ================== ====== =========== ====== =========== ====== ========== ====== =========== ====== Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Novell, Inc. Page 14 of 14 Major IT Software and Solutions Included Within Reported Line Items Open Platform Solutions Linux Platform Products > SUSE LINUX Enterprise Server > SUSE LINUX Enterprise Desktop Other Open Platform Products > openSUSE (formerly SUSE LINUX Professional) > SUSE Engineering Systems, Security and Identity Management Identity and Access Management > Identity Manager > SecureLogin > iChain > Sentinel Resource Management > ZENworks Suite > ZENworks Patch Management > ZENworks Asset Management > ZENworks Linux Management Other Systems, Security and Identity Management Products > Web Services > eDirectory Workspace Solutions Open Enterprise Server > Open Enterprise Server NetWare and Other NetWare-Related > NetWare > Cluster Services Collaboration > GroupWise Other Workspace Products > BorderManager Global Services > IT Consulting Services > Technical Support Services > Training Services