Exhibit 99.1
FOR IMMEDIATE RELEASE
August 29, 2007
Novell Reports Financial Results for Third Fiscal Quarter 2007
• Linux Platform Products revenue grew 77% year-over-year
• Operating results improved year-over-year
WALTHAM, Mass. – August 29, 2007 – Novell, Inc. (NASDAQ:NOVL) today announced financial results for its third fiscal quarter ended July 31, 2007. For the quarter, Novell reported net revenue of $243 million, compared to net revenue of $236 million for the third fiscal quarter 2006. The loss from operations for the third fiscal quarter 2007 was $10 million, compared to a loss from operations of $40 million for the third fiscal quarter 2006. The loss available to common stockholders from continuing operations in the third fiscal quarter 2007 was $3 million, or $0.01 loss per common share. This compares to a loss available to common stockholders from continuing operations of $17 million, or $0.05 loss per common share, for the third fiscal quarter 2006. Foreign currency exchange rates favorably impacted total revenue by approximately $4 million and negatively impacted the loss from operations by $1 million year-over-year.
On a non-GAAP basis, adjusted income from operations for the third fiscal quarter 2007 was $12 million. This compares to non-GAAP adjusted income from operations of $6 million in the year-ago quarter. Non-GAAP adjusted income available to common stockholders from continuing operations for the third fiscal quarter 2007 was $16 million, or $0.05 per adjusted diluted common share. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $24 million, or $0.06 per adjusted diluted common share, for the third fiscal quarter 2006.
For the third fiscal quarter 2007, Novell reported $22 million of revenue from Open Platform Solutions of which $21 million was from Linux* Platform Products, up 77% year-over-year. Linux Platform Products invoicing was $38 million, up 95% year-over-year. Revenue from Identity and Security Management was $30 million of which Identity and Access Management was $27 million, up 2% year-over-year. Revenue from Systems and Resource Management was $35 million, up 4% year-over-year. Revenue from our Workgroup business unit declined 2% from the year-ago period to $83 million.
“We are encouraged by our Linux performance and the market's continued enthusiasm for our desktop to datacenter strategy. In addition, we are pleased with our operating margin expansion and progress on our strategic initiatives, ” said Ron Hovsepian, President and CEO of Novell.
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Cash, cash equivalents and short-term investments were $1.8 billion at July 31, 2007, consistent with last quarter. Days sales outstanding in accounts receivable was 74 days at the end of the third fiscal quarter 2007, down from 88 days at the end of the year-ago quarter. Total deferred revenue was $734 million at the end of the third fiscal quarter 2007, up $343 million, or 88%, from July 31, 2006. Cash flow from operations was $26 million for the third fiscal quarter 2007, compared to $36 million in the third fiscal quarter 2006.
Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.
Financial Outlook
Novell management issues the following financial guidance:
For the full fiscal year 2007:
- Net revenue is expected to be between $925 million and $955 million, in line with prior guidance.
- On a non-GAAP basis, adjusted income from operations is expected to exceed previously stated guidance of between break-even and $10 million.
- Novell reiterates fiscal 2007 non-GAAP exit rate operating margin, as defined below, of between 5% and 7%.
Non-GAAP Financial Measures
We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, adjusted diluted income available to common stockholders from continuing operations, and adjusted diluted income per common share from continuing operations based on an adjusted number of diluted weighted average shares. We provide non-GAAP financial measures to (i) enhance an overall understanding of our current financial performance and prospects for the future and (ii) enable investors to evaluate our performance in the same way that management does. Management uses these non-GAAP adjusted financial measures to evaluate performance, allocate resources, and determine commissions and bonuses. The non-GAAP adjusted financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinary course of business.
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These non-GAAP financial measures exclude items such as, but not limited to, stock-based compensation expenses, restructuring expenses, asset impairments, litigation judgments and settlements, the write-off of acquired in-process research and development, and gains (losses) on the sale of business operations, long-term investments, and property, plant and equipment.
A summary of Novell’s vision, mission and strategy can be accessed on the Novell® 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 August 29, 2007, from Novell’s Investor Relations Web page:
http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is 866-335-5255, password “Novell”, and the international dial-in number is +1-706-679-2263, password “Novell”.
The call will be archived on the Novell Web site approximately two hours after its conclusion and will remain on the Web site until September 14, 2007. The call will also be available for telephone playback through midnight ET, September 14, 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 10920968.
A copy of this press release is posted on Novell's Web site at:
http://www.novell.com/company/ir/qresults/.
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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 on May 25, 2007. Novell disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release except as required by the securities laws.
About Novell
Novell, Inc. (Nasdaq: NOVL) delivers infrastructure software for the Open Enterprise. Novell is a leader in 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 5 of 13 Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year-to-Date ----------------------------- ---------------------------- Jul 31, 2007 Jul 31, 2006 Jul 31, 2007 Jul 31, 2006 ------------ ------------- ------------ ------------ Net revenue: Software licenses $ 44,748 $ 45,435 $ 124,822 $ 127,600 Maintenance and subscriptions 124,832 117,538 366,403 361,899 Services (1) 73,555 73,298 215,662 216,462 ------------ ------------- ------------ ------------ Total net revenue 243,135 236,271 706,887 705,961 ------------ ------------- ------------ ------------ Cost of revenue: Software licenses 5,286 4,984 13,773 13,570 Maintenance and subscriptions 12,498 13,137 35,423 37,794 Services 54,281 58,537 162,973 179,396 ------------ ------------- ------------ ------------ Total cost of revenue 72,065 76,658 212,169 230,760 ------------ ------------- ------------ ------------ Gross profit 171,070 159,613 494,718 475,201 ------------ ------------- ------------ ------------ Operating expenses: Sales and marketing 84,591 89,703 263,367 266,871 Product development 54,207 45,993 153,236 136,836 General and administrative 28,647 25,605 82,581 80,172 ------------ ------------- ------------ ------------ Total operating expenses before other 167,445 161,301 499,184 483,879 Income (loss) from operations before other operating expenses 3,625 (1,688) (4,466) (8,678) Other operating expenses (2) 13,780 37,904 37,342 35,599 ------------ ------------- ------------ ------------ Loss from operations (10,155) (39,592) (41,808) (44,277) Other income, net 15,446 10,781 47,246 36,602 ------------ ------------- ------------ ------------ Income (loss) from continuing operations, before income taxes 5,291 (28,811) 5,438 (7,675) Income tax expense (benefit) 8,711 (11,683) 20,927 5,527 ------------ ------------- ------------ ------------ Loss from continuing operations (3,420) (17,128) (15,489) (13,202) Income (loss) from discontinued operations, before income taxes - 12,453 (10,137) 15,346 Income tax expense (benefit) on discontinued operations - 849 (69) 2,461 ------------ ------------- ------------ ------------ Income (loss) from discontinued operations - 11,604 (10,068) 12,885 Loss before cumulative effect of a change in accounting principle (3,420) (5,524) (25,557) (317) Cumulative effect of a change in accounting principle - (897) - (897) ------------ ------------- ------------ ------------ Net loss $ (3,420) $ (6,421) $ (25,557) $ (1,214) ============ ============= ============ ============ Loss available to common stockholders: Continuing operations $ (3,420) $ (17,175) $ (15,489) $ (13,343) ============ ============= ============ ============ Net loss $ (3,420) $ (6,468) $ (25,557) $ (1,355) ============ ============= ============ ============ Loss per share available to common stockholders: Continuing operations $ (0.01) $ (0.05) $ (0.04) $ (0.04) Net loss $ (0.01) $ (0.02) $ (0.07) $ (0.00) Weighted average shares 348,177 340,127 346,731 368,106 (1) Services includes consulting, technical support and training services (2) See Page 8 of 13 for a detail of other operating expenses. Certain reclassifications, none of which affected net 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 ----------------------------- ---------------------------- Jul 31, 2007 Jul 31, 2006 Jul 31, 2007 Jul 31, 2006 ------------ ------------- ------------ ------------ Cost of revenue $ 1,257 $ 1,034 $ 3,241 $ 3,019 ------------ ------------- ------------ ------------ Sales and marketing 2,831 2,819 7,091 9,394 Product development 2,684 1,954 7,370 6,341 General and administrative 2,087 1,880 5,787 10,095 ------------ ------------- ------------ ------------ Total operating expenses 7,602 6,653 20,248 25,830 ------------ ------------- ------------ ------------ Continuing operations 8,859 7,687 23,489 28,849 Discontinued operations - - - 263 ------------ ------------- ------------ ------------ Total stock-based compensation expense $ 8,859 $ 7,687 $ 23,489 $ 29,112 ============ ============= ============ ============
Page 6 of 13 Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (In thousands) Jul 31, 2007 Oct 31, 2006 ------------------ ----------------- Assets Current assets: Cash and cash equivalents $ 957,379 $ 675,787 Short-term investments 865,259 790,500 Receivables, net 200,831 233,986 Prepaid expenses 55,593 32,328 Other current assets 31,931 28,524 ------------------ ----------------- Total current assets 2,110,993 1,761,125 Property, plant and equipment, net 180,520 184,084 Long-term investments - 2,263 Goodwill 415,471 424,701 Intangible assets, net 32,613 40,404 Deferred income taxes 4,387 4,770 Other assets 30,156 32,376 ------------------ ----------------- Total assets $2,774,140 $2,449,723 ================== ================= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 36,131 $ 44,419 Accrued compensation 102,080 103,710 Other accrued liabilities 100,352 106,837 Income taxes payable 48,743 49,600 Deferred revenue 456,253 380,979 ------------------ ----------------- Total current liabilities 743,559 685,545 Deferred income taxes 5,642 4,186 Long-term deferred revenue 277,642 45,992 Senior convertible debentures 600,000 600,000 ------------------ ----------------- Total liabilities 1,626,843 1,335,723 Preferred stock - 9,350 Stockholders' equity 1,147,297 1,104,650 ------------------ ----------------- Total liabilities and stockholders' equity $2,774,140 $2,449,723 ================== ================= Reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 7 of 13 Novell, Inc. Consolidated Unaudited Condensed Statements of Cash Flows (In thousands) Fiscal Quarter Ended Fiscal Year-to-Date ---------------------------- ---------------------------- Jul 31, 2007 Jul 31, 2006 Jul 31, 2007 Jul 31, 2006 ------------ ------------- ------------- ------------- Cash flows from operating activities: Net loss $ (3,420) $ (6,421) $ (25,557) $ (1,214) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation expense 8,859 7,687 23,489 29,112 Stock-based compensation modification expense 673 - 2,475 - Depreciation and amortization 9,690 11,530 31,163 33,908 Changes in accounts receivable allowances (427) 243 (878) (4,660) Utilization of previously reserved acquired net operating losses 10 340 4,835 3,860 Purchased in-process research and development - - - 2,110 Net gain on sale of property, plant and equipment - (3,778) - (5,968) Loss on sale of Japan consulting group - 8,273 - 8,273 Executive termination benefits, non-cash - 9,409 - 9,409 Impairment of long-term investments, net of gains on sale - 128 (1,738) 626 Gain on sale of venture capital funds - - (3,591) - Impairment of intangible assets and goodwill 3,851 - 14,699 - Gain on sale of discontinued operations, before taxes - (11,960) (628) (11,960) Cumulative effect of a change in accounting principle - 897 - 897 Changes in current assets and liabilities, excluding the effect of acquisitions and dispositions 6,424 19,252 300,324 (27,616) ------------ ------------- ------------- ------------- Net cash provided by operating activities 25,660 35,600 344,593 36,777 ------------ ------------- ------------- ------------- Cash flows from financing activities: Issuance of common stock, net 6,248 3,592 14,375 21,674 Excess tax effects from stock-based compensation 1,389 (1,028) 5,452 4,258 Payment of cash dividends on Series B Preferred Stock - (94) (5) (141) Repurchases of common stock, retired - (132,521) - (400,000) ------------ ------------- ------------- ------------- Net cash provided (used) by financing activities 7,637 (130,051) 19,822 (374,209) ------------ ------------- ------------- ------------- Cash flows from investing activities: Purchases of property, plant and equipment (4,971) (4,986) (17,479) (19,540) Proceeds from the sale of property, plant and equipment - 17,734 - 24,992 Proceeds from repayment of note receivable - - - 9,092 Short-term investment activity (24,913) (1,223) (72,333) 45,035 Long-term investment activity - 1,586 1,738 (1,428) Cash paid for equity investment in Open Invention Network, LLC - - - (4,225) Proceeds from the sale of Celerant, net of cash divested - 37,922 - 37,922 Proceeds from the sale of Salmon, net of cash divested - - 2,749 - Proceeds from sale of venture capital funds - - 4,964 - Cash paid for acquisition of e-Security, net of cash acquired - - - (71,550) Cash paid for acquisition of Redmojo, net of cash acquired - - (9,727) - Purchase of intangible assets (300) (1,159) (1,175) (1,159) Other 3,274 3,219 8,440 7,771 ------------ ------------- ------------- ------------- Net cash (used) provided by investing activities (26,910) 53,093 (82,823) 26,910 ------------ ------------- ------------- ------------- Increase (decrease) in cash and cash equivalents 6,387 (41,358) 281,592 (310,522) Cash and cash equivalents - beginning of period 950,992 542,074 675,787 811,238 ------------ ------------- ------------- ------------- Cash and cash equivalents - end of period $ 957,379 $ 500,716 $ 957,379 $ 500,716 ============ ============= ============= =============
Page 8 of 13 Novell, Inc. Unaudited Non-GAAP Adjusted Income (Loss) From Operations (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year-to-Date ---------------------------- ---------------------------- Jul 31, 2007 Jul 31, 2006 Jul 31, 2007 Jul 31, 2006 ------------ ------------ ------------ ------------ GAAP loss from operations $ (10,155) $ (39,592) $ (41,808) $ (44,277) ------------ ------------ ------------ ------------ Adjustments: Stock-based compensation expense 8,859 7,687 23,489 28,849 ------------ ------------ ------------ ------------ Other operating expenses (income): Restructuring expenses (benefit) 6,024 - 17,898 (1,000) Purchased in-process research and development - - - 2,110 Gain on sale of property, plant and equipment - (3,778) - (5,968) Litigation-related expense (income) 450 24,000 (93) 22,775 Loss on sale of Japan consulting group - 8,273 - 8,273 Executive termination benefits, non-cash - 9,409 - 9,409 Impairment of intangible assets 3,851 - 3,851 - Stock-based compensation review expenses 3,455 - 15,686 - ------------ ------------ ------------ ------------ Sub-total 13,780 37,904 37,342 35,599 ------------ ------------ ------------ ------------ Total operating adjustments 22,639 45,591 60,831 64,448 Non-GAAP income from operations $ 12,484 $ 5,999 $ 19,023 $ 20,171 ============ ============ ============ ============ Operating Margin % 5.1% 2.5% 2.7% 2.9%
Novell, Inc. Unaudited Non-GAAP Adjusted Net Income (Loss) (In thousands, except per share data) Fiscal Quarter Ended Fiscal Year-to-Date ---------------------------- ---------------------------- Jul 31, 2007 Jul 31, 2006 Jul 31, 2007 Jul 31, 2006 ------------ ------------ ------------ ------------ GAAP loss available to common stockholders from continuing operations $ (3,420) $ (17,175) $ (15,489) $ (13,343) ------------ ------------ ------------ ------------ Operating adjustments (detailed above) 22,639 45,591 60,831 64,448 ------------ ------------ ------------ ------------ Non-operating expenses (income) adjustments: Gain on sale of venture capital funds - - (3,591) - Impairment of long-term investments, net of gains on sale - 128 (1,738) 626 ------------ ------------ ------------ ------------ Sub-total - 128 (5,329) 626 ------------ ------------ ------------ ------------ Total pre-tax adjustments 22,639 45,719 55,502 65,074 Income tax adjustments (3,075) (6,064) (4,633) (6,768) Diluted income adjustments: Debt interest expense - 1,493 - 4,479 Allocation of earnings to preferred stockholders - (98) - (182) ------------ ------------ ------------ ------------ Total net adjustments 19,564 41,050 50,869 62,603 Non-GAAP diluted income available to common stockholders from continuing operations $ 16,144 $ 23,875 $ 35,380 $ 49,260 ============ ============ ============ ============ GAAP loss per common share from continuing operations $ (0.01) $ (0.05) $ (0.04) $ (0.04) Total adjustments detailed above 0.06 0.11 0.14 0.15 ------------ ------------ ------------ ------------ Non-GAAP diluted income per common share from continuing operations $ 0.05 $ 0.06 $ 0.10 $ 0.11 ============ ============ ============ ============ GAAP weighted average shares from continuing operations 348,177 340,127 346,731 368,106 Change in dilution from assumed: Conversion of convertible debt - 52,074 - 52,074 Adjustments for assumed stock option exercises 6,622 5,601 5,835 9,980 ------------ ------------ ------------ ------------ Non-GAAP diluted weighted average shares 354,799 397,802 352,566 430,160 ============ ============ ============ ============ Revisions were made to prior period amounts in order to conform to the current period's presentation.
Page 9 of 13 Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data) Fiscal Year Trailing Four Q3 2006 % 2006 % Q2 2007 % Q3 2007 % Quarters % --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Net revenue: Software licenses $ 45,435 19.2 $ 173,678 18.4 $ 41,723 17.4 $ 44,748 18.4 $ 170,900 18.0 Maintenance and subscriptions 117,538 49.7 479,283 50.7 122,465 51.2 124,832 51.3 483,787 51.1 Services 73,298 31.0 293,247 31.0 74,968 31.3 73,555 30.3 292,447 30.9 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Total net revenue 236,271 100.0 946,208 100.0 239,156 100.0 243,135 100.0 947,134 100.0 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Cost of revenue: Software licenses 4,984 2.1 18,161 1.9 4,260 1.8 5,286 2.2 18,364 1.9 Maintenance and subscriptions 13,137 5.6 49,680 5.3 11,270 4.7 12,498 5.1 47,309 5.0 Services 58,537 24.8 235,472 24.9 54,515 22.8 54,281 22.3 219,049 23.1 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Total cost of revenue 76,658 32.4 303,313 32.1 70,045 29.3 72,065 29.6 284,722 30.1 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Gross profit 159,613 67.6 642,895 67.9 169,111 70.7 171,070 70.4 662,412 69.9 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Operating expenses: Sales and marketing 89,703 38.0 355,029 37.5 88,447 37.0 84,591 34.8 351,525 37.1 Product development 45,993 19.5 180,380 19.1 52,562 22.0 54,207 22.3 196,780 20.8 General and administrative 25,605 10.8 103,619 11.0 28,697 12.0 28,647 11.8 106,028 11.2 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Total operating expenses before other 161,301 68.3 639,028 67.5 169,706 71.0 167,445 68.9 654,333 69.1 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Income (loss) from operations before other operating expenses (1,688) (0.7) 3,867 0.4 (595) (0.2) 3,625 1.5 8,079 0.9 Other operating expenses 37,904 16.0 44,124 4.7 10,451 4.4 13,780 5.7 45,867 4.8 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Loss from operations (39,592) (16.8) (40,257) (4.3) (11,046) (4.6) (10,155) (4.2) (37,788) (4.0) --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Other income Investment income 12,973 5.5 77,391 8.2 20,669 8.6 21,617 8.9 101,254 10.7 Other, net (2,192) (0.9) (8,018) (0.8) (6,914) (2.9) (6,171) (2.5) (21,237) (2.2) --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Other income, net 10,781 4.6 69,373 7.3 13,755 5.8 15,446 6.4 80,017 8.4 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Income (loss) from continuing operations, before income taxes (28,811) (12.2) 29,116 3.1 2,709 1.1 5,291 2.2 42,229 4.5 Income tax expense (benefit) (11,683) (4.9) 22,642 2.4 2,819 1.2 8,711 3.6 38,042 4.0 --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Income (loss) from continuing operations (17,128) (7.2) 6,474 0.7 (110) (0.0) (3,420) (1.4) 4,187 0.4 Income (loss) from discontinued operations, before income taxes 12,453 5.3 14,640 1.5 574 0.2 - - (10,843) (1.1) Income tax expense (benefit) on discontinued operations 849 0.4 1,561 0.2 2,656 1.1 - - (969) (0.1) --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Income (loss) from discontinued operations 11,604 4.9 13,079 1.4 (2,082) (0.9) - - (9,874) (1.0) --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Income (loss) before cumulative effect of a change in accounting principle (5,524) (2.3) 19,553 2.1 (2,192) (0.9) (3,420) (1.4) (5,687) (0.6) Cumulative effect of a change in accounting principle (897) (0.4) (897) (0.1) - - - - - - --------- ------ --------- ------ --------- ------ --------- ------ ---------- ----- Net income (loss) $ (6,421) (2.7) $ 18,656 2.0 $ (2,192) (0.9) $ (3,420) (1.4) $ (5,687) (0.6) ========= ====== ========= ====== ========= ====== ========= ====== ========== ===== Income (loss) available to common stockholders: Continuing operations $(17,175) (7.3) $ 6,260 0.7 $ (110) (0.0) $ (3,420) (1.4) ========= ====== ========= ====== ========= ====== ========= ====== Net income (loss) $ (6,468) (2.7) $ 18,220 1.9 $ (2,192) (0.9) $ (3,420) (1.4) ========= ====== ========= ====== ========= ====== ========= ====== Income (loss) per share available to common stockholders: Continuing operations $ (0.05) $ 0.02 $ (0.00) $ (0.01) Net income (loss) $ (0.02) $ 0.05 $ (0.01) $ (0.01) Weighted average shares 340,127 365,659 346,492 348,177 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 10 of 13 Novell, Inc. Consolidated Unaudited Condensed Segment Results (in thousands, except per share data) Fiscal Quarter Ended July 31, 2007 --------------------------------------------------------------------------------------------------------------------------------------- Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Net revenue: Software licenses $ 3 0.0 $ 9,686 21.3 $ 12,967 25.1 $ 22,092 20.6 $ - - $ - $ 44,748 18.4 Maintenance and subscriptions 22,067 68.5 25,164 55.3 16,832 32.5 60,769 56.6 - - - 124,832 51.3 Services 10,166 31.5 10,631 23.4 21,944 42.4 24,469 22.8 6,345 100.0 - 73,555 30.3 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total net revenue 32,236 100.0 45,481 100.0 51,743 100.0 107,330 100.0 6,345 100.0 - 243,135 100.0 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Cost of revenue: Software licenses - - 1,101 2.4 2,786 5.4 1,399 1.3 - - - 5,286 2.2 Maintenance and subscriptions 2,132 6.6 2,861 6.3 3,616 7.0 3,847 3.6 - - 42 12,498 5.1 Services 8,563 26.6 4,671 10.3 21,963 42.4 12,332 11.5 5,537 87.3 1,215 54,281 22.3 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total cost of revenue 10,695 33.2 8,633 19.0 28,365 54.8 17,578 16.4 5,537 87.3 1,257 72,065 29.6 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Gross profit 21,541 66.8 36,848 81.0 23,378 45.2 89,752 83.6 808 12.7 (1,257) 171,070 70.4 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Operating expenses: Sales and marketing - - - - - - - - - - 84,591 84,591 34.8 Product development 13,639 42.3 10,147 22.3 15,529 30.0 12,208 11.4 - - 2,684 54,207 22.3 General and administrative - - - - - - - - - - 28,647 28,647 11.8 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total operating expenses before other 13,639 42.3 10,147 22.3 15,529 30.0 12,208 11.4 - - 115,922 167,445 68.9 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Income (loss) from operations before other operating expenses $ 7,902 24.5 $ 26,701 58.7 $ 7,849 15.2 $ 77,544 72.2 $ 808 12.7 $ (117,179) $ 3,625 1.5 =========== ===== =========== ===== ========== ====== ========== ===== =========== ===== =========== ========== ====== 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 and subscriptions 21,041 67.4 24,770 58.7 15,570 30.7 61,084 56.4 - - - 122,465 51.2 Services 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 - - 841 2.0 2,128 4.2 1,291 1.2 - - - 4,260 1.8 Maintenance and subscriptions 2,154 6.9 2,708 6.4 2,960 5.8 3,416 3.2 - - 32 11,270 4.7 Services 8,729 28.0 4,602 10.9 22,264 43.9 12,542 11.6 5,473 80.9 905 54,515 22.8 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total cost of revenue 10,883 34.8 8,151 19.3 27,352 54.0 17,249 15.9 5,473 80.9 937 70,045 29.3 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Gross profit 20,347 65.2 34,042 80.7 23,310 46.0 91,053 84.1 1,296 19.1 (937) 169,111 70.7 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Operating expenses: Sales and marketing - - - - - - - - - - 88,447 88,447 37.0 Product development 13,603 43.6 8,570 20.3 15,389 30.4 12,465 11.5 - - 2,535 52,562 22.0 General and administrative - - - - - - - - - - 28,697 28,697 12.0 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total operating expenses before other 13,603 43.6 8,570 20.3 15,389 30.4 12,465 11.5 - - 119,679 169,706 71.0 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Income (loss) from operations before other operating expenses $ 6,744 21.6 $ 25,472 60.4 $ 7,921 15.6 $ 78,588 72.6 $ 1,296 19.1 $ (120,616) $ (595) (0.2) =========== ===== =========== ===== ========== ====== ========== ===== =========== ===== =========== ========== ====== Fiscal Quarter Ended July 31, 2006 --------------------------------------------------------------------------------------------------------------------------------------- Systems Identity Open Platform and Resource and Security Business Common Solutions % Management % Management % Workgroup % Consulting % Unallocated Total % ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Net revenue: Software licenses $ 123 0.6 $ 8,760 20.1 $ 12,986 23.8 $ 23,566 21.5 $ - - $ - $ 45,435 19.2 Maintenance and subscriptions 14,874 73.9 24,840 57.0 17,177 31.4 60,647 55.3 - - - 117,538 49.7 Services 5,119 25.4 9,982 22.9 24,511 44.8 25,477 23.2 8,209 100.0 - 73,298 31.0 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total net revenue 20,116 100.0 43,582 100.0 54,674 100.0 109,690 100.0 8,209 100.0 - 236,271 100.0 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Cost of revenue: Software licenses - - 800 1.8 2,700 4.9 1,484 1.4 - - - 4,984 2.1 Maintenance and subscriptions 2,919 14.5 2,486 5.7 3,782 6.9 3,913 3.6 - - 37 13,137 5.6 Services 6,183 30.7 5,122 11.8 24,710 45.2 15,302 14.0 6,223 75.8 997 58,537 24.8 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total cost of revenue 9,102 45.2 8,408 19.3 31,192 57.1 20,699 18.9 6,223 75.8 1,034 76,658 32.4 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Gross profit 11,014 54.8 35,174 80.7 23,482 42.9 88,991 81.1 1,986 24.2 (1,034) 159,613 67.6 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Operating expenses: Sales and marketing - - - - - - - - - - 89,703 89,703 38.0 Product development 12,078 60.0 6,213 14.3 14,565 26.6 11,183 10.2 - - 1,954 45,993 19.5 General and administrative - - - - - - - - - - 25,605 25,605 10.8 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Total operating expenses before other 12,078 60.0 6,213 14.3 14,565 26.6 11,183 10.2 - - 117,262 161,301 68.3 ----------- ----- ----------- ----- ---------- ------ ---------- ----- ----------- ----- ----------- ---------- ------ Income (loss) from operations before other operating expenses $ (1,064) (5.3) $ 28,961 66.5 $ 8,917 16.3 $ 77,808 70.9 $ 1,986 24.2 $ (118,296) $ (1,688) (0.7) =========== ===== =========== ===== ========== ====== ========== ===== =========== ===== =========== ========== ====== 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 11 of 13 Novell, Inc. Unaudited Trended Segment and Region Revenue (In thousands) Fiscal Year Change from Revenue by segment Q3 2006 % 2006 % Q2 2007 % Q3 2007 % Q3 2007 to Q2 2007 Q3 2007 to Q3 2006 ------------ ------- ------------- ------- ------------ ------ ------------ ------ ---------------------- --------------------- Open platform solutions Linux platform products $ 11,590 4.9 $ 45,296 4.8 $ 18,889 7.9 $ 20,565 8.5 $ 1,676 8.9 $ 8,975 77.4 Other open platform products 3,407 1.4 8,146 0.9 2,152 0.9 1,505 0.6 (647) (30.1) (1,902) (55.8) ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Total open platform solutions 14,997 6.3 53,442 5.6 21,041 8.8 22,070 9.1 1,029 4.9 7,073 47.2 ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Systems and resource management 33,600 14.2 134,579 14.2 32,420 13.6 34,850 14.3 2,430 7.5 1,250 3.7 ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Identity and security management Identity and access management 26,053 11.0 97,721 10.3 23,471 9.8 26,690 11.0 3,219 13.7 637 2.4 Other identity and security management 4,110 1.7 17,975 1.9 3,227 1.3 3,109 1.3 (118) (3.7) (1,001) (24.4) ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Total identity and security management 30,163 12.8 115,696 12.2 26,698 11.2 29,799 12.3 3,101 11.6 (364) (1.2) ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Workgroup Open Enterprise Server 45,204 19.1 181,695 19.2 43,180 18.1 44,604 18.3 1,424 3.3 (600) (1.3) NetWare and other NetWare-related 9,592 4.1 47,779 5.0 6,251 2.6 5,830 2.4 (421) (6.7) (3,762) (39.2) Collaboration 25,276 10.7 96,176 10.2 23,503 9.8 24,689 10.2 1,186 5.0 (587) (2.3) Other workgroup 4,141 1.8 23,594 2.5 11,095 4.6 7,738 3.2 (3,357) (30.3) 3,597 86.9 ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Total workgroup 84,213 35.6 349,244 36.9 84,029 35.1 82,861 34.1 (1,168) (1.4) (1,352) (1.6) ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Total software licenses, maintenance and subscriptions 162,973 69.0 652,961 69.0 164,188 68.7 169,580 69.7 5,392 3.3 6,607 4.1 Services 73,298 31.0 293,247 31.0 74,968 31.3 73,555 30.3 (1,413) (1.9) 257 0.4 ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Total net revenue by segment $ 236,271 100.0 $ 946,208 100.0 $ 239,156 100.0 $ 243,135 100.0 $ 3,979 1.7 $ 6,864 2.9 ============ ======= ============= ======= ============ ====== ============ ====== =========== ======== ========== ======== Revenue by region Americas $ 136,660 57.8 $ 536,813 56.7 $ 136,436 57.0 $ 138,000 56.8 $ 1,564 1.1 $ 1,340 1.0 EMEA 78,738 33.3 324,528 34.3 82,718 34.6 84,940 34.9 2,222 2.7 6,202 7.9 Asia Pacific 20,873 8.8 84,867 9.0 20,002 8.4 20,195 8.3 193 1.0 (678) (3.2) ------------ ------- ------------- ------- ------------ ------ ------------ ------ ----------- -------- ---------- -------- Total net revenue by region $ 236,271 100.0 $ 946,208 100.0 $ 239,156 100.0 $ 243,135 100.0 $ 3,979 1.7 $ 6,864 2.9 ============ ======= ============= ======= ============ ====== ============ ====== =========== ======== ========== ======== Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 12 of 13 Novell, Inc. Unaudited Trended Segment Revenue by Software Licenses and Maintenance and Services (In thousands) Fiscal Year Change from Q3 2006 % 2006 % Q2 2007 % Q3 2007 % Q3 2007 to Q2 2007 Q3 2007 to Q3 2006 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ------------------------------------------ Open platform solutions Linux platform products Software licenses $ - - $ - - $ - - $ - - $ - - $ - - Maintenance and subscriptions 11,590 4.9 45,296 4.8 18,889 7.9 20,565 8.5 1,676 8.9 8,975 77.4 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 11,590 4.9 45,296 4.8 18,889 7.9 20,565 8.5 1,676 8.9 8,975 77.4 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Other open platform products Software licenses 123 0.1 605 0.1 - - 3 0.0 3 - (120) (97.6) Maintenance and subscriptions 3,284 1.4 7,541 0.8 2,152 0.9 1,502 0.6 (650) (30.2) (1,782) (54.3) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 3,407 1.4 8,146 0.9 2,152 0.9 1,505 0.6 (647) (30.1) (1,902) (55.8) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Systems and resource management Software licenses 8,760 3.7 30,839 3.3 7,650 3.2 9,686 4.0 2,036 26.6 926 10.6 Maintenance and subscriptions 24,840 10.5 103,740 11.0 24,770 10.4 25,164 10.3 394 1.6 324 1.3 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 33,600 14.2 134,579 14.2 32,420 13.6 34,850 14.3 2,430 7.5 1,250 3.7 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Identity and security management Identity and access management Software licenses 11,947 5.1 40,760 4.3 10,186 4.3 12,099 5.0 1,913 18.8 152 1.3 Maintenance and subscriptions 14,106 6.0 56,961 6.0 13,285 5.6 14,591 6.0 1,306 9.8 485 3.4 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 26,053 11.0 97,721 10.3 23,471 9.8 26,690 11.0 3,219 13.7 637 2.4 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Other identity and security management Software licenses 1,039 0.4 5,430 0.6 942 0.4 868 0.4 (74) (7.9) (171) (16.5) Maintenance and subscriptions 3,071 1.3 12,545 1.3 2,285 1.0 2,241 0.9 (44) (1.9) (830) (27.0) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 4,110 1.7 17,975 1.9 3,227 1.3 3,109 1.3 (118) (3.7) (1,001) (24.4) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Workgroup Open Enterprise Server Software licenses 9,071 3.8 39,269 4.2 9,022 3.8 9,877 4.1 855 9.5 806 8.9 Maintenance and subscriptions 36,133 15.3 142,426 15.1 34,158 14.3 34,727 14.3 569 1.7 (1,406) (3.9) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 45,204 19.1 181,695 19.2 43,180 18.1 44,604 18.3 1,424 3.3 (600) (1.3) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- NetWare and other NetWare-related Software licenses 5,961 2.5 24,108 2.5 4,951 2.1 4,414 1.8 (537) (10.8) (1,547) (26.0) Maintenance and subscriptions 3,631 1.5 23,671 2.5 1,300 0.5 1,416 0.6 116 8.9 (2,215) (61.0) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 9,592 4.1 47,779 5.0 6,251 2.6 5,830 2.4 (421) (6.7) (3,762) (39.2) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Collaboration Software licenses 7,570 3.2 23,585 2.5 6,389 2.7 7,299 3.0 910 14.2 (271) (3.6) Maintenance and subscriptions 17,706 7.5 72,591 7.7 17,114 7.2 17,390 7.2 276 1.6 (316) (1.8) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 25,276 10.7 96,176 10.2 23,503 9.8 24,689 10.2 1,186 5.0 (587) (2.3) ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Other workgroup Software licenses 964 0.4 9,082 1.0 2,583 1.1 502 0.2 (2,081) (80.6) (462) (47.9) Maintenance and subscriptions 3,177 1.3 14,512 1.5 8,512 3.6 7,236 3.0 (1,276) (15.0) 4,059 127.8 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 4,141 1.8 23,594 2.5 11,095 4.6 7,738 3.2 (3,357) (30.3) 3,597 86.9 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Total software licenses, maintenance and subscriptions Software licenses 45,435 19.2 173,678 18.4 41,723 17.4 44,748 18.4 3,025 7.3 (687) (1.5) Maintenance and subscriptions 117,538 49.7 479,283 50.7 122,465 51.2 124,832 51.3 2,367 1.9 7,294 6.2 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- 162,973 69.0 652,961 69.0 164,188 68.7 169,580 69.7 5,392 3.3 6,607 4.1 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Services 73,298 31.0 293,247 31.0 74,968 31.3 73,555 30.3 (1,413) (1.9) 257 0.4 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Total net revenue Software licenses 45,435 19.2 173,678 18.4 41,723 17.4 44,748 18.4 3,025 7.3 (687) (1.5) Maintenance and subscriptions 117,538 49.7 479,283 50.7 122,465 51.2 124,832 51.3 2,367 1.9 7,294 6.2 Services 73,298 31.0 293,247 31.0 74,968 31.3 73,555 30.3 (1,413) (1.9) 257 0.4 ----------- ------ ------------ ------- ----------- ------ ------------ ------ ---------- -------- ---------- ------- Total net revenue $ 236,271 100.0 $ 946,208 100.0 $ 239,156 100.0 $ 243,135 100.0 $ 3,979 1.7 $ 6,864 2.9 =========== ====== ============ ======= =========== ====== ============ ====== ========== ======== ========== ======= Certain reclassifications were made to the prior period amounts in order to conform to the current period's presentation.
Page 13 of 13 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 Services > IT Consulting Services > Technical Support Services > Training Services