Exhibit 99.1
FOR IMMEDIATE RELEASE
March 1, 2007
Novell Reports Preliminary Financial Results for First Fiscal Quarter 2007
• Linux Platform Products recognized revenue grows 46% year-over-year, invoicing grows 659%
• Balance sheet strengthened through increased operating cash flow
WALTHAM, Mass. – March 1, 2007 – Novell, Inc. (NASDAQ:NOVL) today announced preliminary financial results for its first fiscal quarter ended January 31, 2007. These financial results are preliminary because Novell, during the third fiscal quarter of 2006, 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 report for the third fiscal quarter ended July 31, 2006, its Form 10-K report for the full fiscal year ended October 31, 2006, and its Form 10-Q report for the first fiscal quarter ended January 31, 2007.
Financial Results
For the first fiscal quarter 2007, Novell reported net revenue of $230 million, compared to net revenue of $242 million for the first fiscal quarter 2006. The loss available to common stockholders from continuing operations in the first fiscal quarter 2007 was $20 million, or $0.06 loss per common share. This compares to income available to common stockholders from continuing operations of $4 million, or $0.01 per diluted common share, for the first fiscal quarter 2006.
On a non-GAAP basis, which includes stock-based compensation as described below, adjusted loss available to common stockholders from continuing operations for the first fiscal quarter 2007 was $3 million, or $0.01 loss per common share. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $4 million, or $0.01 per diluted common share, for the first fiscal quarter 2006.
During the first fiscal quarter 2007, Novell reported $15 million of revenue from Linux* Platform Products, up 46% year-over-year, and $91 million of invoicing, up 659% year-over-year. Revenue from Identity and Access Management was $24 million, down 7% year-over-year. Combined revenue from Open Enterprise Server and products related to NetWare® declined 18% from the year ago period.
“We are very pleased with our first quarter Linux results and momentum, ” said Ron Hovsepian, President and CEO of Novell. “We have made good progress toward implementing our strategic initiatives and achieving our key fiscal year 2007 milestones. Overall, our quarterly results were mixed and we will need to improve our execution in our identity, security and systems management businesses. We feel confident that we are on the right path to put Novell on target for sustained profitability. ”
Cash, cash equivalents and short-term investments were $1.8 billion at January 31, 2007, up from $1.5 billion last quarter. Days sales outstanding in accounts receivable was 57 days at the end of the first fiscal quarter 2007, down from 59 days in the year ago quarter. Deferred revenue was $728 million at the end of the first fiscal quarter 2007, up $361 million, or 98%, from the prior year. Cash flow from operations was $348 million for the first fiscal quarter 2007, up from $25 million from the first fiscal quarter 2006. Both deferred revenue and cash flow from operations were up from the prior year due to the Microsoft agreement completed in the quarter.
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, its Form 10-K report for the full fiscal year ended October 31, 2006, and its Form 10-Q report for the first fiscal quarter ended January 31, 2007, following the conclusion of the review.
Update on Preliminary Full Fiscal Year 2006 Results
Because of the stock-based compensation review, the financial results of the third and fourth fiscal quarters 2006 and full fiscal year 2006 remain preliminary. We are required to revise results for those periods as a result of material changes in estimates. Accordingly, an increase of $15 million in other accrued liabilities as a result of a change in estimate identified during the first fiscal quarter 2007 must be recognized as an expense in the third fiscal quarter 2006.
Similarly, a decrease of $2 million in accrued compensation as a result of a change in estimate identified during the first fiscal quarter 2007 must be recognized as a reduction of expense in the fourth fiscal quarter 2006. As a result, the following changed in the full fiscal year 2006:
- Cost of revenue and operating expenses decreased a combined $13 million,
- Income available to common stockholders from continuing operations decreased from $21 million, or $0.06 per diluted common share, to $7 million, or $0.02 per diluted common share, and
- Non-GAAP adjusted income available to common stockholders from continuing operations of $29 million increased to $30 million, and adjusted income per diluted common share of $0.08 remained unchanged.
Financial Outlook
Novell management reiterates 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 to $45 million in stock-based compensation expense.
- 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 (loss) available to common stockholders from continuing operations and adjusted diluted income (loss) 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 (loss) available to common stockholders from continuing operations to be after-tax income (loss) generated from continuing operations excluding certain non-recurring or non-core items such as, but not limited to, 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.
In the full fiscal year 2006, Novell excluded stock-based compensation expense from non-GAAP adjusted diluted income (loss) available to common stockholders from continuing operations for transition purposes following the adoption of FAS 123R, "Accounting for Stock-Based Compensation," to provide investors with an easier comparison to the prior year's performance. Beginning in the first fiscal quarter 2007, Novell no longer excludes stock-based compensation expense from its non-GAAP financial measures. Accordingly, the fiscal year 2006 non-GAAP financial measures were revised to include stock-based compensation for comparative purposes to the current year.
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 March 1, 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 Web site approximately two hours after its conclusion, and will be available for telephone playback through midnight ET, March 9, 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 8070024.
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 realize the benefits anticipated from the Microsoft transaction, 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, the final conclusions of the Audit Committee (and the timing of such conclusions) concerning matters relating to the company's review of its historical 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 (“SEC”) 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, the full fiscal year 2006, the first fiscal quarter 2007 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 SEC on a timely basis, may change our conclusions on the effectiveness of our internal control over financial reporting and disclosure controls and procedures and may affect 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
Page 7 of 15 Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (Preliminary) (In thousands, except per share data) Fiscal Quarter Ended --------------------------------- Jan 31, 2007 Jan 31, 2006 --------------- -------------- Net revenue: Software licenses $ 38,351 $ 42,102 Maintenance and services 191,225 200,192 --------------- -------------- Total net revenue 229,576 242,294 --------------- -------------- Cost of revenue: Software licenses 4,227 4,545 Maintenance and services 69,956 76,778 --------------- -------------- Total cost of revenue 74,183 81,323 --------------- -------------- Gross profit 155,393 160,971 --------------- -------------- Operating expenses: Sales and marketing 90,940 88,193 Product development 46,433 43,724 General and administrative 25,985 28,801 --------------- -------------- Total operating expenses before other 163,358 160,718 Income (loss) from operations before other operating expenses (income) (7,965) 253 Other operating expenses (income) (1) 23,334 (1,000) --------------- -------------- Income (loss) from operations (31,299) 1,253 Other income, net 18,059 12,978 --------------- -------------- Income (loss) from continuing operations, before income taxes (13,240) 14,231 Income tax expense 6,672 10,001 --------------- -------------- Income (loss) from continuing operations (19,912) 4,230 Loss from discontinued operations, before income taxes - (1,043) Income tax expense - 1,322 --------------- -------------- Loss from discontinued operations - (2,365) Net income (loss) $ (19,912) $ 1,865 =============== ============== Income (loss) available to common stockholders - diluted: Continuing operations $ (19,912) $ 4,167 =============== ============== Net income (loss) $ (19,912) $ 1,811 =============== ============== Income (loss) per share available to common stockholders - diluted: Continuing operations $ (0.06) $ 0.01 Net income (loss) $ (0.06) $ 0.00 Weighted average shares - diluted 345,522 394,534 (1) See Page 10 of 15 for a detail of other operating expenses (income). Certain 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 Ended --------------------------------- Jan 31, 2007 Jan 31, 2006 --------------- -------------- Cost of revenue $ 1,017 $ 1,062 --------------- -------------- Sales and marketing 1,928 3,532 Product development 2,117 2,637 General and administrative 1,404 6,271 --------------- -------------- Total operating expenses 5,449 12,440 Discontinued operations - 193 --------------- -------------- Total stock-based compensation expense $ 6,466 $ 13,695 =============== ==============
Page 8 of 15 Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (Preliminary) (In thousands) Jan 31, 2007 Oct 31, 2006 ------------------ ------------------ Assets Current assets: Cash and cash equivalents $ 1,025,478 $ 675,787 Short-term investments 790,033 790,500 Receivables, net 146,291 233,986 Prepaid expenses 38,099 32,328 Other current assets 27,254 28,524 ------------------ ------------------ Total current assets 2,027,155 1,761,125 Property, plant and equipment, net 182,721 184,084 Long-term investments - 2,263 Goodwill 420,275 424,701 Intangible assets, net 38,980 40,404 Deferred income taxes 4,586 4,770 Other assets 32,391 32,376 ------------------ ------------------ Total assets $ 2,706,108 $ 2,449,723 ================== ================== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 41,592 $ 44,419 Accrued compensation 71,031 103,710 Other accrued liabilities 101,941 106,837 Income taxes payable 47,560 49,600 Deferred revenue 469,791 426,971 ------------------ ------------------ Total current liabilities 731,915 731,537 Deferred income taxes 4,119 4,186 Deferred revenue - long-term 258,573 - Senior convertible debentures 600,000 600,000 ------------------ ------------------ Total liabilities 1,594,607 1,335,723 Preferred stock - 9,350 Stockholders' equity 1,111,501 1,104,650 ------------------ ------------------ Total liabilities and stockholders' equity $ 2,706,108 $ 2,449,723 ================== ================== Amounts reported as 'preliminary' for the fourth fiscal quarter ended October 31, 2006 have been updated for a known change in estimate. Also, reclassifications, none of which affected net income (loss), were made to the prior period amounts in order to conform to the current period's presentation.
Page 9 of 15 Novell, Inc. Consolidated Unaudited Condensed Statements of Cash Flows (Preliminary) (In thousands) Fiscal Quarter Ended ------------------------------------ Jan 31, 2007 Jan 31, 2006 ---------------- ---------------- Cash flows from operating activities: Net income (loss) $ (19,912) $ 1,865 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Stock-based compensation expense 6,466 13,695 Depreciation and amortization 11,164 11,511 Changes in accounts receivable allowances 773 (2,973) Utilization of previously reserved acquired net operating losses 2,471 544 Net (gain) loss on impaired long-term investments (1,738) 387 Gain on sale of venture capital partnership interests (3,591) - Impairment of goodwill and intangible assets 10,848 - Changes in current assets and liabilities, excluding the effect of acquisitions and dispositions 341,047 94 ---------------- ---------------- Net cash provided by operating activities 347,528 25,123 ---------------- ---------------- Cash flows from financing activities: Issuance of common stock, net 7,385 9,876 Excess tax benefits from stock-based compensation 1,986 4,039 Payment of cash dividends on Series B Preferred Stock (5) - ---------------- ---------------- Net cash provided by financing activities 9,366 13,915 ---------------- ---------------- Cash flows from investing activities: Purchases of property, plant and equipment (4,958) (7,603) Short-term investment activity 132 4,474 Long-term investment activity 1,738 (256) Cash paid for equity share of Open Invention Network, LLC - (4,225) Proceeds from sale of venture capital partnership interests 4,964 - Cash paid for acquisition of Redmojo (9,727) - Other 648 2,462 ---------------- ---------------- Net cash used in investing activities (7,203) (5,148) ---------------- ---------------- Increase in cash and cash equivalents 349,691 33,890 Cash and cash equivalents - beginning of period 675,787 811,238 ---------------- ---------------- Cash and cash equivalents - end of period $ 1,025,478 $ 845,128 ================ ================ Certain reclassifications, none of which affected net income (loss), were made to prior period amounts in order to conform to the current period's presentation.
Page 10 of 15 Novell, Inc. Unaudited Non-GAAP Adjusted Earnings Information (Preliminary) (In thousands, except per share data) Fiscal Quarter Ended ------------------------------------------- Jan 31, 2007 Jan 31, 2006 ------------------- ------------------ GAAP diluted income (loss) available to common stockholders from continuing operations $ (19,912) $ 4,167 ------------------- ------------------ Pre-tax adjustments: Other operating expenses (income): Restructuring expenses 7,351 (1,000) Litigation-related income (543) - Impairment of goodwill and intangible assets 10,848 - Stock-based compensation review expenses 5,678 - ------------------- ------------------ Sub-total 23,334 (1,000) ------------------- ------------------ Non-operating expenses (income): Gain on sale of venture capital partnership interests (3,591) - Net (gain) loss on impaired long-term investments (1,738) 387 ------------------- ------------------ Sub-total (5,329) 387 ------------------- ------------------ Total pre-tax adjustments 18,005 (613) Income tax adjustments (1,567) 756 Diluted income (loss) adjustments: Allocation of earnings to preferred stockholders - (1) ------------------- ------------------ Total net adjustments 16,438 142 Non-GAAP diluted income (loss) available to common stockholders from continuing operations $ (3,474) $ 4,309 =================== ================== GAAP diluted income (loss) per common share from continuing operations $ (0.06) $ 0.01 Adjustments detailed above 0.05 0.00 ------------------- ------------------ Non-GAAP diluted income (loss) per common share from continuing operations $ (0.01) $ 0.01 =================== ================== GAAP diluted weighted average shares from continuing operations 345,522 394,534 Change in dilution from assumed: Stock option exercises - - ------------------- ------------------ Non-GAAP diluted weighted average shares 345,522 394,534 =================== ================== Revisions were made to prior period amounts in order to include stock-based compensation in the non-GAAP adjusted earnings information and conform to the current period's presentation.
Page 11 of 15 Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (Preliminary) (In thousands, except per share data) Fiscal Year Trailing Four Q1 2006 % Q4 2006 % 2006 % Q1 2007 % Quarters % ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Net revenue: Software licenses $ 42,102 17.4 $ 46,078 18.8 $ 173,678 18.0 $ 38,351 16.7 $ 169,927 17.8 Maintenance and services 200,192 82.6 198,827 81.2 793,599 82.0 191,225 83.3 784,632 82.2 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Total net revenue 242,294 100.0 244,905 100.0 967,277 100.0 229,576 100.0 954,559 100.0 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Cost of revenue: Software licenses 4,545 1.9 4,591 1.9 18,161 1.9 4,227 1.8 17,843 1.9 Maintenance and services 76,778 31.7 71,823 29.3 301,923 31.2 69,956 30.5 295,101 30.9 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Total cost of revenue 81,323 33.6 76,414 31.2 320,084 33.1 74,183 32.3 312,944 32.8 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Gross profit 160,971 66.4 168,491 68.8 647,193 66.9 155,393 67.7 641,615 67.2 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Operating expenses: Sales and marketing 88,193 36.4 88,627 36.2 357,407 36.9 90,940 39.6 360,154 37.7 Product development 43,724 18.0 43,615 17.8 180,496 18.7 46,433 20.2 183,205 19.2 General and administrative 28,801 11.9 23,568 9.6 103,754 10.7 25,985 11.3 100,938 10.6 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Total operating expenses before other 160,718 66.3 155,810 63.6 641,657 66.3 163,358 71.2 644,297 67.5 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Income (loss) from operations before other operating expenses (income) 253 0.1 12,681 5.2 5,536 0.6 (7,965) (3.5) (2,682) (0.3) Other operating expenses (income) (1) (1,000) (0.4) 8,525 3.5 44,124 4.6 23,334 10.2 68,458 7.2 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Income (loss) from operations 1,253 0.5 4,156 1.7 (38,588) (4.0) (31,299) (13.6) (71,140) (7.5) ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Other income Investment income 14,467 6.0 34,684 14.2 77,559 8.0 24,308 10.6 87,400 9.2 Other, net (1,489) (0.6) (1,903) (0.8) (8,018) (0.8) (6,249) (2.7) (12,778) (1.3) ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Other income, net 12,978 5.4 32,781 13.4 69,541 7.2 18,059 7.9 74,622 7.8 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Income (loss) from continuing operations, before income taxes 14,231 5.9 36,937 15.1 30,953 3.2 (13,240) (5.8) 3,482 0.4 Income tax expense 10,001 4.1 16,247 6.6 23,263 2.4 6,672 2.9 19,934 2.1 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Income (loss) from continuing operations 4,230 1.7 20,690 8.4 7,690 0.8 (19,912) (8.7) (16,452) (1.7) Income (loss) from discontinued operations, before income taxes (1,043) (0.4) (843) (0.3) 12,900 1.3 - - 13,943 1.5 Income tax expense (benefit) 1,322 0.5 - - 972 0.1 - - (350) (0.0) ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Income (loss) from discontinued operations (2,365) (1.0) (843) (0.3) 11,928 1.2 - - 14,293 1.5 ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Income (loss) before cumulative effect of a change in accounting principle 1,865 0.8 19,847 8.1 19,618 2.0 (19,912) (8.7) (2,159) (0.2) Cumulative effect of a change in accounting principle - - - - (897) (0.1) - - (897) (0.1) ----------- ------ ----------- ------- ------------ ------- ------------ ------- ----------- ------ Net income (loss) $ 1,865 0.8 $ 19,847 8.1 $ 18,721 1.9 $ (19,912) (8.7) $ (3,056) (0.3) =========== ====== =========== ======= ============ ======= ============ ======= =========== ====== Income (loss) available to common stockholders - diluted: Continuing operations $ 4,167 1.7 $ 22,046 9.0 $ 7,471 0.8 $ (19,912) (8.7) =========== ====== =========== ======= ============ ======= ============ ======= Net income (loss) $ 1,811 0.7 $ 21,206 8.7 $ 18,285 1.9 $ (19,912) (8.7) =========== ====== =========== ======= ============ ======= ============ ======= Income (loss) per share available to common stockholders - diluted: Continuing operations $ 0.01 $ 0.06 $ 0.02 $ (0.06) Net income (loss) $ 0.00 $ 0.05 $ 0.05 $ (0.06) Weighted average shares - diluted 394,534 395,456 365,659 345,522 (1) See Page 10 of 15 for a detail of other operating expenses (income). Amounts reported as 'preliminary' for the fourth fiscal quarter and fiscal year ended October 31, 2006 have been updated for known changes in estimates, impacting net income (loss). Also, reclassifications, none of which affected net income (loss), were made to the prior period amounts in order to conform to the current period's presentation.
Page 12 of 15 Novell, Inc. Consolidated Unaudited Condensed Segment Results (Preliminary) (in thousands, except per share data) Fiscal Quarter Ended January 31, 2007 --------------------------------------------------------------------------------------------------------- Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Net revenue: Software licenses $ 194 0.8 $ 7,465 17.7 $ 11,407 24.0 $ 19,285 18.4 $ - - $ - $ 38,351 16.7 Maintenance and services 17,193 72.7 24,697 58.4 16,021 33.6 61,195 58.4 - - - 119,106 51.9 Global services 6,247 26.4 10,113 23.9 20,187 42.4 24,382 23.3 11,190 100.0 - 72,119 31.4 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total net revenue 23,634 100.0 42,275 100.0 47,615 100.0 104,862 100.0 11,190 100.0 - 229,576 100.0 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Cost of revenue: Software licenses 25 0.1 780 1.8 2,237 4.7 1,185 1.1 - - - 4,227 1.8 Maintenance and services 2,205 9.3 2,579 6.1 3,142 6.6 3,761 3.6 - - - 11,687 5.1 Global services 6,368 26.9 5,230 12.4 23,299 48.9 13,619 13.0 9,753 87.2 - 58,269 25.4 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total cost of revenue 8,598 36.4 8,589 20.3 28,678 60.2 18,565 17.7 9,753 87.2 - 74,183 32.3 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Gross profit 15,036 63.6 33,686 79.7 18,937 39.8 86,297 82.3 1,437 12.8 - 155,393 67.7 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Operating expenses: Sales and marketing - - - - - - - - - - 90,940 90,940 39.6 Product development 12,363 52.3 7,293 17.3 15,067 31.6 11,710 11.2 - - - 46,433 20.2 General and administrative - - - - - - - - - - 25,985 25,985 11.3 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total operating expenses before other 12,363 52.3 7,293 17.3 15,067 31.6 11,710 11.2 - - 116,925 163,358 71.2 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Income (loss) from operations before other operating expenses (income) $ 2,673 11.3 $ 26,393 62.4 $ 3,870 8.1 $ 74,587 71.1 $ 1,437 12.8 $(116,925) $(7,965) (3.5) ========= ==== ======== ==== ========= ===== ========= ===== ========= ===== ========= ========= ===== Fiscal Quarter Ended October 31, 2006 --------------------------------------------------------------------------------------------------------- Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Net revenue: Software licenses $ 4 0.0 $ 8,602 19.3 $ 10,950 20.3 $ 26,522 23.0 $ - - $ - $ 46,078 18.8 Maintenance and services 13,908 69.2 25,467 57.2 17,280 32.1 60,729 52.7 - - - 117,384 47.9 Global services 6,176 30.7 10,471 23.5 25,670 47.6 28,002 24.3 11,124 100.0 - 81,443 33.3 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total net revenue 20,088 100.0 44,540 100.0 53,900 100.0 115,253 100.0 11,124 100.0 - 244,905 100.0 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Cost of revenue: Software licenses 1 0.0 881 2.0 2,133 4.0 1,576 1.4 - - - 4,591 1.9 Maintenance and services 2,347 11.7 2,609 5.9 3,365 6.2 3,609 3.1 - - - 11,930 4.9 Global services 6,769 33.7 4,835 10.9 24,334 45.1 14,718 12.8 9,237 83.0 - 59,893 24.5 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total cost of revenue 9,117 45.4 8,325 18.7 29,832 55.3 19,903 17.3 9,237 83.0 - 76,414 31.2 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Gross profit 10,971 54.6 36,215 81.3 24,068 44.7 95,350 82.7 1,887 17.0 - 168,491 68.8 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Operating expenses: Sales and marketing - - - - - - - - - - 88,627 88,627 36.2 Product development 11,876 59.1 6,115 13.7 14,468 26.8 11,156 9.7 - - - 43,615 17.8 General and administrative - - - - - - - - - - 23,568 23,568 9.6 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total operating expenses before other 11,876 59.1 6,115 13.7 14,468 26.8 11,156 9.7 - - 112,195 155,810 63.6 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Income (loss) from operations before other operating expenses (income) $ (905) (4.5)$ 30,100 67.6 $ 9,600 17.8 $ 84,194 73.1 $ 1,887 17.0 $(112,195) $ 12,681 5.2 ========= ==== ======== ==== ========= ===== ========= ===== ========= ===== ========= ========= ===== Fiscal Quarter Ended January 31, 2006 --------------------------------------------------------------------------------------------------------- Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Net revenue: Software licenses $ 404 2.3 $ 6,372 15.0 $ 12,717 25.3 $ 22,609 19.1 $ - - $ - $ 42,102 17.4 Maintenance and services 12,723 73.5 26,786 63.1 17,129 34.1 67,846 57.3 - - - 124,484 51.4 Global services 4,175 24.1 9,286 21.9 20,427 40.6 27,880 23.6 13,940 100.0 - 75,708 31.2 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total net revenue 17,302 100.0 42,444 100.0 50,273 100.0 118,335 100.0 13,940 100.0 - 242,294 100.0 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Cost of revenue: Software licenses 82 0.5 533 1.3 2,479 4.9 1,451 1.2 - - - 4,545 1.9 Maintenance and services 2,590 15.0 2,241 5.3 3,338 6.6 4,353 3.7 - - - 12,522 5.2 Global services 4,281 24.7 5,261 12.4 24,280 48.3 19,395 16.4 11,039 79.2 - 64,256 26.5 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total cost of revenue 6,953 40.2 8,035 18.9 30,097 59.9 25,199 21.3 11,039 79.2 - 81,323 33.6 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Gross profit 10,349 59.8 34,409 81.1 20,176 40.1 93,136 78.7 2,901 20.8 - 160,971 66.4 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Operating expenses: Sales and marketing - - - - - - - - - - 88,193 88,193 36.4 Product development 11,449 66.2 6,843 16.1 13,265 26.4 12,167 10.3 - - - 43,724 18.0 General and administrative - - - - - - - - - - 28,801 28,801 11.9 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Total operating expenses before other 11,449 66.2 6,843 16.1 13,265 26.4 12,167 10.3 - - 116,994 160,718 66.3 --------- ---- -------- ---- --------- ----- --------- ----- --------- ----- --------- --------- ----- Income (loss) from operations before other operating expenses (income) $ (1,100) (6.4)$ 27,566 64.9 $ 6,911 13.7 $ 80,969 68.4 $ 2,901 20.8 $(116,994) $ 253 0.1 ========= ==== ======== ==== ========= ===== ========= ===== ========= ===== ========= ========= ===== Global services includes consulting, technical support and training services
Page 13 of 15 Novell, Inc. Unaudited Trended Segment and Region Revenue (In thousands) Fiscal Year Change from Revenue by segment Q1 2006 % Q4 2006 % 2006 % Q1 2007 % Q1 2007 to Q4 2006 Q1 2007 to Q1 2006 ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- --------------------------- --------------------------- Open platform solutions Linux platform products $ 10,382 4.3 $ 13,017 5.3 $ 45,296 4.7 $ 15,166 6.6 $ 2,149 16.5 $ 4,784 46.1 Other open platform products 2,745 1.1 893 0.4 8,146 0.8 2,221 1.0 1,328 148.7 (524) (19.1) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Total open platform solutions 13,127 5.4 13,910 5.7 53,442 5.5 17,387 7.6 3,477 25.0 4,260 32.5 ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Systems and resource management 33,158 13.7 34,022 13.9 134,579 13.9 32,162 14.0 (1,860) (5.5) (996) (3.0) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Identity and security management Identity and access management 25,548 10.5 23,773 9.7 97,721 10.1 23,864 10.4 91 0.4 (1,684) (6.6) Other identity and security management 4,298 1.8 4,506 1.8 17,975 1.9 3,564 1.6 (942) (20.9) (734) (17.1) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Total identity and security management 29,846 12.3 28,279 11.5 115,696 12.0 27,428 11.9 (851) (3.0) (2,418) (8.1) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Workgroup Open Enterprise Server 43,112 17.8 47,660 19.5 181,695 18.8 43,207 18.8 (4,453) (9.3) 95 0.2 NetWare and other NetWare-related 18,256 7.5 8,365 3.4 47,779 4.9 7,036 3.1 (1,329) (15.9) (11,220) (61.5) Collaboration 23,676 9.8 24,394 10.0 96,176 9.9 22,266 9.7 (2,128) (8.7) (1,410) (6.0) Other workgroup 5,411 2.2 6,832 2.8 23,594 2.4 7,971 3.5 1,139 16.7 2,560 47.3 ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Total workgroup 90,455 37.3 87,251 35.6 349,244 36.1 80,480 35.1 (6,771) (7.8) (9,975) (11.0) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Total software-related licenses and maintenance 166,586 68.8 163,462 66.7 652,961 67.5 157,457 68.6 (6,005) (3.7) (9,129) (5.5) Global services 75,708 31.2 81,443 33.3 314,316 32.5 72,119 31.4 (9,324) (11.4) (3,589) (4.7) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Total net revenue by segment $ 242,294 100.0 $ 244,905 100.0 $ 967,277 100.0 $ 229,576 100.0 $ (15,329) (6.3) $ (12,718) (5.2) ================ ========= ================ ========= =============== ========= ================ ========= ================ ========= ================ ========= Revenue by region Americas $ 133,777 55.2 $ 137,032 56.0 $ 536,813 55.5 $ 126,220 55.0 $ (10,812) (7.9) $ (7,557) (5.6) EMEA 88,836 36.7 86,362 35.3 345,597 35.7 84,607 36.9 (1,755) (2.0) (4,229) (4.8) Asia Pacific 19,681 8.1 21,511 8.8 84,867 8.8 18,749 8.2 (2,762) (12.8) (932) (4.7) ---------------- --------- ---------------- --------- --------------- --------- ---------------- --------- ---------------- --------- ---------------- --------- Total net revenue by region $ 242,294 100.0 $ 244,905 100.0 $ 967,277 100.0 $ 229,576 100.0 $ (15,329) (6.3) $ (12,718) (5.2) ================ ========= ================ ========= =============== ========= ================ ========= ================ ========= ================ ========= Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 14 of 15 Novell, Inc. Unaudited Trended Segment Revenue by Software Licenses and Maintenance and Services (In thousands) Fiscal Year Change from Q1 2006 % Q4 2006 % 2006 % Q1 2007 % Q1 2007 to Q4 2006 Q1 2007 to Q1 2006 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------------------- ------------------------- Open platform solutions Linux platform products Software licenses $ - - $ - - $ - - $ - - $ - - $ - - Maintenance and services 10,382 4.3 13,017 5.3 45,296 4.7 15,166 6.6 2,149 16.5 4,784 46.1 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 10,382 4.3 13,017 5.3 45,296 4.7 15,166 6.6 2,149 16.5 4,784 46.1 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Other open platform products Software licenses 404 0.2 4 0.0 605 0.1 194 0.1 190 4,750.0 (210) (52.0) Maintenance and services 2,341 1.0 889 0.4 7,541 0.8 2,027 0.9 1,138 128.0 (314) (13.4) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 2,745 1.1 893 0.4 8,146 0.8 2,221 1.0 1,328 148.7 (524) (19.1) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Systems and resource management Software licenses 6,372 2.6 8,602 3.5 30,839 3.2 7,465 3.3 (1,137) (13.2) 1,093 17.2 Maintenance and services 26,786 11.1 25,420 10.4 103,740 10.7 24,697 10.8 (723) (2.8) (2,089) (7.8) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 33,158 13.7 34,022 13.9 134,579 13.9 32,162 14.0 (1,860) (5.5) (996) (3.0) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Identity and security management Identity and access management Software licenses 11,603 4.8 9,429 3.9 40,760 4.2 10,460 4.6 1,031 10.9 (1,143) (9.9) Maintenance and services 13,945 5.8 14,344 5.9 56,961 5.9 13,404 5.8 (940) (6.6) (541) (3.9) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 25,548 10.5 23,773 9.7 97,721 10.1 23,864 10.4 91 0.4 (1,684) (6.6) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Other identity and security management Software licenses 1,114 0.5 1,521 0.6 5,430 0.6 947 0.4 (574) (37.7) (167) (15.0) Maintenance and services 3,184 1.3 2,985 1.2 12,545 1.3 2,617 1.1 (368) (12.3) (567) (17.8) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 4,298 1.8 4,506 1.8 17,975 1.9 3,564 1.6 (942) (20.9) (734) (17.1) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Workgroup Open Enterprise Server Software licenses 9,983 4.1 10,990 4.5 39,269 4.1 8,317 3.6 (2,673) (24.3) (1,666) (16.7) Maintenance and services 33,129 13.7 36,670 15.0 142,426 14.7 34,890 15.2 (1,780) (4.9) 1,761 5.3 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 43,112 17.8 47,660 19.5 181,695 18.8 43,207 18.8 (4,453) (9.3) 95 0.2 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- NetWare and other NetWare-related Software licenses 6,762 2.8 5,509 2.2 24,108 2.5 5,024 2.2 (485) (8.8) (1,738) (25.7) Maintenance and services 11,494 4.7 2,856 1.2 23,671 2.4 2,012 0.9 (844) (29.6) (9,482) (82.5) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 18,256 7.5 8,365 3.4 47,779 4.9 7,036 3.1 (1,329) (15.9) (11,220) (61.5) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Collaboration Software licenses 4,891 2.0 6,581 2.7 23,585 2.4 5,242 2.3 (1,339) (20.3) 351 7.2 Maintenance and services 18,785 7.8 17,813 7.3 72,591 7.5 17,024 7.4 (789) (4.4) (1,761) (9.4) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 23,676 9.8 24,394 10.0 96,176 9.9 22,266 9.7 (2,128) (8.7) (1,410) (6.0) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Other workgroup Software licenses 973 0.4 3,442 1.4 9,082 0.9 702 0.3 (2,740) (79.6) (271) (27.9) Maintenance and services 4,438 1.8 3,390 1.4 14,512 1.5 7,269 3.2 3,879 114.4 2,831 63.8 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 5,411 2.2 6,832 2.8 23,594 2.4 7,971 3.5 1,139 16.7 2,560 47.3 ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Total software-related licenses and maintenance Software licenses 42,102 17.4 46,078 18.8 173,678 18.0 38,351 16.7 (7,727) (16.8) (3,751) (8.9) Maintenance and services 124,484 51.4 117,384 47.9 479,283 49.5 119,106 51.9 1,722 1.5 (5,378) (4.3) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- 166,586 68.8 163,462 66.7 652,961 67.5 157,457 68.6 (6,005) (3.7) (9,129) (5.5) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Global services 75,708 31.2 81,443 33.3 314,316 32.5 72,119 31.4 (9,324) (11.4) (3,589) (4.7) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Total net revenue Software licenses 42,102 17.4 46,078 18.8 173,678 18.0 38,351 16.7 (7,727) (16.8) (3,751) (8.9) Maintenance and services 200,192 82.6 198,827 81.2 793,599 82.0 191,225 83.3 (7,602) (3.8) (8,967) (4.5) ------------- ---------- -------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- ---------- Total net revenue $ 242,294 100.0 $ 244,905 100.0 $ 967,277 100.0 $ 229,576 100.0 $ (15,329) (6.3) $ (12,718) (5.2) ============= ========== ============== ========== ============= ========== ============= ========== ============= ========== ============= ========== Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 15 of 15 Novell, Inc. 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 and Resource Management > ZENworks Suite > ZENworks Patch Management > ZENworks Asset Management > ZENworks Linux Management Identity and Security Management Identity and Access Management > Identity Manager > SecureLogin > iChain > Sentinel Other Identity and Security Management > Web Services > eDirectory Workgroup Open Enterprise Server > Open Enterprise Server NetWare and Other NetWare-Related > NetWare > Cluster Services Collaboration > GroupWise Other Workgroup > BorderManager Global Services > IT Consulting Services > Technical Support Services > Training Services