Exhibit 99.1
FOR IMMEDIATE RELEASE
May 30, 2007
Novell Reports Financial Results for Second Fiscal Quarter 2007
• Revenue grows year-over-year, driven by continued strength in Linux Platform Products
• Improved profitability on a non-GAAP basis
WALTHAM, Mass. – May 30, 2007 – Novell, Inc. (NASDAQ:NOVL) today announced financial results for its second fiscal quarter ended April 30, 2007. For the quarter, Novell reported net revenue of $239 million, compared to net revenue of $233 million for the second fiscal quarter 2006. The loss available to common stockholders from continuing operations in the second fiscal quarter 2007 was $110,000, or $0.00 loss per common share. This compares to income available to common stockholders from continuing operations of $2 million, or $0.00 per diluted common share, for the second fiscal quarter 2006. Foreign currency exchange rates favorably impacted total revenue by approximately $4 million and negatively impacted net income by $2 million year-over-year.
On a non-GAAP basis, which excludes stock-based compensation and certain other items, adjusted income available to common stockholders from continuing operations for the second fiscal quarter 2007 was $16 million, or $0.05 per diluted common share, which includes a $0.02 favorable tax adjustment. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $7 million, or $0.02 per diluted common share, for the second fiscal quarter 2006.
During the second fiscal quarter 2007, Novell reported $19 million of revenue from Linux* Platform Products, up 83% year-over-year, and $29 million of invoicing, up 114% year-over-year. Revenue from Identity and Access Management was $23 million, up 5% year-over-year. Revenue from Systems and Resource Management was $32 million, down 4% year-over-year. Revenue from our Workgroup business unit declined 4% from the year ago period to $84 million.
“We were pleased with the overall results this quarter. We saw continued strength in our Linux business, improvement in our Identity business and better-than-expected results in Workgroup. Additionally, we benefited from the impact of cost control measures, ” said Ron Hovsepian, President and CEO of Novell. “While there remains a lot of work ahead of us, our business is moving in the right direction and we believe we are on track to achieve our fiscal 2007 exit rate operating margin target. ”
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Cash, cash equivalents and short-term investments were $1.8 billion at April 30, 2007, consistent with last quarter. Days sales outstanding in accounts receivable was 64 days at the end of the second fiscal quarter 2007, down from 66 days in the year ago quarter. Total deferred revenue was $700 million at the end of the second fiscal quarter 2007, up $354 million, or 102%, from the prior year. Cash flow from operations was a negative $29 million for the second fiscal quarter 2007, compared to a negative $24 million in the second fiscal quarter 2006.
Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.
Update on Stock-Based Compensation Review
Novell recently concluded its self-initiated, voluntary review of its historical stock-based compensation practices, the results of which it announced in a press release on May 23, 2007. The associated SEC filing on Form 8-K, along with the press release, may be viewed at http://sec.gov/Archives/edgar/data/758004/000075800407000082/novl-8k_052307.htm.
On May 25, 2007, Novell filed its Quarterly Reports on Form 10-Q for the fiscal quarters ended July 31, 2006 and January 31, 2007 and its Annual Report on Form 10-K for the fiscal year ended October 31, 2006 with the SEC. Copies of these filings may be accessed through Novell's Investor Relations website at http://www.novell.com/ir.
Financial Outlook
Novell management issues the following financial guidance:
For the full fiscal year 2007:
- Net revenue is expected to be between $925 million and $955 million, adjusted to account for the divestment of the Salmon business consulting group during the second fiscal quarter 2007.
- On a non-GAAP basis, adjusted income from operations is expected to be between break-even and $10 million, excluding stock-based compensation and restructuring expenses.
- Novell is targeting fourth fiscal quarter 2007 exit rate operating margins, as described below, of between 5% and 7%.
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For the full fiscal year 2008:- Novell is targeting fourth fiscal quarter 2008 exit rate operating margins of between 12% and 15%.
Non-GAAP Financial Measures
To supplement Novell's 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, restructuring expenses, asset impairments, litigation judgments and settlements, the write-off of acquired in-process research and development, and gains (losses) on the sale of business operations, long-term investments and property, plant and equipment.
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/.
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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 May 30, 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, June 8, 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 7709752.
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 ability to achieve its expense targets, Novell's success in executing its Linux Platform Products, Identity and Access Management, and Systems and Resource Management strategies, Novell's ability to take a competitive position in the Linux Platform Products, Identity and Access Management, and Systems and Resource Management industries, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand, Novell's ability to integrate acquired operations and employees, and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 25, 2007. Novell disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release except as required by the securities laws.
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About Novell
Novell, Inc. (Nasdaq: NOVL) delivers infrastructure software for the Open Enterprise. Novell is a leader in enterprise-wide operating systems based on Linux and open source and provides the enterprise management services required to operate mixed IT environments. Novell helps customers minimize cost, complexity and risk, allowing them to focus on innovation and growth. For more information, visithttp://www.novell.com.
_________________
* 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:
Susan Walker White
Novell, Inc.
Phone: 800-317-3195
E-Mail: swhite@novell.com
Page 6 of 14 Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year-to-Date ---------------------------------------------- ------------------------------------------------ Apr 30, 2007 Apr 30, 2006 Apr 30, 2007 Apr 30, 2006 -------------------- -------------------- --------------------- --------------------- Net revenue: Software licenses $ 41,723 $ 40,063 $ 80,074 $ 82,165 Maintenance, subscriptions and services 197,433 193,086 383,678 387,525 -------------------- -------------------- --------------------- --------------------- Total net revenue 239,156 233,149 463,752 469,690 -------------------- -------------------- --------------------- --------------------- Cost of revenue: Software licenses 4,260 4,041 8,487 8,585 Maintenance, subscriptions and services 65,785 73,281 131,617 145,517 -------------------- -------------------- --------------------- --------------------- Total cost of revenue 70,045 77,322 140,104 154,102 -------------------- -------------------- --------------------- --------------------- Gross profit 169,111 155,827 323,648 315,588 -------------------- -------------------- --------------------- --------------------- Operating expenses: Sales and marketing 88,447 89,453 178,776 177,168 Product development 52,562 47,119 99,029 90,843 General and administrative 28,697 25,915 54,559 54,567 -------------------- -------------------- --------------------- --------------------- Total operating expenses before other 169,706 162,487 332,364 322,578 Loss from operations before other operating expenses (income) (595) (6,660) (8,716) (6,990) Other operating expenses (income) (1) 10,451 (1,305) 22,937 (2,305) -------------------- -------------------- --------------------- --------------------- Loss from operations (11,046) (5,355) (31,653) (4,685) Other income, net 13,755 12,917 31,800 25,821 -------------------- -------------------- --------------------- --------------------- Income from continuing operations, before income taxes 2,709 7,562 147 21,136 Income tax expense 2,819 5,607 12,216 17,210 -------------------- -------------------- --------------------- --------------------- Income (loss) from continuing operations (110) 1,955 (12,069) 3,926 Income (loss) from discontinued operations, before income taxes 574 3,279 (10,137) 2,893 Income tax expense (benefit) on discontinued operations 2,656 1,892 (69) 1,612 -------------------- -------------------- --------------------- --------------------- Income (loss) from discontinued operations (2,082) 1,387 (10,068) 1,281 Net income (loss) $ (2,192) $ 3,342 $ (22,137) $ 5,207 ==================== ==================== ===================== ===================== Income (loss) available to common stockholders - diluted: Continuing operations $ (110) $ 1,900 $ (12,069) $ 3,817 ==================== ==================== ===================== ===================== Net income (loss) $ (2,192) $ 3,178 $ (22,137) $ 5,021 ==================== ==================== ===================== ===================== Income (loss) per share available to common stockholders - diluted: Continuing operations $ (0.00) $ 0.00 $ (0.03) $ 0.01 Net income (loss) $ (0.01) $ 0.01 $ (0.06) $ 0.01 Weighted average shares - diluted 346,492 385,320 346,007 389,657 (1) See Page 9 of 14 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 Fiscal Year-to-Date ---------------------------------------------- ------------------------------------------------ Apr 30, 2007 Apr 30, 2006 Apr 30, 2007 Apr 30, 2006 -------------------- -------------------- --------------------- --------------------- Cost of revenue $ 937 $ 923 $ 1,984 $ 1,985 -------------------- -------------------- --------------------- --------------------- Sales and marketing 2,400 3,043 4,260 6,575 Product development 2,535 1,750 4,686 4,387 General and administrative 2,259 1,944 3,700 8,215 -------------------- -------------------- --------------------- --------------------- Total operating expenses 7,194 6,737 12,646 19,177 -------------------- -------------------- --------------------- --------------------- Continuing operations 8,131 7,660 14,630 21,162 Discontinued operations - 70 - 263 -------------------- -------------------- --------------------- --------------------- Total stock-based compensation expense $ 8,131 $ 7,730 $ 14,630 $ 21,425 ==================== ==================== ===================== =====================
Page 7 of 14 Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (In thousands) Apr 30, 2007 Oct 31, 2006 ------------------------ ------------------------- Assets Current assets: Cash and cash equivalents $ 950,992 $ 675,787 Short-term investments 840,721 790,500 Receivables, net 178,269 233,986 Prepaid expenses 37,406 32,328 Other current assets 30,710 28,524 ------------------------ ------------------------- Total current assets 2,038,098 1,761,125 Property, plant and equipment, net 183,491 184,084 Long-term investments - 2,263 Goodwill 415,815 424,701 Intangible assets, net 38,035 40,404 Deferred income taxes 4,805 4,770 Other assets 31,131 32,376 ------------------------ ------------------------- Total assets $ 2,711,375 $ 2,449,723 ======================== ========================= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 43,386 $ 44,419 Accrued compensation 90,643 103,710 Other accrued liabilities 97,891 106,837 Income taxes payable 44,837 49,600 Deferred revenue 412,007 380,979 ------------------------ ------------------------- Total current liabilities 688,764 685,545 Deferred income taxes 5,004 4,186 Long-term deferred revenue 287,494 45,992 Senior convertible debentures 600,000 600,000 ------------------------ ------------------------- Total liabilities 1,581,262 1,335,723 Preferred stock - 9,350 Stockholders' equity 1,130,113 1,104,650 ------------------------ ------------------------- Total liabilities and stockholders' equity $ 2,711,375 $ 2,449,723 ======================== ========================= Reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 8 of 14 Novell, Inc. Consolidated Unaudited Condensed Statements of Cash Flows (In thousands) Fiscal Quarter Ended Fiscal Year-to-Date -------------------------------------- ------------------------------------- Apr 30, 2007 Apr 30, 2006 Apr 30, 2007 Apr 30, 2006 ----------------- ----------------- ---------------- ----------------- Cash flows from operating activities: Net income (loss) $ (2,192) $ 3,342 $ (22,137) $ 5,207 Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities: Stock-based compensation expense 9,933 7,730 16,432 21,425 Tax effects of stock-based compensation plans 2,077 1,247 4,063 5,286 Excess tax benefits from stock-based compensation (2,077) (1,247) (4,063) (5,286) Depreciation and amortization 10,309 10,867 21,473 22,378 Changes in accounts receivable allowances (1,224) (1,930) (451) (4,903) Utilization of previously reserved acquired net operating losses 2,354 2,976 4,825 3,520 Purchased in-process research and development - 2,110 - 2,110 Net gain on sale of property, plant and equipment - (2,190) - (2,190) Net (gain) loss on impaired long-term investments - 111 (1,738) 498 Gain on sale of venture capital partnership interests - - (3,591) - Loss on impaired goodwill and intangibles - - 10,848 - Gain on sale of discontinued operations, before taxes (628) - (628) - Changes in current assets and liabilities, excluding the effect of acquisitions and dispositions (47,147) (46,962) 293,900 (46,868) ----------------- ----------------- ---------------- ----------------- Net cash (used) provided by operating activities (28,595) (23,946) 318,933 1,177 ----------------- ----------------- ---------------- ----------------- Cash flows from financing activities: Issuance of common stock, net 742 8,206 8,127 18,082 Excess tax benefits from stock-based compensation 2,077 1,247 4,063 5,286 Payment of cash dividends on Series B Preferred Stock - (47) (5) (47) Repurchases of common stock, retired - (267,479) - (267,479) ----------------- ----------------- ---------------- ----------------- Net cash provided (used) by financing activities 2,819 (258,073) 12,185 (244,158) ----------------- ----------------- ---------------- ----------------- Cash flows from investing activities: Purchases of property, plant and equipment (7,550) (6,951) (12,508) (14,554) Proceeds from the sale of property, plant and equipment - 7,258 - 7,258 Proceeds from repayment of note receivable - 9,092 - 9,092 Short-term investment activity (47,552) 41,784 (47,420) 46,258 Long-term investment activity - (2,758) 1,738 (3,014) Cash paid for equity investment in Open Invention Network, LLC - - - (4,225) Proceeds from the sale of Salmon, net of cash divested 2,749 - 2,749 - Proceeds from sale of venture capital partnership interests - - 4,964 - Cash paid for acquisition of e-Security, net of cash acquired - (71,550) - (71,550) Cash paid for acquisition of Redmojo, net of cash acquired - - (9,727) - Purchase of intangible assets (875) - (875) - Other 4,518 2,090 5,166 4,552 ----------------- ----------------- ---------------- ----------------- Net cash used in investing activities (48,710) (21,035) (55,913) (26,183) ----------------- ----------------- ---------------- ----------------- (Decrease) increase in cash and cash equivalents (74,486) (303,054) 275,205 (269,164) Cash and cash equivalents - beginning of period 1,025,478 845,128 675,787 811,238 ----------------- ----------------- ---------------- ----------------- Cash and cash equivalents - end of period $ 950,992 $ 542,074 $ 950,992 $ 542,074 ================= ================= ================ =================
Page 9 of 14 Novell, Inc. Unaudited Non-GAAP Adjusted Earnings Information (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year-to-Date ----------------------------------------- ----------------------------------------- Apr 30, 2007 Apr 30, 2006 Apr 30, 2007 Apr 30, 2006 ------------------ ------------------ ------------------ ------------------ GAAP diluted income (loss) available to common stockholders from continuing operations $ (110) $ 1,900 $ (12,069) $ 3,817 ------------------ ------------------ ------------------ ------------------ Pre-tax adjustments: Operating expenses: Stock-based compensation expense 8,131 7,660 14,630 21,162 Other operating expenses (income): Restructuring expenses 4,523 - 11,874 (1,000) Purchased in-process research and development - 2,110 - 2,110 Gain on sale of property, plant and equipment - (2,190) - (2,190) Litigation-related income - (1,225) (543) (1,225) Stock-based compensation review expenses (1) 5,928 - 11,606 - ------------------ ------------------ ------------------ ------------------ Sub-total 10,451 (1,305) 22,937 (2,305) ------------------ ------------------ ------------------ ------------------ Non-operating expenses (income): Gain on sale of venture capital partnership interests - - (3,591) - Net (gain) loss on impaired long-term investments - 111 (1,738) 498 ------------------ ------------------ ------------------ ------------------ Sub-total - 111 (5,329) 498 ------------------ ------------------ ------------------ ------------------ Total pre-tax adjustments 18,582 6,466 32,238 19,355 Income tax adjustments (2,576) (1,606) (1,317) (704) Diluted income (loss) adjustments: Allocation of earnings to preferred stockholders - (18) - (72) ------------------ ------------------ ------------------ ------------------ Total net adjustments 16,006 4,842 30,921 18,579 Non-GAAP diluted income available to common stockholders from continuing operations $ 15,896 $ 6,742 $ 18,852 $ 22,396 ================== ================== ================== ================== GAAP diluted income (loss) per common share from continuing operations $ (0.00) $ 0.00 $ (0.03) $ 0.01 Adjustments detailed above 0.05 0.02 0.08 0.05 ------------------ ------------------ ------------------ ------------------ Non-GAAP diluted income per common share from continuing operations $ 0.05 $ 0.02 $ 0.05 $ 0.06 ================== ================== ================== ================== GAAP diluted weighted average shares from continuing operations 346,492 385,320 346,007 389,657 Adjustments for assumed stock option exercises 6,171 3,707 5,069 3,745 ------------------ ------------------ ------------------ ------------------ Non-GAAP diluted weighted average shares 352,663 389,027 351,076 393,402 ================== ================== ================== ================== (1) Includes $1.8 million of stock-based compensation expense. Revisions were made to prior period amounts in order to conform to the current period's presentation.
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Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data) Fiscal Year Trailing Four Q2 2006 % 2006 % Q1 2007 % Q2 2007 % Quarters % ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Net revenue: Software licenses $ 40,063 17.2 $ 173,678 18.4 $ 38,351 17.1 $ 41,723 17.4 $ 171,587 18.2 Maintenance, subscriptions and services 193,086 82.8 772,530 81.6 186,245 82.9 197,433 82.6 768,683 81.8 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Total net revenue 233,149 100.0 946,208 100.0 224,596 100.0 239,156 100.0 940,270 100.0 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Cost of revenue: Software licenses 4,041 1.7 18,161 1.9 4,227 1.9 4,260 1.8 18,063 1.9 Maintenance, subscriptions and services 73,281 31.4 285,152 30.1 65,832 29.3 65,785 27.5 271,252 28.8 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Total cost of revenue 77,322 33.2 303,313 32.1 70,059 31.2 70,045 29.3 289,315 30.8 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Gross profit 155,827 66.8 642,895 67.9 154,537 68.8 169,111 70.7 650,955 69.2 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Operating expenses: Sales and marketing 89,453 38.4 355,029 37.5 90,329 40.2 88,447 37.0 356,637 37.9 Product development 47,119 20.2 180,380 19.1 46,467 20.7 52,562 22.0 188,566 20.1 General and administrative 25,915 11.1 103,619 11.0 25,862 11.5 28,697 12.0 103,611 11.0 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Total operating expenses before other 162,487 69.7 639,028 67.5 162,658 72.4 169,706 71.0 648,814 69.0 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Income (loss) from operations before other operating expenses (income) (6,660) (2.9) 3,867 0.4 (8,121) (3.6) (595) (0.2) 2,141 0.2 Other operating expenses (income) (1) (1,305) (0.6) 44,124 4.7 12,486 5.6 10,451 4.4 69,366 7.4 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Loss from operations (5,355) (2.3) (40,257) (4.3) (20,607) (9.2) (11,046) (4.6) (67,225) (7.1) ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Other income Investment income 15,351 6.6 77,391 8.2 24,294 10.8 20,669 8.6 92,610 9.8 Other, net (2,434) (1.0) (8,018) (0.8) (6,249) (2.8) (6,914) (2.9) (17,258) (1.8) ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Other income, net 12,917 5.5 69,373 7.3 18,045 8.0 13,755 5.8 75,352 8.0 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Income (loss) from continuing operations, before income taxes 7,562 3.2 29,116 3.1 (2,562) (1.1) 2,709 1.1 8,127 0.9 Income tax expense 5,607 2.4 22,642 2.4 9,397 4.2 2,819 1.2 17,648 1.9 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Income (loss) from continuing operations 1,955 0.8 6,474 0.7 (11,959) (5.3) (110) (0.0) (9,521) (1.0) Income (loss) from discontinued operations, before income taxes 3,279 1.4 14,640 1.5 (10,711) (4.8) 574 0.2 1,610 0.2 Income tax expense (benefit) on discontinued operations 1,892 0.8 1,561 0.2 (2,725) (1.2) 2,656 1.1 (120) (0.0) ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Income (loss) from discontinued operations 1,387 0.6 13,079 1.4 (7,986) (3.6) (2,082) (0.9) 1,730 0.2 ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Income (loss) before cumulative effect of a change in accounting principle 3,342 1.4 19,553 2.1 (19,945) (8.9) (2,192) (0.9) (7,791) (0.8) Cumulative effect of a change in accounting principle - - (897) (0.1) - - - - (897) (0.1) ------------- -------- ------------- ------- ------------- ------- ------------- -------- ------------ -------- Net income (loss) $ 3,342 1.4 $ 18,656 2.0 $ (19,945) (8.9) $ (2,192) (0.9) $ (8,688) (0.9) ============= ======== ============= ======= ============= ======= ============= ======== ============ ======== Income (loss) available to common stockholders - diluted: Continuing operations $ 1,900 0.8 $ 6,260 0.7 $ (11,959) (5.3) $ (110) (0.0) ============= ======== ============= ======= ============= ======= ============= ======== Net income (loss) $ 3,178 1.4 $ 18,220 1.9 $ (19,945) (8.9) $ (2,192) (0.9) ============= ======== ============= ======= ============= ======= ============= ======== Income (loss) per share available to common stockholders - diluted: Continuing operations $ 0.00 $ 0.02 $ (0.03) $ (0.00) Net income (loss) $ 0.01 $ 0.05 $ (0.06) $ (0.01) Weighted average shares - diluted 385,320 365,659 345,522 346,492 (1) See Page 9 of 14 for a detail of other operating expenses (income). 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.
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Consolidated Unaudited Condensed Segment Results (in thousands, except per share data) Fiscal Quarter Ended April 30, 2007 ------------------------------------------------------------------------------------------------------------------------------------------------------------ Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Net revenue: Software licenses $ - - $ 7,650 18.1 $ 11,128 22.0 $ 22,945 21.2 $ - - $ - $ 41,723 17.4 Maintenance, subscriptions and services 21,041 67.4 24,770 58.7 15,570 30.7 61,084 56.4 - - - 122,465 51.2 Global services (1) 10,189 32.6 9,773 23.2 23,964 47.3 24,273 22.4 6,769 100.0 - 74,968 31.3 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total net revenue 31,230 100.0 42,193 100.0 50,662 100.0 108,302 100.0 6,769 100.0 - 239,156 100.0 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Cost of revenue: Software licenses - - 836 2.0 2,115 4.2 1,283 1.2 - - - 4,234 1.8 Maintenance, subscriptions and services 2,154 6.9 2,708 6.4 2,960 5.8 3,416 3.2 - - - 11,238 4.7 Global services 8,729 28.0 4,610 10.9 22,272 44.0 12,552 11.6 5,473 80.9 - 53,636 22.4 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total cost of revenue 10,883 34.8 8,154 19.3 27,347 54.0 17,251 15.9 5,473 80.9 - 69,108 28.9 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Gross profit 20,347 65.2 34,039 80.7 23,315 46.0 91,051 84.1 1,296 19.1 - 170,048 71.1 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Operating expenses: Sales and marketing - - - - - - - - - - 86,036 86,036 36.0 Product development 13,606 43.6 8,572 20.3 15,392 30.4 12,468 11.5 - - - 50,038 20.9 General and administrative - - - - - - - - - - 26,438 26,438 11.1 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total operating expenses before other 13,606 43.6 8,572 20.3 15,392 30.4 12,468 11.5 - - 112,474 162,512 68.0 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Stock-based compensation expense - - - - - - - - - - 8,131 8,131 3.4 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Income (loss) from operations before other operating expenses (income) $ 6,741 21.6 $ 25,467 60.4 $ 7,923 15.6 $ 78,583 72.6 $ 1,296 19.1 $(120,605) $ (595) (0.2) ============ ======= ============= ====== ============= ====== ============ ======= ============ ====== ============= ============ ======= 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 17.1 Maintenance, subscriptions and services 17,193 72.7 24,697 58.4 16,021 33.6 61,195 58.4 - - - 119,106 53.0 Global services (1) 6,247 26.4 10,113 23.9 20,187 42.4 24,382 23.3 6,210 100.0 - 67,139 29.9 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total net revenue 23,634 100.0 42,275 100.0 47,615 100.0 104,862 100.0 6,210 100.0 - 224,596 100.0 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Cost of revenue: Software licenses 25 0.1 777 1.8 2,229 4.7 1,177 1.1 - - - 4,208 1.9 Maintenance, subscriptions and services 2,184 9.2 2,570 6.1 3,130 6.6 3,737 3.6 - - - 11,621 5.2 Global services 6,284 26.6 5,144 12.2 22,753 47.8 13,403 12.8 5,599 90.2 - 53,183 23.7 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total cost of revenue 8,493 35.9 8,491 20.1 28,112 59.0 18,317 17.5 5,599 90.2 - 69,012 30.7 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Gross profit 15,141 64.1 33,784 79.9 19,503 41.0 86,545 82.5 611 9.8 - 155,584 69.3 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Operating expenses: Sales and marketing - - - - - - - - - - 88,469 88,469 39.4 Product development 11,814 50.0 6,953 16.4 14,347 30.1 11,202 10.7 - - - 44,316 19.7 General and administrative - - - - - - - - - - 24,421 24,421 10.9 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total operating expenses before other 11,814 50.0 6,953 16.4 14,347 30.1 11,202 10.7 - - 112,890 157,206 70.0 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Stock-based compensation expense - - - - - - - - - - 6,499 6,499 2.7 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Income (loss) from operations before other operating expenses (income) $ 3,327 14.1 $ 26,831 63.5 $ 5,156 10.8 $ 75,343 71.8 $ 611 9.8 $(119,389) $ (8,121) (3.6) ============ ======= ============= ====== ============= ====== ============ ======= ============ ====== ============= ============ ======= Fiscal Quarter Ended April 30, 2006 ------------------------------------------------------------------------------------------------------------------------------------------------------------ Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Net revenue: Software licenses $ 74 0.5 $ 7,105 16.3 $ 9,537 18.7 $ 23,347 20.4 $ - - $ - $ 40,063 17.2 Maintenance, subscriptions and services 11,334 71.0 26,694 61.1 17,871 35.0 63,978 56.0 - - - 119,877 51.4 Global services (1) 4,548 28.5 9,865 22.6 23,634 46.3 26,930 23.6 8,232 100.0 - 73,209 31.4 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total net revenue 15,956 100.0 43,664 100.0 51,042 100.0 114,255 100.0 8,232 100.0 - 233,149 100.0 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Cost of revenue: Software licenses 16 0.1 626 1.4 1,719 3.4 1,573 1.4 - - - 3,934 1.7 Maintenance, subscriptions and services 2,289 14.3 2,353 5.4 3,220 6.3 4,313 3.8 - - - 12,175 5.2 Global services 4,976 31.2 5,044 11.6 25,888 50.7 17,697 15.5 6,685 81.2 - 60,290 25.9 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total cost of revenue 7,281 45.6 8,023 18.4 30,827 60.4 23,583 20.6 6,685 81.2 - 76,399 32.8 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Gross profit 8,675 54.4 35,641 81.6 20,215 39.6 90,672 79.4 1,547 18.8 - 156,750 67.2 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Operating expenses: Sales and marketing - - - - - - - - - - 86,364 86,364 37.0 Product development 12,169 76.3 6,995 16.0 13,903 27.2 12,348 10.8 - - - 45,415 19.5 General and administrative - - - - - - - - - - 23,971 23,971 10.3 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Total operating expenses before other 12,169 76.3 6,995 16.0 13,903 27.2 12,348 10.8 - - 110,335 155,750 66.8 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Stock-based compensation expense - - - - - - - - - - 7,660 7,660 3.2 ------------ ------- ------------- ------ ------------- ------ ------------ ------- ------------ ------ ------------- ------------ ------- Income (loss) from operations before other operating expenses (income) $ (3,494) (21.9) $ 28,646 65.6 $ 6,312 12.4 $ 78,324 68.6 $ 1,547 18.8 $(117,995) $ (6,660) (2.9) ============ ======= ============= ====== ============= ====== ============ ======= ============ ====== ============= ============ ======= (1) Global services includes consulting, technical support and training services 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 14 Novell, Inc. Unaudited Trended Segment and Region Revenue (In thousands) Fiscal Year Change from Revenue by segment Q2 2006 % 2006 % Q1 2007 % Q2 2007 % Q2 2007 to Q1 2007 Q2 2007 to Q2 2006 ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- ---------------------------- ---------------------------- Open platform solutions Linux platform products $ 10,307 4.4 $ 45,296 4.8 $ 15,166 6.8 $ 18,889 7.9 $ 3,723 24.5 $ 8,582 83.3 Other open platform products 1,101 0.5 8,146 0.9 2,221 1.0 2,152 0.9 (69) (3.1) 1,051 95.5 ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Total open platform solutions 11,408 4.9 53,442 5.6 17,387 7.7 21,041 8.8 3,654 21.0 9,633 84.4 ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Systems and resource management 33,799 14.5 134,579 14.2 32,162 14.3 32,420 13.6 258 0.8 (1,379) (4.1) ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Identity and security management Identity and access management 22,347 9.6 97,721 10.3 23,864 10.6 23,471 9.8 (393) (1.6) 1,124 5.0 Other identity and security management 5,061 2.2 17,975 1.9 3,564 1.6 3,227 1.3 (337) (9.5) (1,834) (36.2) ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Total identity and security management 27,408 11.8 115,696 12.2 27,428 12.2 26,698 11.2 (730) (2.7) (710) (2.6) ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Workgroup Open Enterprise Server 45,719 19.6 181,695 19.2 43,207 19.2 43,180 18.1 (27) (0.1) (2,539) (5.6) NetWare and other NetWare-related 11,566 5.0 47,779 5.0 7,036 3.1 6,251 2.6 (785) (11.2) (5,315) (46.0) Collaboration 22,830 9.8 96,176 10.2 22,266 9.9 23,503 9.8 1,237 5.6 673 2.9 Other workgroup 7,210 3.1 23,594 2.5 7,971 3.5 11,095 4.6 3,124 39.2 3,885 53.9 ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Total workgroup 87,325 37.5 349,244 36.9 80,480 35.8 84,029 35.1 3,549 4.4 (3,296) (3.8) ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Total software-related licenses and maintenance 159,940 68.6 652,961 69.0 157,457 70.1 164,188 68.7 6,731 4.3 4,248 2.7 Global services 73,209 31.4 293,247 31.0 67,139 29.9 74,968 31.3 7,829 11.7 1,759 2.4 ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Total net revenue by segment $ 233,149 100.0 $ 946,208 100.0 $ 224,596 100.0 $ 239,156 100.0 $ 14,560 6.5 $ 6,007 2.6 ================ ========= ================ ========== ================= ========= ================= ========= =============== =========== ============== =========== Revenue by region Americas $ 129,344 55.5 $ 536,813 56.7 $ 126,220 56.2 $ 136,436 57.0 $ 10,216 8.1 $ 7,092 5.5 EMEA 81,003 34.7 324,528 34.3 79,627 35.5 82,718 34.6 3,091 3.9 1,715 2.1 Asia Pacific 22,802 9.8 84,867 9.0 18,749 8.3 20,002 8.4 1,253 6.7 (2,800) (12.3) ---------------- --------- ---------------- ---------- ----------------- --------- ----------------- --------- --------------- ----------- -------------- ----------- Total net revenue by region $ 233,149 100.0 $ 946,208 100.0 $ 224,596 100.0 $ 239,156 100.0 $ 14,560 6.5 $ 6,007 2.6 ================ ========= ================ ========== ================= ========= ================= ========= =============== =========== ============== =========== Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 13 of 14 Novell, Inc. Unaudited Trended Segment Revenue by Software Licenses and Maintenance and Services (In thousands) Fiscal Year Change from Q2 2006 % 2006 % Q1 2007 % Q2 2007 % Q2 2007 to Q1 2007 Q2 2007 to Q2 2006 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- --------------------------------------------------------- Open platform solutions Linux platform products Software licenses $ - - $ - - $ - - $ - - $ - - $ - - Maintenance, subscriptions and services 10,307 4.4 45,296 4.8 15,166 6.8 18,889 7.9 3,723 24.5 8,582 83.3 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 10,307 4.4 45,296 4.8 15,166 6.8 18,889 7.9 3,723 24.5 8,582 83.3 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Other open platform products Software licenses 74 0.0 605 0.1 194 0.1 - - (194) (100.0) (74) (100.0) Maintenance, subscriptions and services 1,027 0.4 7,541 0.8 2,027 0.9 2,152 0.9 125 6.2 1,125 109.5 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 1,101 0.5 8,146 0.9 2,221 1.0 2,152 0.9 (69) (3.1) 1,051 95.5 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Systems and resource management Software licenses 7,105 3.0 30,839 3.3 7,465 3.3 7,650 3.2 185 2.5 545 7.7 Maintenance, subscriptions and services 26,694 11.4 103,740 11.0 24,697 11.0 24,770 10.4 73 0.3 (1,924) (7.2) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 33,799 14.5 134,579 14.2 32,162 14.3 32,420 13.6 258 0.8 (1,379) (4.1) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Identity and security management Identity and access management Software licenses 7,781 3.3 40,760 4.3 10,460 4.7 10,186 4.3 (274) (2.6) 2,405 30.9 Maintenance, subscriptions and services 14,566 6.2 56,961 6.0 13,404 6.0 13,285 5.6 (119) (0.9) (1,281) (8.8) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 22,347 9.6 97,721 10.3 23,864 10.6 23,471 9.8 (393) (1.6) 1,124 5.0 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Other identity and security management Software licenses 1,756 0.8 5,430 0.6 947 0.4 942 0.4 (5) (0.5) (814) (46.4) Maintenance, subscriptions and services 3,305 1.4 12,545 1.3 2,617 1.2 2,285 1.0 (332) (12.7) (1,020) (30.9) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 5,061 2.2 17,975 1.9 3,564 1.6 3,227 1.3 (337) (9.5) (1,834) (36.2) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Workgroup Open Enterprise Server Software licenses 9,225 4.0 39,269 4.2 8,317 3.7 9,022 3.8 705 8.5 (203) (2.2) Maintenance, subscriptions and services 36,494 15.7 142,426 15.1 34,890 15.5 34,158 14.3 (732) (2.1) (2,336) (6.4) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 45,719 19.6 181,695 19.2 43,207 19.2 43,180 18.1 (27) (0.1) (2,539) (5.6) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- NetWare and other NetWare-related Software licenses 5,876 2.5 24,108 2.5 5,024 2.2 4,951 2.1 (73) (1.5) (925) (15.7) Maintenance, subscriptions and services 5,690 2.4 23,671 2.5 2,012 0.9 1,300 0.5 (712) (35.4) (4,390) (77.2) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 11,566 5.0 47,779 5.0 7,036 3.1 6,251 2.6 (785) (11.2) (5,315) (46.0) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Collaboration Software licenses 4,543 1.9 23,585 2.5 5,242 2.3 6,389 2.7 1,147 21.9 1,846 40.6 Maintenance, subscriptions and services 18,287 7.8 72,591 7.7 17,024 7.6 17,114 7.2 90 0.5 (1,173) (6.4) ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 22,830 9.8 96,176 10.2 22,266 9.9 23,503 9.8 1,237 5.6 673 2.9 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Other workgroup Software licenses 3,703 1.6 9,082 1.0 702 0.3 2,583 1.1 1,881 267.9 (1,120) (30.2) Maintenance, subscriptions and services 3,507 1.5 14,512 1.5 7,269 3.2 8,512 3.6 1,243 17.1 5,005 142.7 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 7,210 3.1 23,594 2.5 7,971 3.5 11,095 4.6 3,124 39.2 3,885 53.9 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Total software-related licenses and maintenance Software licenses 40,063 17.2 173,678 18.4 38,351 17.1 41,723 17.4 3,372 8.8 1,660 4.1 Maintenance, subscriptions and services 119,877 51.4 479,283 50.7 119,106 53.0 122,465 51.2 3,359 2.8 2,588 2.2 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- 159,940 68.6 652,961 69.0 157,457 70.1 164,188 68.7 6,731 4.3 4,248 2.7 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Global services 73,209 31.4 293,247 31.0 67,139 29.9 74,968 31.3 7,829 11.7 1,759 2.4 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Total net revenue Software licenses 40,063 17.2 173,678 18.4 38,351 17.1 41,723 17.4 3,372 8.8 1,660 4.1 Maintenance, subscriptions and services 193,086 82.8 772,530 81.6 186,245 82.9 197,433 82.6 11,188 6.0 4,347 2.3 ---------------- --------- ----------------- --------- ---------------- --------- ---------------- --------- -------------- ---------- -------------- ----------- Total net revenue $ 233,149 100.0 $ 946,208 100.0 $ 224,596 100.0 $ 239,156 100.0 $ 14,560 6.5 $ 6,007 2.6 ================ ========= ================= ========= ================ ========= ================ ========= ============== ========== ============== =========== Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 14 of 14 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 > 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 > Access Manager > 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